Succumbing to Internal Bias
Over the past five years, I’ve had the good fortune to work with companies on three continents and ranging from startups to $4 billion businesses.
The common denominator of my work has been new product development (“NPD”) and watching how different companies and teams develop products has been fascinating. The experience has made me realize there is no one-size-fits-all approach to NPD as company size, industry, geographic location, budgets or product type will all vary.
However, in virtually all of my engagements, the first-principles of new product development are always present. These are at the foundation of the Product Opportunity Mapping framework I offer which incorporates four key questions when considering a new product opportunity:
What problem are you trying to solve? (and is it worthwhile solving?)
Who is your customer and where do they exist?
Who and what are your direct and indirect competitors?
How and why will you win? (what is your “secret sauce”?)
Answering these questions will not guarantee product success but going through the exercise of answering them honestly will create a development tailwind and reduce the risk of failure.
On the flip side, NPD efforts will always have multiple headwinds as well. There is no one comprehensive list for why products fail but if it did exist, it would include a limited product-market fit, competition, lack of a competitive advantage, the technology not working, market and industry characteristics and how much is being invested.
Another significant source of headwinds are internal factors such as the personalities of those on the product team, compensation & incentives, company leadership and culture.
Internal Biases
I collectively call these internal biases. “Bias” is defined as “prejudice in favour of or against one thing, person, or group compared with another, usually in a way considered to be unfair”. Every company has built-in biases which influence how and why things get done. While bias is often perceived as being negative (i.e unfair), biases within a corporate setting are also what makes a company successful in the first place. Employees do things in their own (“biased”) way.
However, when a company is trying to do something different – like developing a new product that differs from current core offerings - this is where the “unfair” part of the bias definition comes in.
In my experience, internal biases can make or break a product development effort. They exist in every single company and are hard to tackle. Complicating things further, the type of bias will differ from company to company.
The key is to accept that they exist and to be as objective as possible when trying to root them out. That leads to the conundrum: when you are inside a company, biases don’t seem to be biased: they are simply how things are done.
It’s not until you compare yourself to other companies do you realize they exist and how entrenched they have become.
The Impact of Bias on New Product Development
Bias can doom a new product development effort before it even starts. Therefore, it’s incredibly important to identify and address them as early as possible.
For sake of illustration, I will argue that a company’s culture is the collection of many biases (fair and unfair) put together. If this culture is misaligned with the NPD process, it is highly likely a product development effort will fail.
For example, I have worked with construction companies who are very serious about developing new products in order to diversify their revenue. They invest significant resources (people and cash) into the process, identify new and fast-growing markets and have come up with a new and competitive product offering. However, business culture in the construction industry is centred around safety and reducing risk wherever possible. This makes sense as people otherwise could get hurt or die on an unsafe construction site - and I suspect there is a direct correlation between strong safety practices and the overall success of a general contractor.
What these companies may not recognize or fully appreciate is that NPD is a probabilistic, high-risk endeavour. Research shows that majority of new product development efforts fail (60 – 80% depending on the study) with failure defined as the product being a bust or not meeting the expectations set out for it.
This means a successful product company should build a portfolio of NPD efforts that is managed with the expectation that some will fail and others will succeed. In contrast, for a risk-adverse company - such as a construction company - a single failure might be seen as unacceptable - and this creates strong headwinds and undue pressure for product teams.
Another example relates to service-related companies (lawyers, doctors, consultants, engineers) who charge by the hour but decide they want to develop new non-service-based products so they can “make money while they sleep”. This too makes sense as there are only so many hours in the day and only so much you can charge per hour. However, some people in these companies will see an hour invested in NPD as an hour not billed. If internal incentives (read: personal compensation) are tied to billable hours, this creates another headwind – and a bias against making long-term investments into NPD efforts.
Diagnose and Minimize Internal Bias
Biases will differ from company to company and here are five ways to diagnose and minimize them:
1. Have an External Voice at the Table
Companies will often not understand their own biases until they are pointed out by someone from the outside. Bringing in an external skilled facilitator or expert consultant – and one who is not afraid to be objective - is an effective way to identify and root them out.
