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What product development strategy is right for your start up?

There are two primary product development strategies and multiple ways of executing them, but there is only one that is right for your company. Finding that strategy and understanding the dynamics may be the difference between success and failure. It may also revert your perception of whether you are doing well.

Nicholas Nassim Taleb has an interesting concept of antifragility. Antifragility are strategies that benefit from shock or randomness, where fragility is the opposite.

A fragile strategy is the classical stock investment or lending money where most likely you will get an ok return, but there is the odd chance that you could loose all your money.

An antifragile strategy is counting on loosing money with the odd chance that you could gain a lot. Options trading would be an example. Here the unexpected is your friend.

Product development
I was thinking about how that could translate into product development strategies. Developing a product is similar in that you invest in it and expect to get a return.

The fragile strategy would be to continually try to develop the product so it performs a bit better in the market place. This is the typical way, and we know it from techniques such as A/B testing and constant tweaking to increase performance on some central product parameter. But this is also risky, because suddenly you may wake up and find out that your entire product line is obsolete even though you have continually improved it. This is what happens when companies are disrupted.

So, could an antifragile strategy be the solution and how would it look? I think it would be a strategy where you try a lot of things that are most likely going to fail, with the odd chance that you could hit it big time.

One scenario is launching a lot of products just to try and see. This is what google and Richard Branson do. There is no end to what they launch. A cheaper way to do this is to probe for demand through market research, prototypes or some other way to get input from the customer about the perceived value. The Lean start up movement is the champion of building cheap “fake” products that are good enough to verify a potential demand.

Another scenario is to launch a product in a market that you feel there could be a potential, but where no product has really had any success. Continuing to develop this product is certain to loose money, but something might happen. You may hit the right combination or market conditions could change. You just need to make sure not to make the same mistake twice

Choose the right strategy for you
Choosing one or the other strategy is not not self evident. Whereas the financial system seems to have most people following a fragile strategy it seems that the start up “industry” is following an antifragile, which is great for the very few people who have time, resources and luck enough to stumble upon a product that hits it big time. It seems to me that your choice of strategy should depend on what sort of life you want to live. Is it ok, although very unlikely, to one day not have a product? Can you live with continuing protracted loss? Do you just want a predictable return? or do you want to have the remote possibility to become a billionaire.

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Why You Shouldn’t Try to be Like Steve Jobs or Wonder What Google Would Do

There is no end to the inspiration that the most hyped tech giants inspire. Books like “What would google do”, films like “The Social Network” and hundreds of daily blog posts and articles chronicle the amazing exploits of some of the world’s most successful companies. Never the less, you are better off ignoring everything they did if you want to succeed yourself.

Read about these companies as if they were great works of fiction. You may get moral encouragement or emotional energy, but what they did is not a recipe to follow. You would not try to drive like James Bond does or attempt to move things with the power of your mind like Luke Skywalker (I hope). Similarly you should look at the life of Steve Jobs as a great story and don’t try it at home.

In the world of businesses big companies like apple, google, facebook, amazon, twitter etc. are anomalies. They are exceptions to the rule. As Malcolm Gladwell demonstrated in his book “Outliers” extraordinarily successful people are typically more a product of particular circumstances than their own skills. For example it is hardly a coincidence that Bill Gates, Paul Allen, Steve Jobs, Larry Ellison and Sun Microsystem founders Bill Joy and Scott McNealy where all born within a year of each other. To be sure, they were indeed incredibly talented, but above all they were at the right place at the right time.

From another angle Nicholas Nassim Taleb has argued that just by sheer chance you would find superstar investors that appear to have otherworldly qualities in picking the right investments. They have repeatedly placed everything they owned in risky investments and yielded massive returns. But if the strategy is to place everything you own on stupid risky financial bets, chances are that some one by the simple laws of chance will have won the bet several times and made a gazillion dollars. Whereas thousands following the same strategy will have lost the bet at one point and lost everything they owned. Guess who we hear about: naturally it is more interesting to look at the one case where it paid off, but should you copy the investments strategy just because it paid off one time? Off course you shouldn’t.

Anyhow, entrepreneurs and business people get mesmerized by the extraordinary success of a few companies and don’t think of the thousands of companies who did the same thing, but went bankrupt because they weren’t at the right place at the right time or because they just didn’t have the same luck. Consequently, doing what google does or trying to be Steve Jobs might be a bad idea and jeopardise your company’s existence.

Remember that google and facebook are still one hit wonders (but what hits!). Google is still just an advertising network, although they are good at advertising themselves as something else. Facebook is still just a social network, trying to be an advertising network. Apple started that way too and managed to survive long enough for the next fluke. All of them have been able to get away with massive amounts of incompetence and bad decisions that we just don’t notice because of the glare of success. Most “normal” companies could not get away with the same.

So, what we can learn from them is to be just as determined and work just as hard. Not be discouraged that we don’t succeed in quite the same way. And most important of all seek out the right place and time for what we are doing.