Four Types of Product Risk

Answering the question: should we build it?” is perhaps one of the most important, yet overlooked, questions product development teams ask themselves.

Especially an engineering teams tends to rather focus on the question can we build it?” or even “how fast can we build it?”.

While this is an important question to answer and a risk to mitigate, it is not the most important one. Building something no one wants is by far the largest risk, especially for new products. In fact, I argue that there are four major types of product risk that needs to be dealt with in different ways.

Let’s see if we can bring some order to the four by drawing a trusty old two-by-two:

Now we have four fields, each representing one type of risk. Out/In is the risk outside our organisation (the market) or inside (the team). Ability and Desire should be self explanatory. Now, let’s fill them in with questions:

If we start in the upper right, we have the OUT/DESIRE risk. Here we must answer the critical question: do they want it? This is a critical — and hard — question to answer but it needs to be addressed throughout the development of the product. The entire underlying premise of a method such as Lean Startup is about exploring the problem space of a customer until you discover a product where this question gets a positive reply.

The next box is the IN/DESIRE one. This is often overlooked, especially in corporate settings. It asks the very human question: do we want to build it? A product team with no motivation or desire to build an awesome product will fail. (This is why Purpose is the word of the year.)

Now moving over to IN/ABILITY we finally ask the question can we build it?This is familiar territory for most people working in product development.

Last but not least we ask the question of OUT/ABILITY: can our customers find us? This is the domain of marketing and sales and should help answer the question if the cost of selling covers the cost of production.

If you have worked with building or selling products you’ll most likely notice that the questions to the left are familiar — but it’s the questions to the right that really matters. At the very least, they are questions you must ask before asking the questions to the left. They are questions a lean forward organisation asks. Hopefully this short post helps you do the same.

This post was first published on LinkedIn. Feel free to connect with me if this is a topic of interest!

UPDATE: a slightly newer version of this has 8 fields:

The fields are:

  • Customer Desire: Problem. Are we solving an actual problem?
  • Customer Desire: Solution. Is our solution the right one?
  • Team Desire: Team Goal. Does the team understand why we do this? Does the team want to build the product? (Very important!)
  • Team Desire: Collaboration. Can the team work together? Is it a suboptimal team? Are people friends or at least respect each other? (Five Dysfunctions of a Team is good read for this one.)
  • Team Ability: Resources. Do we have the resources (money, time, tech etc) necessary to build the product?
  • Team Ability: Skills. Do we have the proper skills in the team?
  • User Ability: Usability. Does the user understand how the product should be used?
  • User Ability: Findability. Can the user find the product? Do we market it in the right channels?

Brought together, they bring a pretty complete picture of what a product team needs to figure out to build a good product.