Internet Product Design Guide--nine major mistakes of new product development

The following case may have been a long time, but the lessons are timeless. At the height of the dotcom bubble at the end of 20th century, Webvan, an American online grocery retailer, was once very famous and declared bankrupt in 2001. As one of the most exciting new start-ups, the company has been ambitious in claiming that its products go deep into every American family. After successfully raising the largest investment in history (more than $800 million trillion), the company proposed a 450 million-dollar, revolutionary online grocery retail business, claiming to be "on-site delivery services on the day." Webvan that the idea is one of the first "killer programs" on the Internet, where customers only have to select, click and Order, and all other work is done by the company. Webvan will "set rules for the largest consumer sector in the national economy," the company's chief executive said in an interview with Forbes magazine.

In addition to a lot of financing, every move by the Webvan founder seems to be right. With the support of experienced venture capital investors, the company quickly set up a huge area of automated storage centers, purchased a large number of freight trucks, launched a simple and Easy-to-use Web site page. In addition, Webvan hired a seasoned chief executive from the consulting industry. Most of all, most early customers really liked this service. But just two years after the initial public offering, Webvan declared bankruptcy. What is the reason?

Obviously, this is by no means an execution failure. Webvan has done every job that the board and investors have asked for. It is particularly worth mentioning that the company is very keen to follow the most innovative enterprises widely used in the traditional model of new products, firmly believe that the very popular management ideas, such as "preemptive advantage" and "Happy Rodeo operation." The reason for this is that Webvan's inability to answer clearly "what is the customer base" is the key to failure, and it is this that has led to the failure of proven product-import models that have plunged hundreds of millions of of billions of dollars into the abyss.

For new products such as Webvan, the business plan cannot be a roadmap for its development because its products and customers are unknown. For most start-ups, the following 9 assumptions are the most lethal.

1 Think "I know what the client needs."

The first mistake is that founders believe they know what the customer base is, what they need, and how to sell to them. In fact, when a business is first established, a dispassionate bystander will find that it has no clients. Unless the founder is an expert in a particular field, it can only make preliminary assumptions about customer groups, customer issues, and business models. At the start, it can be said that startups are just a project based on assumptions and based on the founders ' personal convictions. However, the traditional method of product introduction allows the founders to use these business model assumptions as facts to design the product and spend money on "first-time customer delivery", even though they have virtually no contact with any customers at all.

Founded at the beginning, the start-up is only a personal belief for the project to support ...

To achieve business success, the founders must turn the assumptions or conjectures into facts as quickly as possible, by going out of the office and asking the customer if the assumptions are correct, and then quickly changing the wrong content.

2 Think "I know what product features to develop"

The second false assumption is based on the first error. The founders of the company who think they know what the customer group is, assume that they understand the product characteristics that the customer needs. They will use the traditional product development model in the Office to designate, design and create a comprehensive feature of the product, but this practice is really suitable for start-ups? The answer is no, because it is only suitable for mature enterprise applications with known customer groups.

...... Without a survey, you don't know whether product features can attract customers.

The waterfall development method (see fig. 1-2) usually lasts for one or two consecutive years. Before a product is released, the enterprise can measure the entire development process with newly written code or newly installed hardware. However, because of the lack of direct and continuous communication between customers, it is not clear whether these product features are attractive to customers. Obviously, when the product has been formed and delivered to the hands of the customer, then correct the inevitable problems, not only expensive and time-consuming, and may even bring the enterprise to extinction. This type of development tends to make the product on the day of the release become a dead. Worse still, it can cause serious engineering waste, and when customers say they are not interested in new product features, hundreds of hours of work is lost and tens of thousands of lines of code turn into garbage. Ironically, it is precisely the way in which start-ups have been used to develop new products.

3 Attention Release Date

The traditional product import model emphasizes engineering, sales and marketing activities in accordance with the Shine product release date. The marketing department chooses the marketing activities (trade fairs, press conferences, blogs, etc.) according to the product release time, and the manager reverses the work plan according to the release date and the product development calendar. The importance of the release date is highly emphasized by both the management and the investor, and the "wrong behavior" penalties the delay. However, although traditional engineering plans have the entire cycle of internal testing, external testing and product launches, there is little time to improve the product. It can be said that their goal is to try to launch a one-time problem with the least initial product.

The product release date and the first customer delivery date are just the dates that the product development team thinks the product's start phase is "over", and does not mean that the business is fully aware of the customer and how to market or sell it to the customer. But in almost every start-up, whether or not they are ready, the timing of each department is based on "first-time customer delivery". Worse, corporate investors are also managing their financial activities on a time basis.

