The New Product Development Minefield

Product development, particularly innovative product development (creating something brand new as opposed to building a better mousetrap), is a risky endeavor. Not only do risks show up frequently in the development and realization of a product concept, but they also exist in the commercialization and market reaction to that concept once it’s been created. Consumer product failure rates are often quoted as being around 40%.

Synapse has been developing products with clients since 2002. We’ve delivered many ‘first of its kind’ products and have seen key themes emerge from our work over the years. With enough engineering horsepower, time, and money, even extremely ambitious product concepts are possible. But that’s not the reality for most aspiring product companies—time and budget constraints are very real and many companies run out of time or money before their ambitious ideas see the light of day. A clear pattern in our work over the years is that it can be very difficult to decide which risks to accept and which ones to minimize and mitigate when hoping to deliver an exceptional product to market quickly with minimal costs.

Here are some things we’ve learned that help us make these strategic development decisions with our clients.

Our Recommendations

1. Plan for Optimistic Realism with a Contingency

Part of the challenge with making risk decisions in projects is that the optimism bias means we’re often starting with a schedule, budget, and plan that assume things will go pretty well. There’s a good reason why many clients like a “happy path” approach in the planning stage—if we set a plan that is too conservative, we’ll be sure to collectively spend more while the market passes us by. But if we’re too optimistic, our clients will run out of funding and time before crossing the finish line.

First, we recommend performing a feasibility analysis before estimating and planning a full project—converging on some key points enables a much tighter and more accurate estimate. A feasibility analysis can be a lightweight paper study to check key assumptions (e.g. developing a thermal model to see if solder joints will melt during FPCA overmolding) or it can be a more involved prototype effort to ensure a critical subsystem architecture will work (e.g. building a real FPCA and actually overmolding it to ensure the fabrication approach is viable).

Second, when making an end-to-end estimate, we recommend creating a realistic-to-optimistic plan (that isn’t so aggressive as to cripple design and validation iterations), with a schedule and budget contingency to mitigate risks and address issues down the road. Depending on the profile of the project, an appropriate contingency can be 10-20% or more. This approach keeps overall costs in check while enabling the product owner to make better decisions without their back against the wall from the start.

2. Consider the Full Picture in Each Trade-off Along the Way

Making the decision to mitigate a risk can feel like buying insurance. Asking “do you want to spend more for a parallel path to mitigate the risk now or do you want to accept the risk that something might go wrong and then deal with it later?” means that cost is a sure thing to mitigate and only a possibility to accept the risk. It’s well documented that people exhibit loss aversion, where costs are weighed more negatively than benefits are weighted positively, so there’s no wonder product owners often accept risks along the way under this framing.

To help our clients make good strategic product development decisions, we have to follow best practices for risk management by articulating the probability and consequence of risks as well as the costs of the mitigation options. We also need to ensure that we’re aligned on the holistic project risk profile as a reference point for each decision. Accepting some risk in an otherwise on-track project is one thing, but stacking more risk onto a house of cards is another. It’s too easy to make each decision independently and then have the impact be too severe to recover from—we recommend visualizing the holistic project risk profile in a weekly status report dashboard.

3. Invest in Test and Validation

Putting the time and energy into defining minimum viable product (MVP) requirements and test plans to verify and validate that a device meets those requirements is essential to the success of any product. This is especially true for risky development programs. While risk may have been accepted along the way and corners may have been successfully cut to reduce costs and time to market, test and validation is a critical safeguard. It forces a hard look in the mirror to assess a product against the definition of success (usability, functionality, reliability, cost, etc.) along the way and, most importantly, before sending it out into the world.

There’s so much more to the full recipe for product success that we haven’t gotten into here, but we hope that these specific recommendations from years spent bringing risky ideas to market can help entrepreneurs and established companies alike.