The Corporate Product Death Cycle
What happens when success is communicated, not validated.
Building startups is really really hard. The road to success is filled with many challenges that need to be fixed in order to keep momentum and build the product/business that’s envisioned. One of the challenges that has interested me is “The Product Death Cycle”, a term coined by David J Bland, and explained in depth by Andrew Chen.
This diagram shows a trap that startups need to avoid. And even though it looks obvious, it’s unfortunately very simple to fall into, causing a startup to implode over time. You listen to customers, build what they want, but forget to ask yourself: why am I really building this?
In his article, Andrew Chen shares ideas on how to break out of this seemingly infinite cycle.
Most importantly: objectively identify the reasons (and results) of why you’re building more product and adjust your activities accordingly. This is closely connected with the Lean Startup way of thinking and working: Lean doesn’t guarantee success, it decreases risks and limits grand failures.
After working with dozens of startups in the past few years I’ve been intrigued by corporate innovation and the challenges these companies have in exploring and developing new products and business models. Corporate startups and new products have an advantage over traditional startups when it comes to potential distribution of their product: actually letting potential users and customers know about a new product (through their current distribution channels and market). Their biggest challenge is something that’s natural to a lot of startups: knowing what it takes to build a good product, move quickly and iterate as you go. You need to be an experienced practitioner, or at least a digital enthusiast, with a certain mindset to understand where to start, what to build, how to objectively judge the progress you’re making and when to pivot, pursue or stop.
What I’ve discovered while being part of the innovation movement within a big corporate, and after taking a deep dive into corporate innovation, is that there’s something going on that looks similar to Bland’s “Product Death Cycle”. But instead of products dying a slow and painful death, they are kept alive by the environment in which they were created.
I think this new diagram perfectly illustrates one of the major challenges of corporate innovation. I call it the “Corporate Product Death Cycle”:
Let me explain:
- Ideas are overvalued 💡
Tech entrepreneur Derek Sivers once said: “Ideas are just a multiplier of execution”. Accepting that execution trumps everything will help you to objectively judge any new business idea that comes to the table. But, answering “how do you execute on an idea to make it worth anything?” can only be done after the idea is researched and validated. Customer behaviour and expectations are constantly evolving, making the urge for corporates to succeed in digital transformation and innovation very real. Technology is seen as THE solution to accommodate these changes and therefore often prioritized, and valued, above culture, strategy, general exploration and even vision. The idea that technology can fix or cater to everything, leads to the overvaluation of new business ideas and initiatives: “we can make it, so why not do it?”, “if we build it they will come”. This mostly happens when traditional managers (in leadership positions) are the ones who judge and decide whether an idea is worth pursuing. These ideas are valued on their story and promise, but are not (pre-)validated by customer, desk or business research. The first hurdle towards the exploration of a new idea is often not a hurdle: almost all ideas are interesting enough to start working on because of their promise and the pressure that surrounds the challenge of innovation.
- Buy-in creates implications and expectations 💸
Since corporates are built on hierarchy, the danger exists that decisions made by senior leadership are accepted without really being challenged. The weight of these decisions leads to disproportionate buy-in when it comes to new ideas and initiatives. This is a big threat in corporate innovation since it’s not clear as to why an idea is being pursued. Are we servicing a growing market trend? Does this fit our vision? Is the potential business value big enough? Is there even business value? When budget and resources are allocated, the corporate structure instantly creates implications and sets great expectations for the idea’s (certain) future success. The allocation itself is already seen as a success and the promise of the idea is therefore set in stone. This clouds the ability of the team working on the project to objectively judge their progress in the future: “when do we pivot, pursue or stop?”. Even though there’s been unvalidated buy-in, failure is already not an option for the unvalidated idea. What could go wrong?
- Building without validation 🏗
When budget and resources are allocated to a “promising” idea, something happens within a corporate environment that will never happen in a “real world” startup: boundaries and limitations dissolve. The boundaries and limitations that entrepreneurs experience due to their limited funds and time, forces them to be creative and objective about the steps they need to take to make their idea a success. In order to objectively judge this, it’s important to constantly validate if what you’re doing is the right thing. Talk with customers, listen to them, make sure you understand their pains/needs and create a product that delivers the value they are looking for. If it’s not, it’s a team’s task to interpret the information they have gathered and put that in the right context of the problem they’re trying to solve. What happens when you have a pocket full of cash to work on a “promising” idea without boundaries or limitations? You put your resources to work and start building stuff. It’s an understandable move, but without the right mindset this serves as a catalyst for the Corporate Product Death Cycle.
