© Tweeter Linder 2016 – All rights reserved. Photo by iStock
In the past we defined needs, solutions and pricing in sequential flows. A vital enabler was market stability over quarterly or yearly horizons. In fast paced markets we need to think and work in a more iterative way with all three areas in parallel.
The old sequential model and its shortcomings
Our previous assumption was customers had all answers and with a consultative selling we could figure it all out. We asked them about their needs. We tailored solutions to their request. We addressed the pre-defined budget with a TCO or FCF centric business proposal. This work when there is a low level of change in the market with no/low business risks.
The old sequential model has limitation in volatile markets with a higher degree of change. Businesses face larger businesses risks due to changes in the market. Digital is making inroads in all businesses. The importance of Software and service centric business logic is growing fast.
Transition to an iterative development model
The first aspect to address is the move from a sequential to an iterative development model. A model with parallel development of customer need, solution and business model.
In the past we had firm market and customer requirements from start. Now we can expect to start from a vaguer picture of the market and customer needs. Since we deal with both technology and business model innovations at the same time, we need to take both forward together. A technical innovation in prototype stage is often the starting point for engaging with the customer.
From that point an onwards we need to iterative our understanding in all three dimensions. Across all three fields we will start with hypothesis that we gradually refine. Until we reach a point where need, solution, business models and price-points meet the needs.
Refine understanding of customer situation and needs
Innovators need to define both the product and the commercial requirements for their offering. The challenge for the product requirements is to define the minimum viable product. An journey more about eliminating what you don’t need for initial market launch and feedback. A goal you should not confuse with minimizing the R&D required for the first product prototype.
Your prototype is your ticket to play. The most important aspect of the prototype is to enable conversations on how to guide the next development phase.
The second aspect is about understanding of the business situation and needs to address. A clear and crisp view of the expected business gains and the current paint points is the ultimate target. It is more important for innovators to understand how to eliminate customers pains than how the create gains.
A good recipe for a strong offering is 2-4 pain relievers and 1-3 gain creators. Then you are set-up for rapid success in the market.
Solution-smithing is growing more complex
The solutions offerings for the new world are becoming more complex. The offering is likely to involve both your own parts as well as third party additions. Your offering is part of a broader eco-system with components in your solution as well as leverage points in your go to market model. Beyond the pure product content professional services might represent a part of your offering. The solution iterations will take you from an early hypothesis to final offering. Your challenge is a bit like combining, dough, tomato sauce and toppings into an attractive pizza offering.
Iterations are vital to get the mix of product and services right as well as you long term mix of own and third party elements.
Business model innovations before you get to a price
The business channel for new innovations is both about business models and price levels. You need to address both aspect to maximize customer and share holder value.
Expect a key part of market shifts to be business related. You own the task to capture the full potential of your offering with the best business model. In some cases the business model innovations is the key to market adoption. . In other cases it is about strengthening your position in the value chain and maximizing your share of the value
Your insights on business gains and pains lay the foundation for the pain relievers and gain creators your model will build on. The icing on the take is to run your business model into priced offerings.
Set up your organization for iterative learnings
How fast you can learn and implement learnings define your innovation speed. The cost of acquiring this learning represents a large part of the cost in bringing new offerings to market. Learning too little too late with too many people is costly from both a cost and revenue perspective. The tools you apply across the three fields and how you refined your growing insights is a central part of the new process. It has to be iterative and learning at the same time.
Questions for you and your team
- Is our current DNA to develop new business in an sequential or a iterative model – most companies has a heritage in one of the two
- What changes do you need to implement to reach an iterative business development flow – this is table stakes for start-ups
- Who can mentor the team in making a transition from a the sequential to an iterative model – expect your team to need support in the transition
- Who is best in your team to set-up a hypothesis for needs, solutions and business model – a critical resource in the team
- How can you secure needs and business model is in alfa stage when your offering is in alfa – timing is a key parameter to work with when aligning the three areas.
- How do you capture and structure the learnings as an integrated part of your business development process – mails without tools will not cut it.
- What sales people need to know about the new B2B landscape [ARTICLE] – by Harvard Business Review, August 2015
- The lean start-up [BOOK] – by Eric Reis
- What is wrong with the lean start-up methodology [ARTICLE] – by Natasha Hussein, TNW News
- A new model for innovation in big companies [ARTICLE] – by Harvard Business review
- How to create a lean learning environment [BLOGPOST] – by Todd Hudson at Chief Learning Officer
- 7 steps towards a more structured approach to content marketing [BLOGPOST] – by Jill Quick for Smart Insights
You can expect to start with vague information on the customers’ business needs. At the same time a solid understanding of the business need and consolidation of multiple customers’ needs is the foundation for your solution development and your business model creation work.