How to build great products?

On our fourth lecture we discussed how to create great products and how to develop business plan.  We also compared product business to service business.

When building a product it is vital to have the customer constantly in mind. Why would he or she use your product? What is the benefit of using your product? How does the product feel to use? What are the potential fears that a customer will face when switching to your product? Are there substitute products? How does your product differ from the substitutes? You should have an answer for all these before going any further with your idea.

Other important point that was raised on the lecture was a point about copying the ideas of others. Copying is something you want to avoid since it will get you nowhere. If everything you do is copy, you don't differ from the competition at all and you are always lagging behind in innovation. You have to bring something new to the table or make your product ten times better than the competitors. You also receive a great benefit from creating unique products since you will acquire a monopoly state for your company once you launch. You will be the only company in the market with such a product and you don't have to deal with competition. Of course if your idea turns out to be very successful other companies will also want a slice of the pie so the monopoly status of your company may not last long. An example of this would be the first iPhone. It was radically different from previous mobile phones and quickly gained a huge share of the market. Many competitors have since done similar products but iPhone still remains hugely successful.

The iPhone example illustrates also an other important point: It's vital to enter the market as soon as you have a functioning product. That way you will get to enjoy the benefits of being first in the market longer that you would if you would strive to create a perfect product before launch. The truth is that there is never going to be a perfect time for launch. The product you are developing will never be perfect so it's better to just launch as soon as you possibly can and reap the benefits from it.

We also discussed the differences between product and service based start-ups. The key difference is that the product approach will require large initial investments since you need a lot of equipment and such to create your product. However, if the product turns out to be successful you will make a lot more money than with a successful service business. The thing about service business is that  you don't require that much initial capital. Generally speaking it is very easy to start a service business compared to starting a product based business. You can pretty much just start offering services for money but the thing is that it is much harder to scale up a service business.  With product approach you can just manufacture more products to sell but with services it is very different. The figure 1 below illustrates the differences between a product start-up and a service start-up.

Figure 1. The differences between product and a service start-ups. (Source )

Here's all for now. Until next time!