How to Develop Consumer Hardware (Part 1 of 4)
Note: parts 1 & 2 cover MVP development and are most useful for early stage start-ups, parts 3 & 4 are still being written and not yet available
A Tale of Two Tracks
In this series I talk about the best way to develop consumer hardware in a way that maximises chances of succes while reducing the most amount of risk. Now, given that I've developed products for both very risk-averse but affluent corporates and also for cash-strapped, risk-inclined start-ups, I've broken it down in two separate, but consecutive flows and will be addressing them from the point of view of a hardware start-up, they are:
The MVP Track: doing things that don't scale (also known as the "fun one"). The purpose is to build something you can learn from. Start proving willingness-to-pay, optimizing for the most valuable feature set and experimenting with price points and revenue models. The purpose is to create proof-of-business in your chosen segment. Also known as Customer Development in Lean Startup terms.
The Scaling Track: Here we develop for a scalable product, user experience and business (also known as "a world of pain"). This is what you do once you've reached proof-of-business and you're ready to cross the product-company gap and ramp up production. The goal here is to dominate the segment you've chosen and become a successful business. Also known as Company Building in Lean Start-up terms.
The MVP Track
Customer Discovery: where you zone in on your Smallest Viable Audience. Once you feel you've hit a group that gives consistently similar answers that have valuable problems to solve, lock it in.
MVP Definition: where you move back and forth between problem analysis and solution definition. Outputs are a clear vision for your scaled product, but also having it stripped down in an MVP design; Before moving forward you should have first evidence of willingness-to-pay.
Customer Validation: where you start selling your MVP in small batches, iterating on the product features, pricing and your business model with each new batch. Outputs are proof-of-business, an updated product vision and a clear set of functional requirements.
Once completed successfully you can move to the Scaling Track, using the outputs of the MVP Track as inputs.
The Scaling Track
Concept Design: a scalable engineering concept and design concept are developed in parallel, if critical risks are identified they are addressed in a feasibility plan. Works-like prototypes are then built to de-risk critical assumptions and modify the concept and requirement accordingly.
Architecture Design: requirement documents are finalized, engineering schematics and industrial design are matured and all of them are frozen to serve as input for the next stage.
Integration: here is where most trade-offs happen and concepts are merged towards a functional design. Once the design is sufficiently tested and de-risked, it gets frozen to serve as input for the next stage.
Industrialization: here the manufacturing process is prototyped in-house, in close collaboration with manufacturers. The output is a trial run of functional products for final verification and certification, once products pass verification and certification, the manufacturing process is frozen.
Manufacturing: depending on if you will take manufacturing completely in house or outsource it directly, the design and process need to be transferred to a manufacturing partner whom needs to prove they can reproduce it.
I won't be able to go as deep in every topic (although it still became a hefty series), this is more of a comprehensive overview, for more detail I’ll refer to other articles wherever I can (and in case I've written them yet).
An introduction to CPS
Here we go again with another acronym. But I love this one because it speak in such simple terms. Coined by Steve Blank, it stand for Customer-Problem-Solution. In essence, these are the core building blocks of your value proposition. It's basically the same thing as the Value Proposition format as used by Geoffry Moore, but still excluding things like how you're different from the competition and more concise. I like it a lot because it focuses on the core in simple words (sorry Geoff, gotta give this one to Steve). Furthermore, the order it is in, also dictated the order in which you should examine them and place your focus on during the MVP Track.
Everything starts with an idea, but you need to untangle that idea and put it a CPS format. Now what do I mean by that? More often than not I see entrepreneurs that have great idea, formulated in a simple elevator pitch that is very imaginative and makes very clear what you're talking about, but tends to miss out on some key elements. One of my favourite is from a client of mine who wanted to build "The Nespresso of Ice Cream". This of course sparks the imagination and makes it crystal clear in one sentence what they're talking about, you can already see the product come alive in your mind! But is it really that clear? Because upon asking the entrepreneur that came up with it: "Very cool, but what problem does this solve?", he was absolutely stumped and couldn't really answer the question (besides the typical: “Everyone is gonna love this, right?!”).
What happened was that he had conflated and combined some elements of the CPS in his "idea ball" where these elements tend to get mashed together or left out. Kind of like a mixed ball of Play-Doh.
The “Idea Ball” - visualization concept: David Wang
When you encounter this you should try to untangle it into it's three core element, this excercise alone often leads to very interesting conversations since start asking the most important questions:
What problem is this solving?
Does this problem exist and is it worth solving?
Who has this problem the most and would benefit greatest? (Who's your SVA?)
What existing solutions and alternatives already exist that are solving this problem today?
How is your solution better than those?
For the ice cream machine, we landed on something like this:
Separated CPS - visualization concept: David Wang
Added benefit is that this makes the conversation more about the problem and less about the solution and makes it clear that the solution doesn't really matter if the problem doesn't exist. It's no surprise that a lot of founders are in love with their solution, while they should be in love with the problem they're trying to solve.