In response, investors reacted almost unanimously: "Enterprises should certainly do so, the timely introduction of products to the market is the task of sales and marketing departments, otherwise how the enterprise to make money?" This proposal is a big mistake, too much focus on the release date will lead to a "fire-ready-aim" type of reverse strategy, it ignores the entire customer discovery process, is a serious and fatal error. It is clear that every start-up or company wants to market and sell products, but if you do not understand the sales target and other reasons for the purchase of blind action, the result will surely be "pretty big." This mandatory development process ignores the role of the iterative loop, which is meant to suggest that "if our assumptions are wrong, we might try to develop different new products." "In other words, the development model based on the date of release cuts off the development-test-learning process, assuming that good engineering implementation is enough to attract customers."

However, it turns out that startups always find that not many customers visit websites, participate in games, recommend friends or form consumption after the product is released. They found that early customers did not form the mainstream market, found that their products can not solve high value problems, found that the cost of sales is too high to bear. This is not the worst of all, and they find themselves burdened with another heavy burden-a sales and marketing agency with high salaries but only burning money. Now, they can only find a way to solve their own problems.

Take Webvan company for example. Internet mania may have strengthened the company's push for product launches, but in practice this management mindset is typical and pervasive for most start-ups. During the first customer delivery phase, Webvan had about 400 employees and recruited more than 500 people in the following six months. In May 1999, the company launched its first distribution center, which cost 4 0 dollars, which was built entirely on the basis of a blind projection of the customer base. At the same time, the company plans to build another 15 equally sized distribution centers. Why is it so crazy? The reason is that Webvan is faithfully acting in accordance with the business plan, regardless of whether the client agrees.

4 emphasizing execution rather than the "hypothesis-test-learning-Iteration" process

The entrepreneurial culture often stresses the idea of "accomplishing goals, getting better", so its engineering, sales and marketing department heads naturally assume that companies hire them because they know how to manage, not because they have the ability to learn. They think that their past experience is related to the new business, that the job is to use their knowledge to manage the implementation of activities-after all, these experiences have been successful many times.

Admittedly, a mature enterprise can execute a business model with known factors such as customer groups, customer problems, product characteristics, and so on, but startups, unlike these, must use the "explore" model to validate each initial assumption by testing. Each test is a learning opportunity to help companies correct assumptions and then test again to find repeatable, scalable, and profitable business models.

To blindly execute without asking it is tantamount to committing a crime against an enterprise.

In practice, startups start with a set of initial assumptions (guesses), most of which are ultimately proven wrong. Obviously, the emphasis on implementing programmes, delivering products or services on the basis of untested initial assumptions is tantamount to suicide.

In contrast, the traditional model of product import, the establishment of a start-up is a step-by-step, the continuity of the implementation-oriented process. In this process, each step is carried out in a logical order, tracked by the Plan Review Technology diagram (PERT, a project management technique that maps the completion steps of the project and the time required), and the completion of each step is assigned milestones and related resources. However, anyone who recommends a new product to a potential customer knows that the process of interacting with clients is fraught with uncertainties, often mixed and difficult to score. Therefore, the ability to learn from mistakes determines the success and failure of startups.

As with all startups focusing on implementing a continuous product import scenario, Webvan employs deputy director of development, marketing, and product management, and all of the company's activities revolve around established sales and marketing strategies, rather than focusing on listening to customer opinions and exploring customer needs. Only 60 days after the first customer delivery, the 3 Deputy directors recruited more than 50 employees.

The ability to learn from mistakes determines whether startups succeed.

5 traditional business Plan says "No tracking, no mistakes"

One of the great advantages of the traditional product development model is that it provides a clear and landmark management path for the board and the founders, making people think that these goals will be achievable. Most engineering technicians are not unfamiliar with the concepts of internal testing, external testing, and first-time customer delivery. If the product developed does not reach the effect, everyone will stop to solve the problem. In stark contrast, sales and marketing campaigns are often improvised and vague, with few measurable targets, and lack of means to stop and solve problems (even if there are problems and how to stop) before first-time customer deliveries.

Financial processes can be tracked through metrics such as income statement, balance sheet and cash flow, even if the business has no measurable revenue. But in practical applications, these metrics have no meaning for startups. Board members will only adopt the traditional metrics used by large enterprises and do not take into account the fact that they (large enterprises) have established customer groups and business models. For startups, none of these metrics can track the only goal they need to focus on-exploring repeatable and scalable business models. On the contrary, traditional metrics can even hinder their development.

