In today’s slow-growth economy, companies are struggling to find new ways to grow. All too often, current products are mature and current markets are saturated with competition.

To escape these brutal facts and find a new avenue for growth, companies are looking diligently for that new and profitable product or service opportunity.

So, what are the fundamentals for new product and service development?

First, let me offer an example of what to avoid.

What to Avoid

My best advice is to avoid making the mistakes that I have made in product development: creating a product and then hoping to find a market.

Several years ago, my team developed a nifty new product. It was extremely well-designed – a triumph of insightful and clever engineering. Though more expensive than the product it was designed to replace, it (in our view) created a great deal more value for the customer. So, we bought capital equipment to produce the product, created marketing material for the product, and rolled it out to the sales team and on to the customer.

Alas, the customer did not care. The improvement that we were certain the customer would want was of little interest to them. And the new product required a change in a number of procedures for the customer. From the customers’ perspective, we now were offering a product that was more expensive to buy, more difficult to use, and brought little additional value. Naturally, it flopped. Licking our wounds, we went back to selling the old, unimproved product that the customer actually did want to buy.

Like countless others, my team and I made the classic product development mistake. We worked inside out. We developed internally a product that we thought the customer “should want” only to discover that we had developed something that they did not want. My colleague Martin Zwilling sums up well this most common of product development errors:

Don’t make the mistake of looking at market needs or requests as an afterthought to verify what’s already been planned.

What to Do

Effective product development is about finding a customer’s need or pain and then creating and providing a product or service to fulfill that need or assuage that pain. As such, three fundamentals in new product development need to be:

1. Talk to customers first
   
2. Start small
   
3. Place multiple bets
   

Talk to Customers First

As in my embarrassing and expensive example above, most marketers and leaders have strong views about what the customer wants and values. But, as Craig Stull et al wrote in the book Tuned In:

Your opinion [about what the customer wants], although interesting, is irrelevant.

It is the opinion of the target customer that matters. As such, begin your new product development by focusing on the customer. Talk to customers, both current and potential customers. Involve all parts of the organization (not just sales who are often poor at these types of discussions) in the customer visits and interviews.

• What problem is the customer having related to your current products and service?
  
• What follow-on products or related services might they need?
  
• What other wants or needs does the customer have?
  
• What is a customer pain point?
  

Asking for your customers’ opinions and guidance ensures that you solve a problem that a real, live customer wants to solve rather than a problem that a “theoretical” customer should want to have solved or a problem that would be nice, but only mildly important, to solve.

Start Small

Do small roll-outs or test cases, especially where it can be done quickly and does not cost much money. Get prototypes made and in the hands of the customers that appear to most want the product or service.

• Does the product resonate with these targeted customers?
  
• What feedback do they have?
  
• What improvements do they suggest?
  
• Do they want to buy the product now?
  

This last point is essential. Are the customers willing to actually buy the product? Of course, customer’s opinions or customer focus groups are useful. Too often, however, customers sincerely intend to buy a product when asked. But, when it comes time to spend their cash, they balk. In the end, money does talk.

After the initial small roll-out or test case, be open to changes to the product, even radical changes, based on the customer feedback and interest (or lack thereof) in the product.

No new product, service or solution survives (unscathed) contact with the marketplace.

Finally, be ready to kill a product that has no “resonance” with its intended target customers. If these customers don’t want the product, it is highly unlikely anyone else will as well.

Place Many Bets

Finally, you need to be like a good Venture Capitalist (VC). VC’s evaluate products and businesses rigorously only choosing the best ones to invest in. But, even then, they hedge their risk by placing many bets. Most will likely lose, but the few successes more than pay for the losers.

Likewise, most new product and service offerings fail. Thus, it make sense (if financially feasible) to do small roll outs of several new product and/or service ideas at the same time. This is especially true if all satisfy a need that a target customer values and address different customer segments (thus minimizing confusion in the marketplace). In short, this is the old case of throwing spaghetti against the wall and seeing what sticks.

Having thrown spaghetti against the wall on several different occasions, I have always been surprised at the results. Products that seemed like “sure winners” weren’t. And product or services where we were quite uncertain turned out to resonate, have legs, and become new and profitable avenues for growth for our business.