The product as market research: The lower cost of digital prototyping helps innovators test lots of ideas simultaneously

September 11, 2013 5:25 pm

The product as market research

By Ian Sanders

In a set of studios close to London’s Old Street roundabout, Stef Lewandowski and his team are working on changing how digital products are built and tested. What sets Mr Lewandowski, co-founder of Makeshift, apart from many of his neighbours in London’s tech community is that his business releases a new product each month, a rate that it achieves by developing multiple ideas simultaneously rather than focusing on one single product.The company’s latest product – HireMyFriend, an online recruitment platform – was conceived, built and tested within a couple of weeks. Mr Lewandowski, whose partners in the business include Paul Birch, co-founder of social network Bebo, says the intention is to make 12 apps or digital products this year, some of which may scale up to become companies in their own right. “The idea of parallelism is opposite to the received wisdom of people in the start-up scene – they’ll tell you just to focus on one thing, to go for just one idea,” he says.

Traditionally, a new product re­quires a big investment of time and money. That is changing as the cost of prototyping products becomes lower and lower, which means innovators can test multiple hypotheses at the same time, putting products in front of customers in weeks not months. Companies such as Makeshift are recognising that they can execute several ideas simultaneously, which means they are not only accelerating the rate of innovation, but also trying to maximise their chances of commercial success by hedging their bets. Now bigger organisations are seeking to emulate start-up behaviour so they can become more adept at digital building.

Mr Lewandowski acknowledges that HireMyFriend is an idea without a business model so far, but says the emphasis is on getting it in front of real users so it can be tested and adapted based on real user experience. Makeshift is only months old but has already developed a suite of other products, from Listerly, a list management service, to Bitsy, a way to sell digital products online. Rather than build products on behalf of clients, the company aims to create a product of its own every few weeks, rapidly testing it in the market and figuring out the business model once launched.

By prototyping in batches, Mr Lew­andowski says, the company can quickly decide which products have the potential for commercial success and which are not good enough. “If ideas are relatively easy to get to market you can quickly find out if something isn’t going to work, and then kill it. It is much easier to have a small amount of money risked on something, and then eject if it is not working,” he says.

New York-based Betaworks launch­ed five years ago to build products in parallel based on ideas originated in its studio of creators and engineers. Its products range from Bitly, a web address shortener, to Instapaper, a tool for saving web pages for later reading. Founder and chief executive John Borthwick agrees with Mr Lewandowski’s “keep or kill” ap­proach. “Breakage and failure is part of our model. If we are not failing, we are not doing our job,” he says.

Nordstrom’s lab

US fashion retailer Nordstrom was founded by John W Nordstrom in 1901. Its Innovation Lab in Seattle brings together designers, entrepreneurs, engineers and researchers to generate, build and test ideas. Here are some lessons from the lab:

●Embrace rapidity Nordstrom creates products fast, aiming to develop new ones in weekly increments. “Through rapid iteration of customer needs – and fast validation of our attempts to solve these needs – we can learn new insights about our customers and incorporate them into our offerings fast,” says JB Brown, ‎director of innovation.

● Keep the focus on the customer The Lab is currently testing a number of digital and physical design concepts to help make the in-store experience better for shoppers. It uses the approach outlined in Eric Ries’s The Lean Startupto stay focused on customer needs.

●Think plural The Lab develops several solutions to the same need simultaneously before choosing the best. “As a result, it’s not a pain for us to think of multiple solutions, but rather a thrill,” says Mr Brown.

Betaworks has developed many of its products into companies in their own right but Mr Borthwick says building a product and building a business re­quire different skills. Making a business out of a product is about forming a tight relationship between product and customer. “Beta-testing products and our process here [avoids] the need for market research: your product is market research,” he says “We tune it, pivot it or kill it, we go through the cycle quickly.” Betaworks has also made seed-stage investments in web businesses such as Airbnb and Pinterest.

Mr Borthwick’s advice to bigger companies looking to learn from his experience is to fast-track the process from developing a product to getting customer feedback. “You need constantly to treat your products as ‘betas’,” he says.

This thinking is not limited to the start-up labs of Makeshift and Betaworks. “Any company can foster this approach if it is willing to adopt the right process and mindset,” says Eric Ries, author of The Lean Startup, who advocates rapid prototyping and testing. Companies such as Philips, Walmart and Marks and Spencer have started their own innovation labs. Similarly, Nordstrom, the US retailer, established the Nordstrom Innovation Lab to develop ideas quickly, building new digital products and apps in one-week increments. Mr Ries says the psychology of big organisations can be changed with support from senior management. “Most companies al­ready employ a lot of entrepreneurs, but they don’t unleash their full potential.”

One executive influenced by Mr Ries’s approach is Corina Kuiper, a former new business development executive at Philips and now an adjunct professor in innovation at Antwerp Management School. Last month, Ms Kuiper spoke at the Corporate Startup Summit in Cologne, a conference aimed at educating corporations about start-up thinking.

Having launched her own “start-up lab” within Philips, Ms Kuiper says the challenge in the parallel model ad­vocated by Betaworks and Makeshift is to think how each product release can help the next one. Using a bowling pin analogy, she says: “If you hit one market with your first product, you need to ask how will that help you hit the next one.”

Recognising that many companies may not want to launch their own start-up labs, Adaptive Lab of London of­fers to do it on their behalf. Rather than starting with an idea for a product, Adaptive Lab begins with a client’s business challenge and comes up with ideas to try out. Managing director James Haycock says the focus is on developing a product that can be put “in the customer’s hands as soon as possible; we can then know in a couple of days if it’s going to work or not”. Clients include online retailer Asos and the pollster YouGov.

Mr Haycock says bigger businesses looking to adopt this ap­proach must be prepared to ex­periment. “You need to try a lot of ideas out and be prepared to kill some of them,” he says.

Back at Makeshift, Mr Lewandowski thinks his business will be more innovative than bigger companies because of its playfulness. “We like playing with different industries that we aren’t too familiar with – we didn’t know anything about rec­ruitment but we launched a recruitment product,” he says. “We’ve proven we can do things quickly and at high quality. The challenge is the bit that comes after the make – how we turn each idea into a business.”

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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