“If problems to be addressed are ranked according to level of innovation, then your limited resources will be used most wisely to create the largest competitive edge, but you must be careful to understand how much change you and your market are willing to make.”
Two important drivers of product development are knowing how much you can differentiate your solution, and how much innovation you can afford. Develop a me-too product at a reasonable cost, and your buyers may ignore yours because they can get it elsewhere. Develop an advanced capability at a higher cost, and your buyers may ignore it as well because they are not ready for it. Finding that sweet spot between satisfying your buyers desires better than the rest, and your cost-position to do that, is the challenge you need to meet in order to stay competitive.
Successful vetting of problems into which development resources are invested includes analyzing the market attractiveness of your problem solution, and your business strengths, to meet that demand.
Home Security Problems
To illustrate, let’s compare the early approaches to home security to today. After a crime wave following World War I prompted increased attention to protecting property, alarm systems were in demand. However, some weren’t ready to buy and instead subscribed to a service of “door shakers”, these were night watchmen who shook doors at night to make sure they were locked. Today companies still providing the equivalent of “door shakers” have been eclipsed by innovative, internet-ready, and affordable home security products that buyers can install and monitor themselves from anywhere in the world.
Differentiators and Cost Position
To be able to decide which problems are most worthy of developing, first you should correctly define the problem(s) to be solved, and in order to evaluate and compare them, the problems should be stated in compelling and consistent ways.
Next determine how much you need to differentiate your solutions from others. Also determine how much innovation is needed to stay competitive. Would a police siren be better than an alarm bell to scare off intruders? What are your competitors up to?
Then understand the amount of change you and your buyers are willing to make. In other words, you need to answer these types of questions:
Which problems should you address given your current product strategies and limitations? How much innovation should you afford on each project? and how will that impact your cost position relative to your competitors?
Assessing the worth of investing in resolving one problem over another by understanding the relative levels of innovation necessary for each, will give you confidence in knowing that you have identified the primary cost drivers for your development projects.