Quick Tips - April 11, 2007

Last issue's Quick Tips discussed how do you judge whether a great idea could be turned into a profitable product? In this issue, we continue with this discussion in establishing the market value of potential new products. Different methods have evolved at different companies to make those determinations when selecting new ideas for further analysis. At a recent Product Strategy Network Member Rountable, three practitioners experienced in making those judgements shared their techniques with the other participants.

• Realize that nothing is new. There is never a totally unknown market; there is always something similar to it.  Even new things are displacing something else. See what you can learn about new applications from studying existing ones. 
   

• Build a baseline.  Find out from potential customers how long their processes take or waste they create.  Then figure out how much time you can save them.

• Calculate displacement.  What is your product idea worth to a customer?  Particularly for Blue Ocean products and strategies, determine what you're displacing and what that displacement is worth.   Is it design time?  Production time?  Record keeping?  Then assign a cost to that displacement.

• Learn the value chain.  Identify all the stakeholders in the value chain and their interactions with one another.  Ask them all what they think of the new product idea and how it impacts their work. 

• Learn the issues.  Particularly for health and security related products, find out what regulatory requirements are involved and what reimbursement issues you are likely to encounter.

• Study the customers.  Observational research of customers and their experience with field prototypes of a product idea can provide in-context insights.  What alternatives procedures or replacement technologies are now in use?  Who are the buyers, the users, the influencers, and the decision-makers on the customer side?  Consider conducting conjoint studies to understand preferences.

• Talk to everyone.  Don't just talk to the people who already love you; talk to those who hate you as well as those who don't know anything about you.  And remember that early adopters are not representative of the market; talk to trailing-edge adopters as well.

• Determine customer ROI.  A product has to have real value to business customers to justify its purchase.  What is that value to your customer?  If there is an ROI, you can build a business model around it.  If not, stay away.

• How much? In the formative idea stage, you don't have a clue.  One person will say it's a 10M revenue opportunity, another 20M and another will say 50M.  Use an order of magnitude scale for potential revenue. If your product idea falls into the middle of the range, then go to the next stage. If it's lower, then let it go. If it's higher, then pinch yourself and go for it. Set a price by a category: cheap, expensive, etc. You're going to have to revisit this later anyway so do it quickly.

• ID the buyer.  If you having trouble identifying a potential customer who is interested in buying your product, then maybe they don't exist.  And if there is one, remember that the first reference customer can be very important, even if they're not very typical
  
  Read the first part of this two-part Quick Tips series on Assessing New Product Opportunities - Evaluating Ideas and Opportunities
  

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