A good prototype may be bad for your start-up
Or “Don’t get carried away with early product validation”
Starting up new businesses is a hard task, we all know that.
But each type of business will carry specific hurdles in specific areas, and one of these cases is product start-ups. Here I’m talking about physical products, not virtual ones. Even more specifically, product start-ups that deal with subjective assessment from its (potential) customers.
Think about manufacturing companies which have fashion, food and design-based products in their product line. Part of what these companies are testing during the validation phase — beauty, taste, comfort — is subject to (potential) customers previous experiences.
Additionally, unless fully outsourced — which may lessen but not eliminate all risks involved — these companies carry specific risks when it comes to production line assembly and inventory management. Different from virtual products, changing any features in their product(s) may unfold in several side-effects down the production, distribution, and sales pipelines. Not to mention the outdated (or faulty) inventory, which may have low or no value at all.
Because of all these specifics, this type of start-up needs to have an effective and efficient product validation process.
Challenges of product validation
Prototype is not a product — yet.
The first big challenge is that during the validation phase you don’t have a product yet. You may have a good, a prototype, a thing, but not a product. Think about the difference between an invention and an innovation. An invention without commercial value is just an invention, not an innovation. You may display it in your living room as a trophy from the Professor Gearloose Challenge, but it will not have any economic or social value.
The same applies to products from these types of companies. If you’re testing product acceptance of a food product, for example, it is quite common for start-ups to mistakenly focus on flavor. It needs to taste good, of course. It is the core value of your product. But remember that the concept of product comprises way more than the core value. Think about a tasty product wrapped in a crappy package, or sold through inefficient sales channels, or too expensive. Being tasty will not be enough to launch the product successfully. You may end up with a food invention, not an innovation.
Tell positive feedback from willingness to buy
Second, during the validation phase, the people trying out your product (and who are your source of inputs) are not your customers yet. You still have to capture them, convince them to buy your product. And here lies the largest trap when you have a good prototype:
getting carried away with positive feedback from the very beginning.
It is funny to realize that something good — positive feedback — may have a bad impact on your venture. And the reason here may be quite simple: a shortcut connecting positive feedback with successful products. The reasoning is simple:
My product is tasty/looks good/fits good, so everything else will adapt. NOT.
As an illustration:
What your customer feedback means: your product is delicious. Really tasteful; I never ate anything like that before.
What it doesn’t mean: your product is delicious. Really tasteful; I never ate anything like that before. I will definitely buy it the next time I come to the supermarket regardless of how many other substitute products from 50-year-old brands are also for sale at a lower price range. And I will buy it every time I go to the supermarket. And I will recommend it to all my friends and family.
This is an exaggeration of course. But you may be deemed to take for granted one or several aspects of a good product if you get carried away with early positive feedback. And getting carried away with positive feedback may blur your assessment capabilities and impair your decision process. You may overestimate your product acceptance, which in turn will make you overestimate your sales volume. And a wrong sales projection may force you to stress the financials, hoping that all those sales one day will flow in. From here to a total failure is a small step.
Okay, but what is indeed a good product?
To become a really good product, your prototype needs to be a good product for everyone, including the several layers of “yourself”. It needs to be good to distributors and retailers — meaning good margins and high-paced sales for all of them — but also to your own procurement, production, storage, and transportation processes. If one or more of these processes — or players — are an Achille’s heel, it will ultimately harm your production process, or increase your final price — or both — due to inefficiency. On top of this, of course, is the challenge of keeping your product at a price range that your potential customer will be willing to pay for. It may ultimately harm your financials, making your — and your investors’ — returns not so attractive.
As a start-up, you may not have most of these processes in place, let alone optimal. In this case, you should consider if these flaws are subjective — due to the initial phase of the company -, or structural — due to poor design of your processes or in your value-chain layout. As you start, the iteration amongst all players is core to your success and will definitely support a successful business.
A good initial feedback based on core value(s) of your prototype may be a good hint over certain aspects of your business, but it is definitely not enough to make it successful.