Startup School – Evolutionary product development and “solving the wrong problem”, problem: Lessons learned
Do markets accept imperfect products? Yes. The demand curve for highly inaccurate North Korean Scud missiles is a case in point. So is the market for badly written self-help books, pills with unpleasant side effects, tread-separating tires, “Star Wars” prequels, and “Star Trek” sequels. Not bad products, just imperfect ones. There is a minimal acceptable feature set that customers are willing to work with. Failed ventures climb higher on the perfection curve than their successful peers, ignoring financially viable product development and rollout strategies that get to revenue generation more quickly.
Is perfection necessarily a bad thing? It depends if it is evolutionary or not. Evolutionary perfection delivers a new generation of better products by building on the work done with earlier generations while those earlier generations continue to produce revenues. Each generation provides the seed capital that can be reinvested in improving the next release. The strategy works best when manufacturers of products can resell each new version to the same customers and charge close to full price for it. Software, laptops, cars, textbooks, fl ue remedies, new and improved diet pills—the strategy has worked for all of them. Non-evolutionary perfection introduces the same changes but skips in between releases. Which means that you isolate yourself for longer periods from your customers, throwing away an opportunity to use them as a bearing point. Case in point – hydrogen fuel cars versus hybrids – you tell me which one is a more successful product and why?
Evolutionary perfection has shorter release dates, higher revenues, more visibility, and fewer headaches. The features introduced in each release are a manageable set, the releases go more smoothly, and customers are happier with products that actually get on desks while there is still a need for them. Nonevolutionary perfection tries to do more with less and without exception fails, often repeatedly.
It would be simple if it stopped here, but it doesn’t. Related to this debate is the perfection curve. The perfection curve plots degrees of perfection against effort and market acceptability. Each startup needs to make a choice that balances available capital, market dynamics, and its spot on the perfection curve. The decision is picking which rung of the perfection ladder will lead to most revenues first.
Here are the rungs of the ladder:
The lemon – A lemon requires minimal effort because the product does not work. Not acceptable to any customer. The only market is lemon sales with an aggressive sales team, but no sustainable business model. Customers ultimately get wise. This is not a sane or rational choice but the result of desperation. The justification runs something like this: “The sales cycle is long. By the time we have to deliver it, we would have fixed the problems” or “By the time they find out, we would have a solution and we will offer free upgrades.” The lemon is a last-resort, daredevil strategy used when a venture has nothing left to lose. Once you’re branded as a lemon maker or a lemonade stand, the reputation tends to stick.
The Band-Aid – The product is functional, has minor packaging or quality assurance issues. If the lemon represents 30%–50% completion, the Band-Aid is closer to 80% done. It has to ship because the deadline is here. Band-Aids will normally work with genuine effort, hand-holding, and expectations management and a commitment to get the remaining 20% done before the client gets tired and starts looking for a different pair of hands to hold. In principle a Band-Aid is good enough to hold a sale or a deal. It won’t if the hand-holding function is mismanaged.
The move-in ready home – The odd faucet that doesn’t work, the patch on the walk-in closet that was overlooked, the hidden hole in the utility cabinet, the power outlet without power, the phone line that goes nowhere. Problems that you will find, in other words, if you live with the product long enough. If you look deep enough, you will also find that in 9 out of 10 cases, the product in question is a second- or third-generation edition that has had time to evolve and improve itself just like your new lived-in home that has been around the market a few times.
The Lexus – The minute you step inside a Lexus, you are in a different world. From finish to details, this is a beast well worth the price you have paid for it. The first thing you notice is the silence. Drive a lesser vehicle on the freeway and you will hear the wind rushing by, the grind of the tires, and the crunch of gravel. The Lexus is a sound-proof cabin from paradise. Real-time software or a product that has been in self- improvement mode for more generations than you can count. You see baby aspirin but do you see the 30 years of product history behind the 80 milligrams? There are two rules to remember when you set out to make a Lexus: You can’t get it right on your first try and you can’t build it on your own dime. The Lexus is a labor of love paid for by a crossed check signed by someone else.