Growth Through Creation

Driving Growth Through New Products and Services

As someone who's always trying to drive operational efficiency in my businesses, I often get in the way of developing new ideas because I'm trying to optimize them on day one. A better method is to follow what I like to call the Test, Launch, Optimize, then Scale approach. This approach allows me to be freer when ideating and developing new products/services and prevents me from wasting time and resources on figuring out how to do things when I still have not determined what to do. You will not have a profitable new product or service on day one. It takes resources and energy to find product-market fit and build the infrastructure to market and produce/deliver new products and services effectively. Our goal should be to reduce the time and resources needed to get to profitability.

When we have an idea of a new product or service that we want to provide to the market, we need to 1st focus on whether there is demand for the product/service. We can use many methodologies and frameworks to help us test ideas, such as Agile, Design Thinking, Lean Startup, etc. While we won’t dive into the mechanics of the various methodologies, the underlying principle is that we want to quickly test if customers are willing to pay for a new product or service while receiving feedback to help us iterate on the product or service. The goal is to determine a viable new product or service in a cost-effective manner so we can move to the launch stage.

Launching a new product and service can be exciting but also very chaotic operationally. Often, small businesses must rely on the organic growth of the new venture and, as a result, cannot hire a dedicated team to service the venture to begin with. As a result, existing resources will need to be utilized to deliver the product or service and manage costs. Ideally, the value flow of delivering the new service does not utilize the critical constraints of the existing value creation system (more on this in a future blog post) so that the new venture does not erode the existing business.

One of the costliest constraints that managers forget to value is the constraint of management attention. Not only can a lack of management attention lead to the erosion of existing business systems, but it can also lead to high opportunity costs as the team cannot capitalize on emergent opportunities that appear for the legacy business. However, this does not mean organizations should stop developing new ventures. Rather, guardrails should be established to prevent managers from over or under-investing their attention in both the new and existing business. As demand for the new venture grows, we can focus our energy on my favorite stage, optimizing value creation flow.

Once a small business has a good idea of the demand for their new venture, they can start developing the systems and infrastructure needed to offer this product/service profitably. The first step is to map out a simplified process of how value is created through this venture. Once this system is mapped out, you can develop the tools and infrastructure needed to deliver this value to the customer. This will include refining the marketing and sales process, the production of the product or service, and how it is delivered to the customer. Like all new processes, there are often big refinements at the beginning that need to be made, and over time, these refinements will continue to be tweaked to optimize value flow. Referencing the steps in the value creation system will help you understand where the bottlenecks and buffers of the system are. The goal, of course, is to increase capacity through the bottlenecks while minimizing the resources needed to operate the value-creation system. Creating systems that can be easily replicated is also beneficial so you are prepared to start scaling the new venture.

Scaling a new venture is the exciting part for your team and pocketbook. Developing new products and services is often a more creative process than scaling the venture. As a result, oftentimes, you need different types of personalities to lead through the scaling process, and it is important to find individuals who can bridge the gap between creative innovators and more systems/ operational leaders. One challenge I often hear from clients is that as they scale a new venture, the individuals who worked so hard to create the product or service get bored during the scale-up. As a result, this can be a time of high turnover, which can be detrimental to small businesses. When possible, it is great to move these creative innovators on to new projects that they will find interesting and allow process-driven leaders to scale up the venture while still having the access and support of the original innovators. This allows process-driven leaders to be unencumbered as they unlock value through scaling. The value created can then be used to fund future innovative projects. However, not every business has the luxury of being able to move individuals into new roles before these ventures start producing profits. In these cases, leaders should be upfront in communicating the change in priorities so creative innovators are more willing to adapt their work style to accommodate the immediate needs of the business. When employees better understand how their actions contribute to the organization's overall value, they're more willing to work through the changes that the new priorities require of them.

Developing new products and services is a great way for small businesses to find valuable growth and diversify their income streams. By focusing on theTest, Launch, Optimize, then Scale approach, small businesses will be better equipped to focus on this innovative process. This does not mean that the process will be smooth and linear. As all business operators know, the path from A to B is full of twists and turns. However, when we have a system for discovery, and a process to get to profitability, we can be more resilient in our quest for growth and development. It all starts with understanding our organization's value creation system, recognizing where we have spare capacity, and finding opportunities to utilize that capacity without adding additional stress to your bottlenecks. If you're looking for help to implement this process in your business, please reach out. Also, comment below on how you've unlocked value in your organizations.