Tuesday, June 20, 2017

Off the Beaten Path to tap New Markets

While working on tapping into new and emerging markets, the product development approach was that of Frugal Discovery. And it was very different and at odds with the conventional approach accepted within the organization. Hence, devised the framework below which explains when and why different product development approach should be used.
Product development of new products and services is often a linear approach. First comes the market research, then the product R&D followed by a big-bang launch. This linear approach rightfully suits the existing markets which are the bread and butter of the organization.
But when it comes to new and emerging markets, such linear approach fails to deliver. And history is replete with such examples like IBM PCjr, Apple Newton, HP's Kitty Hawk, Premier Smokeless Cigarettes... The underlying reasons for such market failures being:
  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.
The recommended 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 above 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 or 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 for both company and 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/demonstrators, test market and iterate. Customers will also learn in due course 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 big-bang and know-it-all approach to a more humble, frugal and discoverer approach. 

No comments:

Post a Comment