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Develop Better Products Through Reducing Uncertainty

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An Introduction to Exploratory Product Development

Most enterprises have difficulty developing products effectively. Typical pressures and frustrations include missed launch dates, sales goals, internal conflict, budget overruns, and the wrong products released to the marketplace. Often, the most common stressor is a sense of uncertainty. Decision-making in the face of uncertainty is a defining characteristic of product development.

As consultants, we implemented the traditional best-practice product development phased-and-gated processes for medium to large enterprises. As a result, companies saw improvements, but we still heard common complaints from our clients: burdensome documentation, glacially slow progress, inability to adapt, and creativity-killing rigidity.

But if the industry-standard best practice—the phased-and-gated approach—wasn’t the best methodology, what was? At the time, there were no good alternatives. That’s when we went to work on developing Exploratory PD (ExPD). We knew product development could be improved substantially. ExPD is an adaptable product development process that adjusts to internal and external factors and individual product nuances. It is a systems approach that fully integrates all the necessary elements and offers a fundamental redesign of the development process, reducing uncertainty and risk. 

Research has shown that different levels of uncertainty require different approaches, and current product development processes, such as the phased-and-gated process, do not address the complexity of highly uncertain and risky products.[1] Another research study observed that the phased-and-gated process harms innovation because it cannot support complex revisions when uncertainty and risk are high.[2]

This paper provides a high-level overview of Exploratory PD® (ExPD), and we provide an overview of its three major segments: (1) Strategy, (2) Ideas & Selection, and (3) Explore & Create.  

The triangle at the bottom of the process depicts the progressive decrease in risk as the product matures (Figure 2.1).

Figure 2.1. The Three ExPD Segments

We can broadly describe the purposes of each segment as follows:

  1. Strategy. Establishes a guide for deciding which products, markets, and technologies should be pursued.
  2. Ideas & Selection. Generates, collects, and selects the best product ideas.
  3. Explore & Create. Creates a successful market-ready product while reducing the risk of failure.

We close this paper by discussing ExPD’s most essential component: People.

Segment 1: Strategy Segment

The Strategy segment is tightly integrated into the ExPD process and fulfills the need for a common, coherent understanding of enterprise goals and objectives. In the 2012 Comparative Performance Assessment Study, 76 percent of the “best” organizations employed strategies to direct and integrate their product development programs.[3] This is not surprising since strategy is positively associated with product innovation for several reasons.[4]The strategy sets an organization’s direction by defining how product categories, technological capabilities, and other assets evolve. It ensures that the product fits the enterprise’s goals and capabilities. If product teams know their organization’s strategy and goals, they will spend less time second-guessing what products they should focus on, leading to less confusion and increased productivity.[5]

We developed the s2m Strategic Framework™ (Figure 2.2) to facilitate strategy integration. It is an instrumental part of the ExPD process since it facilitates adaptation to change and uncertainty.

Figure 2.2. s2m Strategic Framework

Segment 2: Ideas & Selection Segment

The Ideas & Selection segment provides a structure for ensuring the organization maintains a steady supply of new product ideas. Ideas continuously and systematically generated from various sources provide fuel for organic growth. The Ideas & Selection segment has four key components (Figure 2.3).

Figure 2.3. Ideas & Selection Segment

The team starts by generating ideas, which it then captures, filters, and prepares for management review. The fourth component is the unique ExPD feature referred to as Prioritization Valve 1 (PV1). A valve illustrates turning ideas on and off based on the available resources. Without this valve, the development pipeline is easily overloaded, and innovation can slow to a crawl.  Valves are integrated throughout the process to ensure that it is not overloaded.

Segment 3: Explore & Create Segment

The Explore & Create segment focuses on three primary activities: Investigate, Plan, and Resolve (Figure 2.4). During A. Investigate, the project team identifies, evaluates, and prioritizes the uncertainties and risks that can adversely affect a project. B. Plan helps the team determine the appropriate activities and resources to be executed. During C. Resolve, the project team reduces the most impactful product uncertainties and works towards a finished product.

Figure 2.4. Explore & Create Segment

A. Investigate

Beginning with the chosen product idea, Investigate splits into two primary work tracks. In Track A, the cross-functional team identifies, evaluates, and prioritizes the most impactful product uncertainties. In Track B, the Idea Maturity Model™ is used to identify which development activities are necessary to achieve a launched product. These two major work tracks inform the Product Charter and the Resolve Development Plan (RDP), two essential ExPD planning documents (Figure 2.5)

Figure 2.5. Investigate Process

B. Plan

If the project continues in the process, the team starts planning. Planning facilitates the flexibility, adaptability, and speed needed in product development. In ExPD, “Plan” does not mean creating something fixed. Planning is sufficiently flexible to adapt to changes in the market or technology and frequently occurs throughout the entire process.

Two key documents support the planning process: Product Charter and the Resolve Development Plan (RDP). The Product Charter contains the long-term vision and goals for the final product. The  Resolve Development Plan (RDP) is focused on the short-term: the prioritized uncertainties that must be resolved and the activities required to advance the product idea’s maturity (Figure 2.6).

