It is common belief that roughly 80-90% of products fail. Although this figure defies logic, the myth persists.
If over 80% of new products truly fail, does it make sense for anyone to take a professional career risk by committing their time and talents to building new products? From a portfolio perspective, what must the ROI of the remaining 10-20% of successful products be to offset the costs of a development program that fails at that rate? Operationally, how long would it take to realize these returns and what manager would realistically employ time, talent and money on these new product projects?
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Luckily, in reality, the failure rate is 30-49% across all industries, roughly 39-42% in software & services and technology industries, respectively,
according to nineteen peer-reviewed research studies between 1945 and 2004 (sources 1 & 2). Although the rate of failure is dramatically lower than what is rumored, the many risks of product failure cannot be understated.
Below, I talk about the many ways products can fail, how to tackle those risks systematically, and how UXPin has done so over the years. The below concepts are covered in greater depth in oure-book.
Systematically tackling 3 types of risk
Ash Maurya, CEO of Cloudfire and author of Running Lean – Helping Entrepreneurs Succeed, offers a lot of advice about products, especially MVPs. He’s covered topics such as how to build an MVP, delivering customer value, product launches and identifying the riskiest assumptions. On the last topic, he claims there are three general approaches product leaders can take:
- Use your intuition.
- Start with the 3 universal risks — I’ve detailed 4.
- Talk to domain experts.
Ultimately, you alone have to own your business model and product roadmap so having a systematic approach to evaluating them throughout the business and product lifecycle is imperative. Since the first and last approaches are arguably more risky — especially at the earlier stages of a product — I’ll only elaborate on the second approach using the Lean Canvas framework below for nailing your product or MVP.
In his post about 10x Product Launches, Maurya describes in detail how to address the 3 universal risks and I’ve summarized them below. This focused and systematic thinking about product risks was influenced by the management philosophy. Adopting the common idiom “a chain is no stronger than its weakest link,” this management paradigm assumes that processes, organizations, etc. are vulnerable because the weakest person or part can always damage or break them or at least adversely affect the outcome. As a result, managers put this philosophy in practice by focusing on a very small number of constraints that could limit their business or product “system” and restructuring those systems around the constraints to achieve more goals.
I’ve summarized the steps below:
- Identify the system’s constraint(s).
- Exploit the system’s constraint(s).
- Subordinate all other resources to the constraint.
- Elevate the system’s constraint(s).
- Rinse and repeat.
Image Source: The 10x Product Launch.
1. Product Risk – Getting the product right:
- First make sure you have a problem worth solving.
- Then define the smallest possible solution (MVP).
- Build and validate your MVP at small scale (demonstrate UVP).
- Then verify it at large scale.
2. Customer Risk – Building a path to customers:
- First identify who has the pain.
- Then narrow down to early adopters who really want your product now.
- It’s okay to start with outbound channels.
- But gradually build/develop scalable inbound channels – the earlier the better.
3. Market Risk – Building a viable business:
- Identify competition through existing alternatives and pick a price for your solution.
- Test pricing first by measuring what customers say (verbal commitments).
- Then by what they do.
- Optimize your cost structure to make the business model work.
How teams fail to address these risks
An MVP can fail for myriad reasons. Some of these failings have been highlighted in the Forbes’ article, 8 Reasons Startups With Good Ideas Fail, but we’ve got in far greater depth below.
1. Product Failure
Image Source: LeanBlog.
- Solving the wrong problem — Overlooking the purpose of the product before building, or simply focusing on the wrong purpose. You’ll
either end up with a product nobody cares about or one that doesn’t give you the right answers. As discussed in our Guide to MVPs, understanding the business viability of your MVP is more important than whether it’s technically feasible.
- Solving the worthless problem — Worse than having the wrong product that can be tweaked (or pivoted) to solve the right problem is solving a problem correctly, but it’s so minor in people’s everyday life that it ultimately can’t be sustained.
- Poor customer communication — You can’t solve someone’s problems correctly and if you can’t ask them the right questions.
- Not translating customer problems into correct product requirements — You understand the problem that needs to be solved but end up building the wrong solution.
- Not iterating on solutions — You understand the problem being solved and have a great idea for how to build a solution, but you don’t consider alternatives that could be far better and would give you better answers to the question’s you’re trying to solve. Lack of brainstorming, customer engagement, sketching, and wireframing and/or rapidly prototyping could hurt you.
- Overbuilding — You figure out the right solution but add too many features that clutter the valuable functionality, leading to customer abandonment or confusion which will also impact the quality of your learnings because the user feedback and data is so scattered it doesn’t make sense.
- Launching late — Again, you know the solution but then spend too much time building before launching your product. You either become disconnected from the customers you’re trying to satisfy or run out of time, money and resources.
