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You come up with a great idea that you turn into a product: a new gadget, a special dish, a new way of providing a service. From there, you launch a business that begins to thrive. But as your business grows, you find yourself wrestling with a question many entrepreneurs eventually face: Is it time to introduce a second product or product line?
Growing your business with a new offering can be one of the most exciting decisions you’ll make as a business owner. It can also be one of the toughest and most complicated.
Rolling out a new product could be a game-changer for your company, creating new revenue streams and raising your company profile. But it could also be a risky move that might derail your growth.
I became personally familiar with this dilemma, first as a VC investor working with startups and aspiring entrepreneurs, and later as an entrepreneur making tough decisions on the direction of my own startup.
For small business owners and entrepreneurs looking to introduce a new product, I would stress four key actions.
Focus on what your customers need.
The late Steve Jobs famously said: “You’ve got to start with the customer experience and work back toward the technology — not the other way around.” You should definitely keep in this mind when making a decision about introducing a new product.
The decision to roll out a new product should be based on what your current and potential customers need or want. Introducing a new product is exciting. But you don’t do it just because you stumbled upon a new idea. The new product must fit into your operational model, and most important of all, it must be something customers need or want.
That was definitely true for my startup. We began with one product, online invoice factoring, which allowed business owners to get advances on their unpaid invoices. But in our first year, we received strong feedback from our clients that they also want access to flexible capital not based on invoices. That’s how we came up with Flex Credit, a line of credit. Our second product, we launched it based on what our clients were telling us.
Our experience is consistent with trends in the fintech industry where companies are now looking to do more and offer more services to clients. Specifically, the goal for many fintech lenders is to make sure their customers have the right product at the right time.
Have a go-to-market plan.
Coming out with a new product takes detailed planning and preparation. That’s as true for a restaurant looking to offer new dishes as it is for a tech company considering a new online service or gadget.
In the world of fintech, for example, a startup that’s looking to unveil a new product needs to make sure the broader organization — product, R&D, sales, marketing — are aligned on the characteristics of the new product and on how to introduce and sell it to customers. In the financing sector, there are also legal and regulatory issues to consider before introducing a new product.
One of the most important parts of your plan should be a solid go-to-market strategy. You must have a clear idea of the customers you hope to reach, and develop a compelling message about your new product. In connection with this, it is equally important to make sure you have operations support your product needs to succeed.
Roll it out in stages.
Introducing a new product typically involves different stages of development and investment. You don’t have to have all the bells and whistles in place when you roll it out. However, you must have the minimum set of features or attributes to be able to test your hypothesis.
In the tech world, people talk about the MVP, the “minimum viable product.” As entrepreneur and author Eric Ries explains it, the MVP is “that version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort.”
The MVP approach has been widely-embraced in the tech startup world, where entrepreneurs are wary about sinking precious time and resources in developing a product only to discover that it’s not what customers want.
A famous example is how Dropbox, the popular online data storage and sharing service, got started. Ries recalls how Dropbox CEO and co-founder Drew Houston embraced the MVP approach in a TechCrunch article, “To avoid the risk of waking up after years of development with a product nobody wanted, Drew did something unexpectedly easy: he made a video.”
Houston’s three-minute video explaining the product was aimed at technology adopters who he hoped would quickly offer feedback on Dropbox and spread the word about the file-sharing service.
In Dropbox’s case, Ries added, “the video was the minimum viable product,” which “validated Drew’s leap-of-faith assumption that customers wanted the product he was developing not because they said so in a focus group or because of a hopeful analogy to another business, but because they actually signed up.”
We also embraced the MVP approach when we were just getting started. In 2014, we launched our first product, an fully online invoice factoring financing that lets small business owners get cash advances on unpaid invoices. It was an untested concept, and we didn’t have a detailed roadmap to guide us. As I recall, the early results were not exactly encouraging: almost every other customer in the first month defaulted.
But eventually, we were able to fine-tune the product, steadily attracting more customers. And there were many learnings from that initial launch that subsequently guided us in unveiling our second product.
Prepare for the unexpected.
The best laid plans often go awry. Product fumbles do happen. One well-known example was Google Glass. The tech giant’s much-publicized offering in the consumer wearable technology space ran into privacy and safety issues that eventually forced Google to pull the plug on consumer sales of the product in 2015. Refocusing (so to speak), Google now markets Google Glass as a device for the manufacturing industry.
Be prepared for curve balls when introducing a new product. It would be great to have a crystal ball to help you predict what will happen, but in most cases, you won’t find out if your plan is sound until after you’ve launched. Launching a new product, in some ways, entails a leap of faith.
That was true for me and my team. Not everyone on my team or our board was sold on expanding our business with a line of credit product . There were concerns that it would be a bad fit and would end up becoming a major distraction.
Still, we forged ahead. There were unexpected glitches that we had to quickly fix. But it turned out to be a smart move.
April 4, 2019 at 08:02AM