Advanced Operating Models
Feb 12, 2018

Five lessons for successful product innovation in services organizations

Product development in services organizations is challenging. These companies are great at solving individual customer problems, but can't always join up the dots to turn solutions into products that are repeatable and scalable. And at what point should they get input from customers, and to what extent? Or do they build a product and then take it to customers? On top of that, the typical challenges from planning, resourcing, budgets, and governance still exist.

At Genpact, we help clients improve financial leadership, business agility, stakeholder experiences, risk management, and controllership. From my time developing digital products in these areas, I have many lessons that will help product development teams at services organizations meet their objectives, while avoiding common pitfalls. Here are the five that I've found most useful:

Lesson 1: Set the right target for the team

It sounds obvious, but it takes discipline to focus on the right target and outcome. Build a product strategy and roadmap that is market driven (outside-in) along with a business case and broader customer collaboration. A strong qualification methodology enables you prioritize your active projects. You'll need to incorporate both financial and non-financial factors, maintain strong governance, and identify clear deliverables and change-control procedures. Then you can decide between the nice-to-have and must-have products and features.

Lastly, measure your project teams on important factors like client feedback and return on investment, not just resource utilization, despite it being both easy to measure and important to control.

Lesson 2: Decide whether to go solo or pick a partner

Development teams may be inclined to build everything in-house. While this strategy has benefits, if the team lacks some key skills they may face long development times and lost opportunities. 

However, partnering with an external company for every product is not a smart strategy either. 

Partnerships must be chosen and set up carefully to avoid intellectual property issues or the partner getting more value than the effort it puts in. The decision about what to do in-house and when to work with a partner needs to be based on factors such as:

  • Expected product value
  • The organization's strength and capabilities
  • Time to market
  • Intellectual property rights
  • Downstream maintenance needs

Lesson 3: Design and develop minimum viable products

Adding more features to a product increases value and customer satisfaction. Well, not always. This line of thinking fails to take account of how long customers can wait for your new product, and how they'll react when they see it.

The alternative is to develop a minimum viable product (MVP), a solution with just enough features to satisfy early adopters who understand your vision and are willing to co-innovate and give you feedback. Then use their feedback and ideas for the next iteration. Gathering insights from an MVP is often cheaper and less frustrating than developing a solution with more features, then finding they don't meet customer needs.

To develop an MVP, teams must spend significant time articulating the problem. How? Come up with a set of problem hypotheses, conduct client-focused group discussions, speak to external experts, and do secondary research on existing solutions and their limitations. The quality of the research and time spent here makes a huge difference in the MVP's scope and success.

And then you need to find the right customers who will accept an MVP and not demand a fully-fledged product.

Lesson 4: Balance customization and standardization

This is where organizations are most likely to struggle – it's in their nature to customize products for their clients, and work within a limited project timeline. Incremental revenue opportunities for customizations may cloud their decisions and they may neglect the long-term cost of tailoring products. Teams must focus on standardized product offerings that can also be easily configured to specific customer needs. A strong understanding of clients' issues and buying factors is essential.

Don't spend enormous amounts of time and effort customizing MVP features for every client discussion; instead, find out which features are important and will impact the buying decision. Understand customers through client-focused group sessions that uncover their must-haves and nice-to-haves.

Lesson 5: Don't be afraid of mistakes

Development teams often come up with solutions that fail to meet customer expectations. That's ok. It's part of the learning curve. One reason why products don't meet expectations is the pressure to get it right first time.

Some organizations have limited tolerance for failure, so teams develop products that are easy to implement. They may be right first time, but they'll deliver only incremental benefits and won't interest customers. If you instill the right culture and rewards, encourage teams to fail fast and learn to build innovative solutions, you'll build a spirit that strives to satisfy the customer.

Product development teams should be able to adapt to changes and make course corrections. They should take advantage of modeling and simulation capabilities to test different scenarios. And technological developments will continue to create opportunities to improve their performance development processes.

Robust design, planning, development, and project management all play critical roles in the development lifecycle. Rapid prototyping, getting feedback early, accepting mistakes, and incorporating feedback will develop innovative products that are right for market.

Product development for services organizations is still relatively new. And demands for agile development and new technologies continue while market and business needs keep changing. But it's the companies that shape their ideas by listening to customers, and bringing their expertise to the development table that will succeed.

I hope these five lessons help you on your journey.

About the author

Prakash Hariharan

Prakash Hariharan

Finance Transformation Head

Follow Prakash Hariharan on LinkedIn