Now, common practice is you then need to evolve the CPS statement a bit and flesh it out more to properly capture your differentiators (actually bringing it closer to the original format used by Moore. Sneaky one, Steve…). Once you've done this, you need to look at all the assumptions you're making and devising different experiments to (in)validate them, focusing on the most critical ones for which the least evidence exists, taking the three lenses of design thinking in to account. It looks something like this:
However useful, the very first time I believe strongly you can completely skip this step, because there really is only one real question: "does the problem even exist and is it worth solving"? For me this is always the first thing that needs validation. With a first step always being to interview the customers you've selected in your CPS.
A quick note on the term "problem". When teaching about this in the past, I've had students remark that not all products solve problems, especially in consumer goods, they're often just entertaining or even just aesthetical (think fashion and art). There is a point there, but I tend to see the term "problem" rather wide. The answer to this is tied much closer to the theories of "jobs-to-be-done", while I'm not a big fan of the technique, there's definitely some merit to it, especially when describing the types of jobs. In essence it's the same as Baine's Value Pyramid, which focuses on the different types of value you can create for customers. The types of value are grouped in 4 buckets: functional, emotional, life-changing and social impact.
- A functional problem is the most classical definition: it's an actual problem of things being too slow, expensive, ineffective, … you get the idea
- Emotional problems are still easy to grasp: they address the need to regulate emotions, change personal behavior or even combat boredom (see entertainment for instance, or things like meditation apps, cozy furniture, …)
- Social & "life-changing" problems is about how customer want to be perceived by others: think luxury goods, fashion and the likes, but also being aligned with certain rolemodels or lifestyles.
So in a broader sense, you can consider the "problem" as "potential value creator". But I think you can see how the term "problem" becomes heavy handed here (e.g. "emotional problem" sounds kind of loaded), which is why I tend to avoid naming them as such, nevertheless it still holds true.
Baine’s Value Pyramid
MVP Stage 1: Customer Discovery
MVP Stage 1: Customer Discovery
The goal of this stage is to find your Smallest Viable Audience (SVA). What that is, the reasons why it’s important and what their characteristics are, can be found in XXX
There are four possible scenarios in this first stage, but the tools and tactics used are the same:
Either you already have an idea about who your customer is. Ideally it should be very tightly defined, but most likely isn't, but that's okay at first.
You still feel you can help everyone with your amazing idea or just have multiple ideas for different customers you can serve.
You don't have a product idea yet but are just looking to start a business in a sector that you like.
You're starting backwards and have a solution (technology), but are looking for a problem to solve (application).
For all four it's crucial that you speak to enough people until you can start pattern-matching and drawing conclusions. In some cases this might mean conducting up to hundreds of interviews. If you're lucky or have pre-existing knowledge, it can be faster. The key is to lock in on two parameters. Firstly, are you getting consistent answers of a certain set of about 5-6 very similar people? This means this is a needs-based segment cluster. Secondly, do they have a valuable problem that is worth solving?
So, if you're in the first case you need to speak to about 5-6 of the exact same customer profiles and figure out if there is strong evidence that this is truly a serious problem they're already spending money on. A good indication that you've hit a similar segment
In the second and third case it's better to first canvas several different profiles quickly and dive deeper once again with a single customer type if you have strong indications about a certain profile and try to hit those two criteria for success.
The fourth case is a quirky one. I see it happen mostly when university researchers are trying to spin off a technology they've been researching (often under pressure of the university to monetize the tech) or in R&D centers of large corporations where all they're doing is researching (but forgetting they need to profit off it somehow).
Now, this is rarely relevant when dealing with consumer hardware, so I won't spend too much time on it here, but in essence an extra preliminary step needs to be taken where you identify your core abilities, independent of any (envisioned) product, and cross reference them with potential applications and customers to find the perfect match based on overall potential and challenge.
But even in the third case, you end up interviewing your potential customers and three things can happen:
You find sufficient evidence the problem exists and is worth spending time on to solve. Congrats! You move on to the next stage!
You discover the problem you're trying to solve doesn't really exist, isn't that much of a bother to people or evidence remains weak and scattered. Now you either need to find another customer where the problem is more urgent OR you need to work on a different problem!
This one is more rare, but makes for great stories to tell about pivots: while interviewing a certain customer group, you stumble upon a completely different problem to solve which is much more pressing than the one you initially thought to work on and decide to go with that one instead!
In all cases it is critical when validating that you do not speak about your solution, you remain solution-agnostics in your interviews and are only trying to figure out if the problem exists and warrants a solution.
This is also the time to look for strong evidence that customer are already spending money on this problem right now. Try to figure out how much and backtrack if you can build an early business case out of it to help you decide if this is the way to go. This is crucial before diving into the next stage given you'll be spending much more time there with your newly chosen segment, time you won’t get back if it turns out to be a dud.
Ready for Part 2? You can find it here: How to Develop Consumer Hardware (Part 2 of 4)