- Lacking data — You’re not tracking or, worse, you’re improperly tracking user behavior so you can’t properly make informed decisions and ultimately (in)validate your hypotheses about the MVP. You just move onto the next product release with only one eye open.
- Lacking scale — If you don’t get enough data points, your hypotheses about what you’re building is harder to (in)validate. This is more important the bigger or more sophisticated your product becomes because it’s harder to get signal from all of the noise for the growing number of questions you have about the product.
2. Customer Failure
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- Solving one’s own needs, not customers — It’s one thing if you built a product that solves your problems and it’s another if the product only solves your problems. You need to socialize your product with others to find who actually needs your product. Then figure out where you can find more of them.
- Building for too broad of an audience — You can’t be all things to all people. You end up being a ” Jack of all trades, master of none.” The results of this are twofold: You’ll have a product that solves more people’s problems to a lesser degree but you’ll also have a harder time figuring out who to go after first. After all, it takes time, money and energy to get anyone to become your customer, and the task is even more daunting when you’re trying to make the entire World your customer.
- Not finding early adopters — Focusing on the wrong early customers can be just as bad as not having focus. If your first customers are people who aren’t in love with your product, then your product either sucks or you haven’t found the early adopters yet. Think about it. You’re solving a problem that led you to put every day of your life into building a product. You want people that would use your product every day of their life — or close to it.
- No plan for marketing and user acquisition — You have early adopters who love your product but no real way to get your product to market. Your great product will die a slow death from neglect.
- Pushing to customers, not pulling them — You can only scale so much by cold calling and emailing people. Even if your product is successful early on, you’ll need to find better ways to get inbound interest.
3. Market Failure
Image Source: Wikipedia.
- Not considering alternative solutions — You understand the problem being solved and have a great idea for how to build a solution, but you do it in a vacuum. Consider that customers have the power of choice and that you have to compete for their business. If it’s a big problem, you’re not the only one trying to solve it.
- Not charging — It’s hard to get a sense of what your product is worth to customers if you don’t charge (or at least ask them verbally early on). It’s also impossible to sustain your product if you don’t make money. While ad-based businesses often start out free or freemium, they still have a path to revenue. You should too.
- Not pricing correctly — Charging improperly can be as problematic as not charging at all. You could have a false sense of what your product is worth and not catch this for a long time. And it’s always changing based on the next best alternative, customer behaviors and many more factors. Don’t just throw discounts at customers to get them in the door. Try to really understand what your customers will pay. This could also lead to failure for many reasons.
- Not tying pricing to customer value — Along the same lines, your product typically provides different value to different customers for different reasons based on specific functionality you’ve built. Your product doesn’t offer a standard utility to everyone. Therefore, it’s important to really understand how specific aspects of your product can be segmented to get the most revenue and deliver the greatest customer value.
- Not adapting the business model to be profitable — You may have to find a new customer or a new way of getting money from your existing customers even if the product is serving a really important need.
- Not adapting the product to be profitable — Some parts of your product may make it really expensive to operate, may cause a lot of customer service maintenance, etc. Your product can impact your ability to sustain itself. It’s not just the business that could be wrong.
4. Team Failure
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While Maurya doesn’t include this in his framework, the human factor in product failure is critical to consider. Forbes’ article, 8 Reasons Startups With Good Ideas Fail, is a good starting point. I’ve laid out some of the main points of failure below:
- Not taking action — Ideas and direction are worthless if nobody can deliver on them. Don’t get too far ahead of yourself with your ideas (and idealism). You’ll spin your wheels and spend your resources without getting anything tangible done. Or someone else will come in and take your spoils because you were too busy brainstorming release 10 when you haven’t finished v.1.
- Giving up — You just stop, call it quits, throw in the towel. You give up. Building an amazing product and business is hard. Don’t feel bad if it happens. Just recognize that it happened and don’t make excuses.
- Lack of expertise — Collecting data and talking with customers is great. But if you don’t know how to interpret the feedback you’re getting, you’ll be blind. And the blind leading the blind may drive you off a cliff.
- Disagreement about goals and/or direction — If you don’t have a clear objective for your MVP across the team, then your methodology and, therefore, conclusions may be compromised.
Stay Focused Or Your MVP Will SUX
Any of the above MVP failures (or a combination thereof) will produce a product that SUX — an offering with a “Sh***y User Experience.”
At UXPin, we try to address all of these potential failing points. Like many companies, we’ve certainly been guilty of building features that weren’t the most important to our customers or, ultimately, company growth. However, we’ve been aware of and addressed many of the potential failure points mentioned and the results have been incredible.
While I can’t give you exact numbers, you can at least see that we’re driving significant changes in one of several key metrics over the past few months and are on track to blow that number away as well.
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