Risk, in Product Development.

Risk is the backbone of every product development. Across all products my teams have built, we have found risk to be the central core, the spinal cord, the brainstem.

A rarely unspoken truth is that a risk aversion mindset can prevent product’s success.

In my 4 years of advising consumer and enterprise startups, I have seen teams actively dismiss obvious risks, then proceed to build half-baked products or attempt to solve problems that were both poorly researched and executed — ultimately not serving customers. 

As usual in my journey, I have encountered and documented 4 risks that show up very often. I will be sharing them with you, to help your team[s] establish what to look out for and to avoid costly mistakes we made. 

1. Market Risk –

In every market territory we have built products, our default principle is never to assume customer willingness to pay.

At initial product development stages, we ask critical questions like - how will customers will use our product [ In ways we imagined and ways we didn’t] ? Can they pay for it? What is their median spend across similar products? If they will pay for it, how much is fair enough and how can we charge them easily and recurrently?

As a team, we internalize these answers, triage them to our strategy, validate / invalidate certain assumptions, test with a sample panel within our prioritized audience and iterate. 

I recommend that you also run really rapid cycles for your market testing campaigns and have it run in parallel with product development. This way, you save time & cash and also establish what design or feature reinforces your goals and solves customers problem[s] better. 

2. Product Risk –

Unavoidably in the early development stages, product feasibility is a huge [unspoken] risk.

What do I mean?

For example, can you actually build a functional, stable and reliable product?

As I write this article, a core team of mine sitting in HongKong shared a publicly available industry report about a competitor of ours. Digging deeper, we realized the attempt tried to mimic our product, without knowledge of our design principles or certain proprietary components. In 3 months, their development costs had burnt over $1.2 million. This was 110% more than the $115,000 they had initially budgeted.

The point is this – copying is okay. However if you must, you must listen to the market, align the pervasive problem leaks and obsessively solve for that.

PS: Simply because a product has been built previously [ by another startup ] does. not mean it can be copied cheaply.

3. Team Risk –

As an innate problem, 95% of early stage startups typically do not own proprietary distribution channels to drive product adoption and usage. Usually, a startup building a truly problem solving product can be flustered by this problem, while I have found experienced product managers at big tech typically inherit a funnel to address this issue.

Increasingly, early stage product teams find that development timelines can be a problem. Even when you are building the right product and the market truly cares about it, how fast can you deliver a functional version?

For this popular use-case, my recommendation is effective prioritization. Understand that whilst you have identified a lot of problems to be solved, you want to prioritize and ship a cohort specific solution. I call this the “Golden Part" Scenario”. You need to leverage and balance speed and value.

Concurrently, you want to own/outsource a research and development team that works in parallel with your existing engineering / design team. This will help you manage rollouts, GTM and delivery in-terms of infrastructure modularization.

4. Surprise Risks –

As far as recent history goes, we can all see that market climate is very pivotal to the success of a product. This can vary from political, regulatory, seasonal, religion, economic fluctuations and sometimes, impartial competition. I have found these factors to adversely impact customers spending and usage habits, over which you have no control.

A strong hack is to be strategic about markets to penetrate, have a strong sense of the opportunity size and how cuts can affect your growth overtime. Dissect the logic clearly, consider the existing levels of complexity in markets and map them to your product growth. All these things have helped my teams prioritize what markets to rollout in and build out our business.

How can you mitigate risks?

Without doubt, both startups and big tech are equally exposed and not immune to product development risk.

So how then can we reduce risk probability ?

1. Objective Risk Assessment ;

For every product development stage, it is critical to collaboratively build a well-defined, repeatable development process that allows time for critiquing a product’s feasibility.

On my teams, the highest paid people in the room own the same opinion weight as every other person. This ensures that work is evenly distributed in terms of initial risk assessment and helps determine where to focus our early design engineering efforts. 

2. Ruthless Prioritization ;

I recommend that you are intentional about focusing on what user benefits [ not features ] really matter and the corresponding market knowledge.

This sparks important conversations related to use case [ analyzing and making sense of how our customers use[d] our MVP ].

During phase zero, we test if we actually know something or if we’re making assumptions. These learnings provide important information for market testing.

By focusing on unknowns and potential deal-breakers early in the product development process, your startup/product org will be better positioned to kill / pivot a product before serious problems happen — and before burning too much investor $$ in a product that’s likely to fail.