Quick Tips - Tips from the practice masters...
In an ideal world, you start out with a clear definition of a problem and then systematically work your way toward a great solution. But in the real world, you sometimes find yourself with a great technological solution in search of a compelling problem. Even if your business is currently successful, there are good reasons to leverage the investment you've already made by discovering new applications for your core technology. But how do you increase your odds of success? At a recent Product Strategy Network Roundtable, Arun Ranchod, Business Development Manager with MEDRAD, and Jim Thompson-Colön, Head of Future Business at Bayer Material Science, shared their experiences, techniques, and lessons learned with deciding where to place their bets.
Betting right. It makes good business sense to find new applications for your core technology, even if you already have a successful business going. But what you do with those new application possibilities and where you place your large and small bets is another matter.
Be wary. A danger of applying a technology into an unfamiliar market is that, without adequate background, you can end up spending a lot of time creating a new product application before discovering that it won't work in the marketplace.
Take your time. There might be dozens of applications for your technology at any one time. Each one requires homework and research lasting a week or so. You need a sustained period of time to do a proper evaluation of new opportunities; it's not something you can do in ten minutes between primary assignments. So be selective.
Look close to home. Ask yourself if you can realistically become first or second in the particular industry you're looking at. If you don't know anything about that other industry, steer away from it; it's a waste of your time. Look for adjacent areas to apply the technology.
Hit the jackpot. In the betting world, there's an equation that deals with the probability of winning at any particular hand and how you should bet. It shows that you lose a lot of small bets before winning the big pot. The same is true with technology investments: there's a point where the odds favor your going in for the big pot.
Place small bets. If you don't have the capacity to take on another big market right now, placing smaller bets may be a good strategy. But ask yourself first whether that new market opportunity advances the core mission of the company, not just whether it can make money.
Calculate Risk/Reward ratio. If a new application involves a new business model for you, its chances of success are very small. To offset that, your investment has to be very small or your payoff has to be very, very large.
Consider the 10% solution. The rule of thumb for some companies in making an investment decision is that the new opportunity must equal at least ten percent of the business. Of course, that gets harder as the business grows, but you can judge prospective new opportunities by ten percent of the size of your company's original business.
Establish criteria. Use business and strategic fit as well as financial criteria to decide whether to move into another area. Is it consistent with, or adjacent to, the call points in your sales process? Is the business model compatible with what you do? Is there a technology adjacency? If there are enough green lights to warrant it, set up layers of due diligence and allot specific time to each layer.
Brace for internal failure. New applications have a high failure rate and a lot of it is internal. It results from the company having both specific criteria to stick with and real pressure to grow. When these projects are brought to senior management, they are more likely to get shot down.
Apply the new 80:20 rule. This classic rule of thumb works a little differently in technology: Since only 20 percent of the projects actually work, you should work on those 20 percent and disregard the other 80 percent. Bet on the horse that's going to win.
Learn as you go. People want a plan from upper management. But even though you can calculate the risks, you don't know the probability of success at the outset of a new technology; you only find out as you go along. Gaant charts and project management and a structured approach can be very useful when you're building a plant or installing an IT system - things that are risky but not uncertain. New technology is uncertain; nobody knows for sure.
Remember: you never know. There are going to be failures. There are both known unknowns and unknown unknowns; there are things that you're not going to be able to see beforehand.
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