Tuesday, December 30, 2014

Frugal Discovery mode to decode Emerging markets

In general, companies take a linear approach to launch new products and services. First comes the market research, then the forecasts, then the product R&D followed by a big-bang launch. This approach works fine for existing markets. But when it comes to emerging markets, such approach fails to deliver. And history is replete with such examples:
  • IBM PCjr (IBM much hyped PC for consumer market which failed on cost and features)
  • Apple Newton (Big bang launch of a product ahead of its time. With features for which market was not ready then.)
  • HP's Kitty Hawk (Designed for emerging PDA market which collapsed. Meanwhile, missed out on huge market of video gaming systems)
  • Premier Smokeless Cigarettes (Launched when smoke was considered a major health risk, but the taste/flavor was rejected by the users)

The common thread in above and similar examples is that
  1. Companies wade into uncharted territories solely based on their research & forecasts. Their efforts give them the confidence that they have figured out the unknowable/uncertain emerging market. 
  2. And they put huge money, resources and execution capacity behind the launch. This big bet launch gives them little financial room later to turn back and correct course. The managers leading the launch also hurt their credibility.

For uncharted territories, the suggested approach is to use a Discovery mode for the first point above and combine it with Frugal approach to address the second point.

The framework below explains when the Frugal Discovery mode is relevant.

The Discovery mode is required when:
  • Customers do not know what they want. The need is yet to be created/perceived.
  • A company is not sure what customers want. Though the company may rely on its market forecasts. But the actual use may be out of their research radar.
It takes time for consumers to warm up to new product/service features. And to better understand their own needs w.r.t. to given product/service. Discovery mode allows exploration and learning to both company and its customers. 

And being Frugal in discovery mode helps to:
  • Conserve resources for second or even third attempt at getting the product strategy right. Companies tend to do the opposite by opening the full tap and going gung-ho with full scale implementation in the first attempt.
  • In discovery mode, iterations may happen even in commercialization phase on product design and manufacturing capacity. And since such iterations are later in product development lifecycle, they are going to be costly. Hence, it helps to be frugal from the beginning.
Be frugal, make limited prototypes, test market and iterate. Customers will also learn what they actually want and new customer segments might emerge. 

Many companies are now looking beyond their traditional markets towards emerging markets to drive growth. And to do that, they would need to move beyond the traditional approach of big bang launches with know-it-all attitude to a more humble, frugal and discoverer approach.  

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