Risky Business: How Synapse navigates the inherent risks of new product development to launch successful products with our clients
The New Product Development Minefield
Product development, particularly innovative product development (creating something brand new as opposed to building a better mousetrap), is a risky endeavor. Not only do risks show up frequently in the development and realization of a product concept, but they also exist in the commercialization and market reaction to that concept once it’s been created. Consumer product failure rates are often quoted as being around 40%.
As a premium product development consultancy, it’s essential that Synapse successfully navigates the inevitable minefield of risks for every one of our projects and clients—our reputation depends on it.
Day-to-Day Risk Decisions
Should we parallel-path multiple technologies for a key subsystem? Should we include a last-minute feature at launch? Should we find multiple sources for a critical component?
Questions like these arise constantly in product development and they are not easy to answer.
A clear pattern in our work over the years, primarily in the consumer electronics market, is that many clients will accept risks along the way, hoping to deliver exceptional products to market quickly with minimal costs.
With added development risk can come reward in the form of shorter timelines and lower costs, but Murphy’s Law often catches up. A technology sometimes doesn’t pan out and we have to go back to the drawing board. A last-minute feature sometimes proves to be too much and delays launch or enables a user-facing bug to slip out. A single-sourced component sometimes experiences supply chain woes, threatening a holiday launch.
With all of the pressure to get winning products to market as quickly as possible with minimal costs and with the Synapse brand promise of successfully navigating these challenges, how do we make the best decisions in the context of risk?
1. Plan for Optimistic Realism with a Contingency
Part of the challenge with making risk decisions in projects is that the optimism bias means we’re often starting with a schedule, budget, and plan that assume things will go pretty well. There’s a good reason why many clients like a “happy path” approach in the planning stage—if we set a plan that is too conservative, we’ll be sure to collectively spend more while the market passes us by. But if we’re too optimistic, our clients will run out of funding and time before crossing the finish line.
First, we recommend performing a feasibility analysis before estimating and planning a full project—converging on some key points enables a much tighter and more accurate estimate. A feasibility analysis can be a lightweight paper study to check key assumptions (e.g. developing a thermal model to see if solder joints will melt during FPCA overmolding) or it can be a more involved prototype effort to ensure a critical subsystem architecture will work (e.g. building a real FPCA and actually overmolding it to ensure the fabrication approach is viable).
Second, when making an end-to-end estimate, we recommend creating a realistic-to-optimistic plan (that isn’t so aggressive as to cripple design and validation iterations), with a schedule and budget contingency to mitigate risks and address issues down the road. Depending on the profile of the project, an appropriate contingency can be 10-20% or more. This approach keeps overall costs in check while enabling the product owner to make better decisions without their back against the wall from the start.
2. Consider the Full Picture in Each Tradeoff Along the Way
Making the decision to mitigate a risk can feel like buying insurance. Asking “do you want to spend more for a parallel path to mitigate the risk now or do you want to accept the risk that something might go wrong and then deal with it later?” means that cost is a sure thing to mitigate and only a possibility to accept the risk. It’s well documented that people exhibit loss aversion, where costs are weighed more negatively than benefits are weighted positively, so there’s no wonder product owners often accept risks along the way under this framing.
To help our clients make good strategic product development decisions, we have to follow best practices for risk management by articulating the probability and consequence of risks as well as the costs of the mitigation options. We also need to ensure that we’re aligned on the holistic project risk profile as a reference point for each decision. Accepting some risk in an otherwise on-track project is one thing, but stacking more risk onto a house of cards is another. It’s too easy to make each decision independently and then have the impact be too severe to recover from—we recommend visualizing the holistic project risk profile in a weekly status report dashboard.
3. Invest in Test and Validation
Putting the time and energy into defining minimum viable product (MVP) requirements and test plans to verify and validate that a device meets those requirements is essential to the success of any product. This is especially true for risky development programs. While risk may have been accepted along the way and corners may have been successfully cut to reduce costs and time to market, test and validation is a critical safeguard. It forces a hard look in the mirror to assess a product against the definition of success (usability, functionality, reliability, cost, etc.) along the way and, most importantly, before sending it out into the world.