The board and management team of startups should be concerned not with "how many days to conduct external tests" or "what products are in our sales channels", but rather a series of tests and experiments to verify the modules in their business model.

If the startup board is not focused on these issues, it is a waste of time doing nothing. In any case, corporate directors and founders must pay attention to the only important financial measure-burning rates and bank account money for months.

If the startup board is not focused on these issues, it's a waste of time ...

There are no milestone events for "pause development, evaluate release effects" on the development roadmap of the Webvan company. Otherwise, the company may notice a significant difference between the 2 000 actual daily orders and the 8 000-day orders projected in the business plan. In the absence of effective customer feedback, the company signed a 100 million-dollar agreement with the Webvan Engineering Construction Company (Bechtel) within 1 months of product delivery, and plans to create 26 large distribution centers in the next 3 years.

6 confusing traditional jobs with start-up goals

In most start-ups, managers ' positions are copied from mature companies. However, they do not realize that the latter is the organization that carries out the known business model, and its job content is far from theirs. In a mature enterprise, for example, the sales department refers to a team that repeatedly sells known products to known customer groups with standard presentation materials, prices, terms, and conditions. In the opposite sense start-ups, they basically do not have these known factors at all. In fact, they haven't found these factors at all.

As target customers, product specifications, and product demos change every day, early-stage start-up managers must have the skills of a mature Enterprise Manager that is completely different from selling established products and extending products. Customer discovery needs to require start-up managers to have the following characteristics: they should be a group of people who are highly adaptable to change and chaos, learn from failure and tend to work in precarious environments fraught with risk and lack of road map. In short, startups welcome the entrepreneurial minority who are brave enough to learn and explore, curious, inquisitive and creative. They are eager to seek repeatable and scalable business models, highly alert to day-to-day changes and free from established patterns of management restrictions. They can play a variety of roles at any time and can accept failure as a learning and adjustment opportunity.

Webvan Company's chief executive and deputy director all have the large mature company management background, has the rich management experience. In the face of the chaos of start-ups, they feel surprised and uneasy, trying to solve problems by rapidly expanding the size of their businesses.

...... It is a fallacy to measure the management process with the goal of product release or revenue plan.

7 Sales and marketing departments carry out activities according to business plan

Hiring deputy Directors and supervisors to participate in development, although they have the right background but lack the necessary ability, this will only cause more trouble to the enterprise, because these power sales and marketing executives are to carry out a good business plan. This process is specific as follows:

According to the business plan and the traditional product introduction model, the board and the founder agreed on a good product release date, burning rate, revenue plan and a series of milestone events. The VP of Sales started recruiting core sales teams, designing marketing speeches, and assigning and attempting to acquire early "Lighthouse customers" (key customers to attract more customers). The sales team uses the revenue targets specified in the business plan to track activity progress to understand the customer. At the same time, Vice director of marketing is busy designing websites, logos, presentation materials, data sheets and related materials, employing PR companies to promote publicity. Although these are only concrete means, but the enterprise as a marketing target. The problem with this is that marketing departments often have to wait until the first customer is delivered before they know whether their market positioning, information dissemination, pricing schemes, and demand-creation activities are effective.

Executives and board members have become accustomed to measurable progress indicators designed in business plans, focusing on these activities because it is the only way they know how to act (and why they think the company is hiring themselves). Of course, it is very reasonable for a mature enterprise with known customers and known markets to focus on implementation. This is also effective even for startups known to some customers and market factors. But for most start-ups, it's a fallacy to measure the management process with a product release or revenue plan, because there is no real basis for customer feedback. In contrast, the right approach should be to try to understand the client community and its problems and replace the assumptions made with the facts of the survey.

The Webvan company is on this business plan-driven "marketing death road." During the first 6 months of operation, the company successfully acquired 47 000 new customers, but 000 of its 2 71% daily orders were repeat orders. This means that Webvan must quickly dig out more new customers while trying to reduce excessive customer churn rates. To add insult to error, Webvan's investment has been wrongly amplified by unproven marketing forecasts, which found them to be blindly optimistic and completely unrealistic.

8 Think success leads to hasty expansion

Business plans, revenue forecasts, and product-import models suggest that every step of a start-up's growth must be perfect, and only then will the transition to the next stage be achieved. That is, the entire pattern rarely leaves room for mistakes, learning, iterations, and customer feedback. In these activities, we do not see the "Know customer recruitment after" or "stop to listen to customer feedback," such a hint. Even the most experienced managers will have to face the pressure of recruiting in accordance with the business plan, regardless of the company's development process, which inevitably leads to the next trouble-hasty expansion.

