A product development strategy is a strategy based on developing new products or modifying existing products so they appear new, and offering those products to current or new markets. These strategies typically come about when there is little to no opportunity for new growth in a company’s current market.
What is Product Development Strategy?
Product development strategy can be roughly divided into two approaches that are typically used in combination:
- The innovation approach
- The improvement approach
The innovation approach involves developing completely new products, technologies, or processes for the market.
The improvement approach involves making small modifications or changes to existing products, technologies, or processes for the market.
The innovation approach can be further divided into Incremental Innovation, Radical Innovation, and Disruptive Innovation.
This is the usual way of doing product development, but is often considered an unsatisfactory means of growth, but can be profitable than than the alternative if handled correctly:
A company identifies a new market opportunity that they would like to pursue and they have the understanding that they’ll be able to offer something new to the market that will be enough to entice some of the target customers to choose their solution over competing products. From here, the company will create an initial product and put it through the proper marketing and sales channels so it’s available to the target market. After a period of time, the company will revise that initial product to address unmet market needs and hence increase sales. The company will continue the process of creating products in this iteration until they’re unable to or the market shifts.
Most of the time, companies will experience some success with this approach alone, but that success can be diminished if they don’t manage their products correctly or if the market shifts while they’re still in the process of making revisions to their current product.
This involves creating a brand new product or technology that has never before been seen in the market. While these products can be made by any company and thus the term is often used interchangeably with product development strategy, it’s more commonly associated with smaller companies that can’t compete by making incremental improvements to existing products (ie. Apple and the iPhone).
Disruptive innovation can also be thought of as radical innovation, but it’s more of a distinctly different approach that doesn’t involve developing a whole new product. Rather, it involves developing a new method of doing something where the initial use of that method serves an entirely different purpose that’s considered inferior to existing methods.
The use of this method isn’t actually disruptive until a second use is created, one that serves the same purpose as the existing methods (or at least close enough) but that uses the new superior method. The second use is what disrupts the existing marketplace.
The method was first described by Clayton M. Christensen and has been used by companies like Intel, Apple, and Amazon to enter into new markets. The classic example of disruptive innovation is the Personal Computer.
How is Product Development Strategy and Reverse Innovation Different?
While there are many commonalities, there are a few key differences between Product Development Strategy and Reverse Innovation:
The main differences are that in reverse innovation, you’re trying to offer new products to a domestic market, whereas with Product Development Strategy, you’re creating new products for an international market.
Reverse innovation is a business strategy aimed at serving the needs of local consumers in emerging markets. The main objective is not to sell to the local consumers in these emerging markets, but rather to use them as a test bed and to gain brand recognition for the company.
As explained in social entrepreneurship, reverse innovation can occur when a company, often a Western company, searches for a previously unrecognized market in foreign countries. The purpose of reverse innovation is not only to make business, but also social and environmental changes. This is done by developing the products and finding new markets in third world countries, like Zamynan in Africa. The social and environmental changes reverse innovation creates include introducing renewable technologies, employing green policies, creating jobs, and all while increasing the quality of life for many people.
For example, an American company makes some earrings in the US in order to sell, but then they see that there is more demand in Africa, so they come up with a new design that is more appealing to the African ear, and another one, which will appeal to the American ear. These new designs are made with first world manufacturing in mind. Then the company will test the market in Africa by giving out the first ones to see how many are sold. Once the first one is made, the company will make the same earrings to fit American and African ears.
Product Development Strategy
Product Development Strategy is a more traditional approach to growth that involves taking the new or improved product and marketing it to a broad market. The goal is to make the product appealing to as large of an audience as possible so as to increase sales.
The main difference between this approach and reverse innovation is that with product development strategy you’re marketing to established markets, whereas with reverse innovation you’re marketing to markets that still have much growth to be experienced.
Product Development Strategy Best Practices
There are a lot of different best practices associated with product development strategy, but most of them can be summed into the following:
Don’t rush it, but do spend enough time to do it properly. Try to avoid wasting time by making some temporary decisions, but also don’t spend months planning some aspect of the product that’s not as important as other aspects of it. Don’t wait for perfection, but do be compelling. Make sure you’re not trying to make the perfect product, but that the product you’re making is compelling enough to attract buyers.
Don’t steal other people’s ideas, but do steal from yourself. The best products are the ones that are built upon the ideas that have already been brought to the market. Don’t try to completely outdo the competition, but do make it better than theirs. Not only will your product be more interesting to people, but you’ll be able to market it as the better product. Don’t overreach with new products, but do provide for the future. Make sure you’re not trying to predict the future and create a product for something that’s not even here yet, but do make sure you’re providing a means for that future thing to happen.
Product Development Strategy vs. Reverse Innovation
Product Development Strategy is far more common to larger companies who are looking to enter new markets. Big companies like Apple and AT&T, as well as other larger and smaller businesses use product development strategy all the time.
Reverse Innovation is a bit of a different ballgame and is more common among smaller businesses or social entrepreneurs who are looking to use the third world to build a business and better serve the third world.
While the two are often used interchangeably, it’s important to keep in mind the fact that they are different. Jimmy Chen explains that large companies can have difficult times implementing Reverse Innovation, for example when the products are primarily exported to rich markets with mature systems.
What’s Your Take?
Do you feel like you’re using product development strategy in your current project?
Are you looking to use Reverse Innovation in a way where you can inspire some sort of social change?