Why product development decisions are harder than they look
With budgets under pressure and revenue targets increasingly hard to hit, organisations naturally look at their discretionary spending to identify cost savings and focus investment on the things that will have the most impact on business performance and cash flow generation. In that light, product development and service design will be a natural area of focus – it is an organisation’s products and services that are chosen (or not) by customers, and which ultimately drive revenue generation. The ability to make good decisions around where to focus product and service development effort becomes critical if leadership teams are going to maximise the impact of their limited resources.
Despite its importance, we are continually surprised by how many organisations make these product and service development decisions as if they were throwing darts at a dartboard – hoping they come up with a good score but with no real process in place to ensure that they do.
The fundamental premise behind our assertion is that not all product or service improvements are equal.
When organisations invest in improving their products or services, they are trying to make them better in some way – faster, thinner, cheaper, safer, less complex. There are a whole range of dimensions on which any product or service can be improved.
The dimension that most organisations overlook
The critical lens that many organisations miss is which of these dimensions will actually drive customer choice. If a product or service is improved in a dimension that does not drive customer choice, it creates superfluous value. The product will indeed be better – but if it has been improved on dimensions that do not drive choice, it will not impact the number of customers who choose it and will have no impact on uptake or revenue. Worse, it has probably made the product more complex and incurred the opportunity cost of not investing in something that would have been revenue-generating.
As Eric Ries of Lean Startup Methodology fame put it:
There is surely nothing quite so useless as doing with great efficiency what should not be done at all.
What actually drives customer choice
In any market, the drivers of customer choice are a small subset of the full range of dimensions on which a product or service could be improved – the dimensions that, if improved, will cause more customers to choose your product over the competing alternatives.
How to make smarter product development and customer experience decisions
Once organisations understand the drivers of choice in the sectors in which they compete, they can make significantly better decisions about where to focus product and service development effort – confident that any improvements will drive customer uptake and revenue.
The methods for understanding customer choice have matured considerably over the last decade, with new approaches replacing traditional market research and providing businesses with the critical insights needed to make smarter investment prioritisation decisions. Jobs to Be Done, developed by Clayton Christensen and refined by practitioners including Bob Moesta, is the most rigorous of these frameworks – grounded in understanding not what customers say they want, but what causes them to choose.
Elemental Concept and Purple Shirt have been applying these CX methods across the UK and New Zealand. If you would like to learn more about how to make smarter decisions around where to focus product and service development effort, get in touch – we would be glad to talk it through.
