This post is written by my colleague at New Markets Advisors, David Farber:
As Lean Startup principles have taken root over the past few years at companies large and small, innovators have stopped asking whether a product can be built and started asking whether a product should be built
Those who consistently launch successful new products will tell you that the Lean Startup process – getting a cheap, early prototype in front of real consumers, gathering feedback, and iterating based on that feedback – vastly increases the likelihood that new products will fare well in the market. Over roughly the same time period, entrepreneurs have launched thousands of successful new products using the conceptually-similar Kickstarter – a crowdfunding site that allows users to put ideas in front of consumers, get their feedback, and receive funding to get those ideas off the ground.
Beyond the traditional Lean Startup principles of rapid prototyping and iterative design, however, the successes and failures of these entrepreneurs have given us valuable insights into what helps new products gain traction in the market. Looking at the patterns among the most successful Kickstarter projects of 2014, we’ve drawn out five lessons for innovators looking to launch their own breakthrough innovations.
1. Build off the familiar. When people hear the word “innovation,” they often imagine something completely new. In reality, most successful innovations find new ways to combine or reimagine old ideas. Think the most successful Kickstarter project of the year was some fancy new app or mobile device? Actually, it was a cooler – the Coolest Cooler, to be precise. The Coolest Cooler – billed as a portable party that combines a cooler, speakers, blender, and other party accessories – received 26,570% of its funding goal, raising over $13 million from more than 60,000 backers. By launching a product that customers can relate to, you make it easier to capture reliable feedback, while simultaneously lowering the barriers to purchase. Inertia is a powerful force, often keeping consumers in the same purchasing rut. Being familiar with a new product and understanding how it can fit into their lives goes a long way toward getting consumers to try new products.
2. Alleviate high costs and pain points. Initial consumer interest in a product is often sparked by an ability to accomplish a task that was previously difficult or frustrating to complete. No matter how enticing the product sounds, consumers are just as quickly turned off if the product is overly expensive or particularly complicated to use. Look, for example, at Exubera – Pfizer’s inhalable insulin device that was projected to bring in billions of dollars in annual revenue and vastly improve the insulin intake process for diabetics. Instead, Exubera resulted in billions of dollars in losses as consumers found the product too bulky to carry around (it resembled a miniature fire extinguisher) and too cumbersome to use effectively. The Micro, a Kickstarter-funded 3D printer, shows how reducing high costs and pain points can have precisely the opposite effect. While the market for 3D printers has remained small and commercially- focused, the Micro is helping to bring 3D printers to the consumer market by making them compact, less expensive, and easier to use. In addition to the more efficient hardware design (which allows for lower costs), the Micro’s software offers a simple interface for beginners that makes the 3D printing process closely akin to traditional printing. The Micro makes trial of 3D printing affordable, and it vastly reduces the complexity of an otherwise intimidating design process. Raising over $3 million from nearly 12,000 backers, the Micro was one of the most successful campaigns from 2014.
3. Respond to clusters of trends. Executives often worry about how to incorporate trends when designing new products, fearing that they will launch a product focused on a passing fad. Successful new product categories tend to build off of multiple trends that work together. Consider the spread of fitness tracking apps and devices, most of which leverage growing trends in the healthcare industry, such as gamification and beyond-the-doctor care. Moreover, accounting for multiple trends guards against the risk of over-investing in a trend that fades away. Last year also featured a campaign to bring back Reading Rainbow – a PBS show that encouraged children to read throughout its 26-year run – and expand it to the web and mobile devices. The campaign attracted over 100,000 backers and raised over $5 million. What made this one of the most successful campaigns of all time? In part, the effort capitalized on a variety of current trends (some of which are likely to be longer lasting than others), such as corporate social responsibility, socially-spread throwbacks, gamification of learning, and relaunching classic entertainment on mobile platforms. By addressing an entire cluster of trends, the campaign reached an exceptionally wide audience without cluttering the offering with superficial features designed to attract add-on customer types.
4. Learn from real customer interactions. Gaston Blanchet and Jesse Potash, launchers of the Trunkster campaign, have truly taken some of the Lean Startup principles to heart. After noticing a number of pain points in their own travels, they set out to design a better piece of luggage. Starting with little more than a rough sketch of a new suitcase, they set out to understand the problems other travelers faced and to see how their design would fit those needs. As they observed actual travelers, they steadily created a list of small annoyances that their product could address – bags that run over your heels as you hurry to catch a flight, an inability to find a free outlet to charge your phone at the airport, the embarrassing attempt to unload items from your overweight bag. Thinking of new ways to solve these issues, the team developed a series of prototypes – from drawings, to videos, to actual luggage – that allowed them to test the design and gauge interest without spending too much before knowing whether the product would be a success. Because they solved the challenges of real customers they observed, however, the Trunkster campaign has already reached over 2,000% of its funding goal, bringing in over $1 million in funding.
5. Translate benefits into tangible value. All Kickstarter campaigns offer some sort of discount or benefit to backers who provide funding. The Dash – a pair of wireless earbuds that offers built-in music storage as well as fitness tracking opportunities when paired with a smartphone – goes a step farther. In addition to offering reduced-cost versions of the product for early backers, the company identifies how even the full cost of the item compares to the total cost of acquiring its full range of capabilities through distinct devices. Even if the cost of the headphones appears high at first, customers can justify a decision to purchase the item by relying on the hypothetical savings they can identify.
Kickstarter gave entrepreneurs a great platform for sharing their product ideas with the world. In turn, watching how those entrepreneurs used the platform to create success in 2014 gave us insights into what innovators can do to launch their own breakthroughs. Moving beyond the Lean Startup basics of getting early prototypes in front of customers and iterating based on their feedback, the standout entrepreneurs of 2014 have demonstrated that success also depends on leveraging familiar platforms and growing trends, reducing trial costs and pain points, and demonstrating tangible value. But these lessons are not unique to entrepreneurs and startups. These are the same strategies that companies big and small need to put into practice as they prepare to launch new products and services in 2015 and beyond.
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NEW MARKETS ADVISORS