The Best Way to Launch a Product: Analyze and Decide, or Learn by Doing? | Technological Leadership Institute
One of the subjects generating a lot of articles and books today is the age-old question of “How to best launch a product?”
In the beginning (the 1800’s and before), no “market analysis” was done or even possible. An entrepreneur gets an idea, generates a product, and puts it on offer. Based on that person’s own experiences, a product is created that seems like a great idea. It is then put up for sale, and if people buy it, the businessman gets rich. If they don’t, it is “back to the drawing board.”
In the mid-20th century, that model began to change. ‘Scientific marketing’ became the rage, where now an entrepreneur would scope out the size of a market using public data, then focus in on the target segment using detailed reports and surveys. Focus groups would provide more depth of understanding, and help convert the data into human terms. Based on all that information, an optimal product is generated, and communicated to the people likely to care the most.
Marketing became the pivotal discipline in a business. Peter Drucker articulated it best: “Marketing is the whole business, seen from the customer's point of view.” Legendary GE CEO Jack Welsh went further in describing its central role: “Marketing isn’t somebody’s responsibility – it’s everybody’s responsibility.”
The MBA degree became vital for someone wanting to lead the marketing function, especially in a large company. And anyone who wanted to “talk the talk” needed to know the “4 P’s”: Product, Price, Place, Promotion.
But today, there is a new school of thought emerging. It starts with the assumption that market research reports and focus groups have a key limitation: They are based on the world as it was and are out-of-date at once.
Steve Jobs was famous for saying “People don’t know what they want until I show it to them.” How can you assess the market for an iPhone if nobody has seen anything like it?
3M had this exact problem in the initial work on the Post-It® Brand Note. When Marketing was asked to come up with a sales estimate for the potential product, they responded based on the Paper Clip, the most similar product they could imagine. Of course, we laugh at that now, knowing that Post-It® Notes are used for many more things. But imagine the dilemma of the marketing people at the time – what do you compare it with? Any typical market analysis is doomed to being wildly inaccurate.
The modern response to this dilemma is a bit of a return to the past. Of course, it has a modern twist: Experiment!
Start with a new idea. Generate a minimum viable product, and design an affordable experiment to put the product in front of customers. That might be supplying prototypes to a few key customers. Or offering the product only in a couple of test markets. (That is what was finally done with Post-It® Brand Notes.)
The keys to success in this paradigm are a fast cycle time, and a passion to learn from each iteration. You cannot “fall in love” with the first prototype, as you have no data to back up your belief that the market wants it. Instead, you put it into customer’s hands, get feedback, evaluate the data, then adapt the product to the feedback and try the experiment again.
The word “affordable” is key. The best experiment is sufficiently limited in scope and cost that multiple iterations can be run before the business runs out of money.
This concept is at the heart of the “Lean Startup," and it will far outperform the more analytical approach in some cases. The "test and learn" approach is designed for conditions of rapid change, unpredictability and ambiguity. In those circumstances, there is no good substitute for “learning by doing."
Yet it is not a panacea.
In some cases, the environment is so stable and well-known that the traditional analytical approach will lead to useful data. In other cases, the environment may not be stable, but the innovation is so technologically challenging and expensive that a “minimum viable product” may be years away. If we are to proceed with such transformative technologies, the traditional approach is the only option.
Like every other decision made in business, finding the best approach to testing a market is a judgment call. And the best judgments are made when you consider the options first.
This blog is part of a 14-week series by TLI Senior Fellow and Honeywell/Edson W. Spencer Chair in Technology Management Steve Webster. Each post will focus on one concept or idea discussed in his course MOT 5001- Technological Business Fundamentals. Other posts in the series can be found here.