- Shiny boxes without business value 💎☠️
When the allocation of budget and resources sets the promise of an idea in stone, the validation of that promise itself often becomes a project’s goal. There’s already enough challenge in building a digital product, even when it’s possible to literally build anything technical with the resources of a corporate. It’s even more important to identify and validate the business value of the idea you’re working on. The honest story of innovation is that it’s not as glamorous as people think, and you will probably fail. Talking to customers, transcribing interviews, creating customer journeys, determining Problem-Market-Fit, mapping a value proposition canvas, defining a Minimum Viable Product and designing experiments are all hard and shitty work. In other words: when you start out, you don’t have to build anything yet. But hey, who thinks that’s sexy? This is where “Shiny Boxes” come into play: beautiful presentations, mockups and “Beta products”, accompanied with pitches that further share the vision and promise of the groundbreaking idea that will give the company an edge in the battle of innovation. Some people might say it’s like adding sprinkles to a turd.
- “Success” creates more buy-in 🏆
Those sprinkles spread like wildfire. As perception trumps realism in corporate innovation, success is communicated, not validated. When you present yourself as being successful in your journey, you won’t be judged on it’s content. And what happens in this phase is very paradoxical. Senior management seems to feel the pressure to “do something with innovation”, that’s why they buy into unvalidated ideas. But when it comes to judging the progress of innovation projects, they fall for subjective stories instead of objective data and analysis. This results in awarding extended budget and resources for successful pitches and promises (polished shiny boxes). Senior management feels the pain and urgency to innovate but they are experienced in the execution phase of a company, where there is much less uncertainty. The early (search) stages of a new product or business are way more uncertain and they don’t know what to look for as they are unconsciously incompetent to ask the right questions. In their eyes, building an idea is more valuable than working on the (in-)validation of it. “Looks great, let’s continue!”, is not an objective way of making a decision, but it has a huge impact on a team and the project they are working on.
- The cycle seems infinite 🔄
The bigger threat when shiny boxes are rewarded with more buy-in, is that it creates a precedent for something that’s called the “Sunk-Cost-Fallacy”: Reasoning that further investment is warranted on the fact that the resources already invested will be lost otherwise, not taking into consideration the overall losses involved in the further investment. What this means is that the pressure to continue with a project increases, every time it arrives at it’s go/no-go moment of judgement. Combined with a “no-fail-culture” and the “promising innovative projects” spreading rapidly across the organisation, you have a distorted reality cocktail of unvalidated expectations that will keep the cycle going. Instead of the project or product dying a slow and painful death (like in the real world), they are kept alive by the environment in which they were created. Perhaps the “Corporate Product Death Cycle” should be called the “Corporate Product Zombie Cycle”. Projects are kept alive, even while they’re (supposed to be) dead. What really dies in the long run is the potential of the organisation to truly innovate and survive the ever-changing world they’re operating in today.
How to avoid this trap
One word: Mindset.
Much has been written about corporate innovation, but there are only a few people that (I think) really get it. I recommend you read steve blank’s Innovation Process and Pipeline, or his take on the “Three Horizons of Innovation” by Baghai, Coley and White.
The Corporate Startup Book by Tendayi Viki, Dan Toma & Esther Gons is a great (and in my opinion the best) guidebook that explains how to create the best environment for corporate innovation. And Alex Osterwalder’s Strategyzer has a very practical approach for actually working through the steps you need to take to really innovate. Eric Ries also lays out a new management system that leads to sustainable growth and long-term impact in his new book “The Startup Way”.
These are all indispensable resources when it comes to creating the foundation, environment and process to innovate within a corporate enterprise. But they mostly focus on the actual work that needs to be done.
In addition to having a solid strategy and process for innovation, I believe it’s important to learn and have the right mindset. Lacking the right mindset is what drives every step of the Corporate Product Death Cycle.
Searching for a new business model is very different from executing an existing business model, it requires a totally different set of skills and new processes to succeed. Can you ever feel the pain of real entrepreneurs when you’re a board member, senior manager or general employee of a corporate? No. But what you can do is adopt the right mindset to judge what you’re doing and react accordingly.
This mindset is a combination of having a Growth Mindset (the understanding that abilities and intelligence can be developed) and Entrepreneurial Mindset (taking chances and moving forward while accepting risk and uncertainty). These are it’s fundamentals:
- Do, don’t dream → Doing trumps talking.
- Nobody cares about your idea → Don’t attach your ego to ideas.
- An idea is simply a series of untested hypotheses → Ideas are a multiplier of execution.
- Build something people want → Don’t fall in love with the solution, fall in love with the problem you are solving.
- Make everything you do small and measurable → What you “build” needs to match the hypothesis you want to test.
- Quantify results and make decisions based on data → Stay objective and constantly ask yourself: why? how? what?
- Be adaptable and comfortable with making decisions and working in situations of uncertainty → Done well today is better than perfect next week.
- Read, watch, learn → Broaden your knowledge, only then you’ll make connections.
- Success is not guaranteed → Failure is part of the progress and means you’re growing.
- Celebrate failure → Failure is a first attempt in learning.
- Sharing = caring.
- Be humble → Listen to others.
When enough people -especially senior management- in the organisation adopt the right mindset, it doesn’t mean every project will succeed or the Corporate Product Death Cycle will never occur again. But it will help to limit failure and decrease uncertainty as more people will be able to objectively judge if a project should be started, pivoted, pursued or stopped.