For large companies, these mistakes only cost them a few times more.

Recruitment and spending activities can only be accelerated after sales and marketing activities become predictable, repeatable, and upgradeable, rather than based on the dates that are scheduled in the business plan (or when a lighthouse customer is found or a few sales are completed).

For large companies, these mistakes only cost them a few times more to invest and will not bones. Companies such as Microsoft and Google have launched many products, such as Google's Orkut, Wave, Deskbar, dodgeball and talk and Finance, Microsoft's Kin, Vista, Zune, Bob, WebTV, Msntv, and pocket are developed in strict accordance with product development plans and product success assumptions. Unfortunately, the product and its management quickly failed due to lack of customer response soon after these products were developed.

In the Webvan company, by the prevailing wind investment in the "rapid and big" thought of the impact of the entire corporate culture is filled with a hasty expansion of the atmosphere. For example, the company has spent 1 8 million dollars to develop proprietary software, Invest 4 0 dollars to build the first automated warehousing center, and when all this is done, the company has not delivered any products to any of its customers. Hasty expansion will have dire consequences for businesses, and Webvan will be a typical failure case of business school analysis in the coming decades. As customer demand lags behind the company's business plan, Webvan gradually realizes that too much money has been spent on excessive construction and excessive design. Clearly, when Webvan to implement the plan in accordance with the business plans, there is no finding that these plans are only a mirage, completely without customer feedback as the basis.

...... No business plan can pass the initial customer contact test.

9 Crisis management leads to the demise of enterprises

In the Webvan company, the impact of various error behaviors began to appear gradually in the first customer delivery phase. The specific process is as follows:

The company's board was worried about the inability of the sales department to complete its task. The deputy director of sales was still very optimistic when he attended the board meeting and listed a seemingly plausible explanation, but the board did not believe it. As a result, the deputy director returned to the sales department to encourage their subordinates to work harder. The sales department informs the Engineering department to develop custom products, as it is the only means by which they can achieve sales. At the board meeting, the atmosphere became more and more tense, and it was not long before the deputy Director of sales was dismissed by collective resolution.

The new deputy Director of sales took office and soon came to the conclusion that the company neither understood nor understood how to sell to its customers. She believes that the company's positioning and marketing strategy is wrong, the product lacks key characteristics. Since the new deputy director of sales is here to solve the sales problem, the marketing department must now tie in with the former director of the opposition (after all, the former sales director has been fired). As a result, the new sales director began to draw up a new sales plan, everything was overturned again.

Sometimes in this case, the enterprise only need one or two iterations to find the correct sales roadmap, to determine the success of attracting customers positioning. In difficult economic times, when investment funds are limited, the next round of financing may never be achieved.

But the problem with Webvan is not that sales strategies or corporate positioning are wrong, but that any business plan does not pass the initial customer contact test. The assumptions in Webvan's business plan are just a series of untested guesses, and when the real effect emerges, they realize that the assumptions in the revenue plan are wrong. With too much emphasis on the implementation of business plans, Webvan can only achieve strategic adjustment and business model conversion in the form of sacking supervisors.

Failure is an integral part of the process of finding a business model.

Webvan, which went public in 1999, produced a large deficit every quarter thereafter. But Webvan does not recognise that its business plan is wrong, nor is it willing to shrink its expansion, but continues to spend as much as it had planned, leading to a $612 million trillion operating deficit. Just 7 months after the IPO, Webvan collapsed.

Ironically, at the same time as the Webvan case, the other two start-ups that used the idea of customer development and were still unknown were seizing the opportunity. These two companies, the United States Peapod and Tesco, are now successful, expanding in size and earning a good profit. The two companies were small when they were founded, without setting clear assumptions and business plans, but gradually understanding customer needs in the process of developing business models and financial models. Tesco to retail outlets as the starting platform and "warehouse", now can deliver more than 85 000 customer orders per week, to achieve 559 million U.S. dollars sales revenue; Peapod Retail company has delivered more than 1 0 product orders to 330,000 customers. Whether or not it is explicitly announced, the two companies are aware of the importance of customer development test iteration processes.

This article is excerpted from the "Entrepreneur Handbook" by Steve (Steve Blank), Bob Dorf (Bob Dorf), published by Machinery Industry press