Figure 2.6. Plan Activities

C.  Resolve

Once the project clears PV2, the project continues into the Resolve Loop. Generally, the riskier the project, the greater the number of assumptions to be addressed. Resolution can also include testing multiple alternative assumptions in parallel (Figure 2.7). The activities, people, and resources required to execute the Resolve Loop depend on what needs to be learned, the resources available, and the budget.

Figure 2.7. Resolve Loops

A Resolve Loop, as shown in Figure 2.8, contains four steps: Design, Build, Execute, and Learn.

Figure 2.8. Four Steps of the Resolve Loop
  1. In Design, the team finalizes the plan to resolve the most critical assumptions. This step includes but is not limited to constructing hypotheses, reviewing existing data, and identifying the appropriate test methods.
  2. In the Build step, the team creates the test environment. This may involve testing assumptions by building models, creating prototypes, selecting test methods, or designing surveys.
  3. In Execute, the test defined in the Design step is performed using the items created in the Build step. Also, the team summarizes and documents their learnings.
  4. The team analyzes the findings in the final step, Learn & Adapt. The project team should assimilate what has been learned, determine gaps, articulate the most compelling project issues, and determine the next steps.

We like to run Resolve Loops in a short sprint, similar to agile techniques. Some assumptions require iteration. While other assumptions will drop off because they’re no longer relevant, others will need to be continually monitored, and new ones will be added as they arise. The length of a Resolve Loop varies based on the assumption’s complexity and the activities needed for resolution.

People

The final element of the ExPD approach, People,encompassesfour non-discrete areas: Enterprise, Management, Culture, and Teams (Figure 2.9). Distinguishing between these four areas can be difficult.

However, the inescapable fact is that it is people who shape your enterprise, who make up your management, who form your culture, and who structure your teams.

Figure 2.9. Interrelationships of People

To summarize the significance of these areas, enterprises have evolved to a current state of increased complexity, and adaptability is critical for survival. Successful projects have competent managers who are involved but not too involved. Some important military techniques, such as mission-type orders, can apply to today’s leaders’ managing product development teams. Managers can adopt other methods, including management by exception and leading by asking questions.

For many of our clients, culture is a tough nut to crack. It isn’t easy to talk about culture without discussing management, teams, and enterprise since they all help shape the culture. Some of the most important aspects of improving culture include adopting better business practices and processes and addressing the culture of risk-taking, mistakes, and the stigma of failure.

An adaptive team structure enables the success of ExPD, which requires striking a balance between structure and flexibility in the workplace. ExPD works best in an adaptable enterprise characterized by management approaches that decentralize decision-making, cross-functional teamwork built on trust, and a culture that embraces learning and adapting.  According to Ross, Beath, and Mocker, this mindset change will entail upending established management practices and forcing a change in corporate culture. Embracing failure is foreign to most product leaders who have risen in large enterprises today. Companies may need to call upon the next generation of product leaders to change to an iterative test-and-learn culture that enables learning and adapting.[6]

For more details on ExPD, please read our recently published book at Amazon Learn & Adapt: ExPD an Adaptive Product Development Process for Rapid Innovation and Risk Reduction—an easy-to-follow guide with case studies that bring the process to life.


Footnotes:

[1] Patricia J. Holahan, Zhen Z. Sullivan, and Stephen K. Markham, “Product Development as Core Competence: How Formal Product Development Practices Differ from Radical, More Innovative, and Incremental Product Innovations,” Journal of Product Innovation Management 21(2) (2014): 329-345.

[2] Richard Leifer, Radical Innovation: How Mature Firms Can Outsmart Upstarts (Boston: Harvard Business School Press, 2000).

[3] S. K. Markham and H. Lee, “Product Development and Management Association’s 2012 Comparative Performance Assessment Study,” Journal of Product Innovation Management 30(3) (2013).

[4] Michael Song and Yan Chen, “Organizational Attributes, Market Growth, and Product Innovation,” Journal of Product Innovation Management 31(6) (2014): 1312–29.

[5] Chip Heath, “On the Social Psychology of Agency Relationships: Lay Theories of Motivation Overemphasize Extrinsic Incentives,” Organizational Behavior and Human Decision Processes 78(1) (April 1999): 25–62.[6] Jeanne W. Ross, Cynthia M. Beath, and Martin Mocker, “Creating Digital Offerings Customers Will Buy,” MIT Sloan Management Review (Fall 2019).

About the Authors:

Kathy Morrisey (left) and Mary Drotar (right) founded the product development firm Strategy 2 Market® (s2m) in 2002. s2m specializes in helping large and mid-sized enterprises improve their product development processes.

They went on a mission to improve the traditional phased-and-gated product development process that most entrepreses use today. They developed an alternative adaptable process called Exploratory PD® (ExPD) that ultimately drives down and manages the most critical product development uncertainties and risks. Out of this process, they developed the Product Risk Framework® tool.

They received a grant in 2018 from the NSF STEM I-Corp Program sponsored by the University of Chicago Polsky Center for Entrepreneurship and Innovation. The grant was for the Product Risk Framework (PRF), which supports the ExPD process. Mary and Kathy are both graduates of the Booth School of Business at the University of Chicago.

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