Leading digital product development

Objective

The basis of profitable business relationships is that an organisation sells to its customers a product or products at a price and at a volume sufficient to generate a level of return on invested capital greater than that obtainable through (simpler) moneymarket investments. This depends crucially on delivering what customers want, and in turn understanding and acting on the ways in which customer requirements change.

The core objective of product development is to be ahead of today’s profitable transactions, developing what will be sold tomorrow and thereafter. All development now depends on digital technologies. Very simply, then, successful product development depends on:

• understanding what it is about today’s products that is popular (or not) – the actual;
• engaging with customers to learn what else they might want to purchase, and how the way they buy may change – the probable;
• tracking how technology is changing what can be offered to customers – the possible.

Your role is to ensure that your organisation is product sensitive – that is, sensitive to what customers want and to the possibilities of innovation.

Context

How do you engender in an organisation a spirit of innovation that is not so proud and so bound to what it has already achieved that it is deaf to customer feedback, that is prepared to challenge norms and the status quo, and that is restless enough to think what may seem the unthinkable?

There are no rules for innovation, by definition. Some organisations (famously 3M) enable so-called ‘skunk works’ by allowing staff to devote a percentage of their paid employment to their own ideas. Others attempt to formalise seed-corn investment in innovation through creating ring-fenced innovation or venture capital funds.

To foster innovation you must take an innovative stance. You must be:

• countercultural – ready to reject any suggestion that a specific approach is the organisation’s ‘way’;
• iconoclastic – prepared to challenge any and all accepted norms;
• open-minded – receptive to any ideas, however ‘left field’;
• pluralistic – open to ideas wherever and whoever they come from;
• cannibalistic – unafraid of ideas that threaten existing business;
• international – eager to learn from many cultures;
• generationalist – anxious to learn from new generations with fresh perspectives;
• open to new boundaries – unlimited in thinking;
• humble – aware that others have the best ideas.

In whatever role you take, if you successfully engender innovation you do so not through processes, but through creating an innovative culture in which ideas themselves are never penalised.

Challenge

The counterweight to ideas is risk – how much an organisation is prepared to wager on the new and the untried. At one level, this is about portfolio management. Whether you are running an entire business or simply an advertising campaign for a specific product, you take a measured view of the proportion of resources you are prepared to allocate to ‘risk’. The essence here is an estimation of the cost of the failure of innovation and its overall impact.

And it is failure – or rather the fear of failure – that is the biggest challenge to innovation and product development. As leader you must emphasise – and be heard to say – that:

• failure is normal;
• failure is a part of progress;
• failure is key to learning;
• if you haven’t failed, you haven’t risked enough;
• the worst failure is not to learn from failure.

In this way you blend innovative culture with supported risk-taking.

Success

Within a culture of innovation and risk-taking, you must approach product development with a very clear set of seven principles.

• Customer expectations – the fundamental expectation of many customers will be for new or enhanced products delivering more for less cost. The challenge in product development is not to assume that price is always declining but to focus on delivering value – the right price, not the lowest price. Product development will often be informed by market surveys and detailed customer feedback, but a key element in innovation is to generate products that customers would never have imagined, and being unafraid to do so.
• Speed of change – all customers, consumer and corporate, are becoming ever more demanding as globalisation and technological innovation drive increasing competition. No product development approach can be viewed as sequential – i.e. one new product or service follows another. The innovative organisation is already planning the next product innovation (and the next) before the current ‘new’ innovation has even been launched!
• Speed to market – consequently, development processes have had to be massively accelerated and continue to be so. Elapsed times between conceiving and executing product or service innovations are continually shortening. This is putting new demands on planning processes, staff requirements, supplier strategies and relationships, and logistics. Innovation is a fundamentally uncomfortable, fast and bumpy ride!
• Technology – technology is not the be-all-and-end-all, but is an enabling prerequisite for innovation. It should be seen not just as part of new products or services, but as a key driver of process, logistical and supply changes that reduce cost and shorten development time.
• Understanding core competence – being nimble demands a clear insight into competence, along with knowing what your organisation does (and should do) well and what should be outsourced. This will change over time, driven less by the conventional view that outsourcing is an opportunity to reduce costs and increase efficiency, but more by the realisation that decisions on what to insource are crucial insights about how an organisation adds value.
• Global skills sourcing – the best innovation junks any notion that homegrown ideas and resources are the best. Globalisation has pluralised and dispersed knowledge and skill. Strategies for sourcing any element of the innovation development and production supply chain should seek the best available suppliers based on skill, not on where they are.
• Integration of post-sales service – successful product development remembers that the customer experience has hardly begun when a sale is made. Interactions with customers post-sale are part of a ‘think-through’ development process which inextricably binds sales and service from the beginning of the development cycle.

Successfully leading innovative product development is in essence a matter of attitude.

Pitfalls

Successful product development can be undermined if you:

• only listen to customers – sometimes customers don’t have the best ideas and have to be led to innovations they never imagined (for example the iPod); the successful leader avoids being a slave to customer surveys;
• regularly reject new ideas – you should encourage out-of-the-box thinking and never be seen to defend ‘the way we do things’;
• blame failure – as failure is the necessary cost of innovation, sometimes ‘having a go’ but failing must be celebrated as much as success;
• see innovation as a function – good ideas, especially those that challenge the status quo, are the preserve of no one, and the leader must encourage innovation as a culture for all;
• smother innovation in bureaucracy – the temptation to analyse new ideas excessively is very great, as a means of limiting risk; but sometimes (within an overall portfolio of risk) experimentation and trial-and-error are the best ways of testing ideas.

Perhaps the greatest challenge is posed by leaders themselves. The more senior they become, and the more they become responsible for, the more they may feel they have to lose, both professionally and personally. Promotion and career ambition may then become the enemy of innovation. The only response to this is to regard innovation as a badge of, not a barrier to, success.

Leaders’ checklist

• Remember that digital product development essentially depends on creating a culture of innovation.
• Lead a digital innovation culture where ideas are cherished and celebrated.
• Recognise that successful digital innovation demands a fresh approach to all aspects of supply chain management and customer engagement.
• Be seen and heard to encourage countercultural and iconoclastic thinking.
• Know that risks have to be taken and managed within a portfolio approach.
• Be unafraid of failure and be seen and heard to say that failure is the acceptable price for true innovation.
• Be honest in recognising that digital product development requires ever quicker responses to changing customer demands and ever speedier development cycles.