Accessing external voices can also be done by having NPD teams get out of the office and talk to potential customers and product users in their own environment. The Stanford University innovation and entrepreneurship guru Steve Blank famously said a key success factor for developing new products is to “get out of the building”. He believes – and I agree – entrepreneurs focus too much on sales or design before considering the needs of the customer. Therefore, it’s a must to get out of the building, meet potential customers in person and learn about their needs and problems first-hand.
2. Eliminate Personality-Based Biases
I had a client with a senior executive group and product team filled with very vibrant personalities.
It was fun to be part of the group but I couldn’t help comparing each person to a different cartoon character or stereotypical animal. They had a sales guy who got excited by everything and wanted to do it all. As he was bouncing around, he reminded me of Tigger in Winnie the Pooh. In contrast, there was the internal curmudgeon who was the opposite (Eeyore). The zebra presented contrasting black and white views (“on one hand but on the other hand”) but couldn’t decide which was the right direction. Then there is the risk adverse CFO who as one friend calls them, the “CFNo” (not sure what animal that is).
Perhaps the biggest source of bias in the room was the HIPPO which stands for the HIghest Paid Person’s Opinion. In other words, the boss. I think we have all been in meetings where everyone is nodding their head in agreement with what the HIPPO is saying even though it’s clear their view is off-base or irrelevant. It’s hard to disagree with the person who signs your paycheque.
The other benefit of having an external voice at the table (see point #1 above) – and especially if they are a good facilitator - is that they can recognize, head off and neutralize these personality-based biases before they disrupt the overall process.
3. Follow Best Practices But Adapt Them
There is no “one-size-fits-all” approach to NPD but there are global best practices to consider.
Best practices evolve over time and what was relevant 10 or 20 years ago may have limited applicability today. When I first learned about product development in school or a during professional development course, it was presented as a linear, recipe-like approach with the most important part being a strong stage-gate decision making process between each development step. It’s a logical approach and most companies still use a version of it today.
Recently, however, new product development has evolved into a much more iterative approach – especially for digitally based products - as the ability to hypothesize, develop, deploy and test different versions of new products has become much easier, faster and less expensive (this is reflected in The Lean Startup which came out as a book came 2011).
In any well-established business, once a practice is well-entrenched, it’s hard to change (see below) and this will almost always create a negative bias. Instead, there needs to be a feedback loop to adapt a best practics over time.
4. Over-Invest in Accountability and Tracking
The day-to-day operations of a company pays the bills and will almost always take first priority. Again, this is understandable but it can serve as a bias against a successful NPD effort.
NPD teams can easily get distracted by day-to-day or short-term priorities and as NPD efforts are filled with uncertainty, they are not easy to push forward when competing for limited time and resources.
NPD initiatives need to be tied with corporate strategy objectives so there is buy-in from the c-suite. This (hopefully) ensures priorities and targets are clear throughout an organization and the NPD team is seen as a long-term investment and not as a short-term expense.
Part of the solution is to also over-invest in tracking and coaching of NPD teams to ensure they are making progress. As well, senior or sponsoring executives need to eliminate barriers and other obstacles (and, while it’s a subject for another blog post, executives can’t necessarily rely on traditional progress metrics as they may not be as relevant in the NPD world).
5. Tackle Resistance to Change
Resistance to change and innovation is a powerful driver for doing nothing. Change makes people uncomfortable and is a surprisingly large source of bias.
In a 1989 article in the MIT Sloan Review, the authors (Sundaresan Ram of Thunderbird School of Global Management and Jagdish N. Sheth of Emory University) identified five barriers that slow down the adoption of innovations. While their focus was on a consumer’s resistance to change, the lessons are applicable to a company launching a NPD effort – and especially for products that differ from a company’s current core offering.
First, the new product being developed may not be compatible with existing workflows and practices; and many will prefer the status quo if the process requires learning new skills or altering long-ingrained routines.
A second barrier occurs when the NPD team may not understand the value of a new product from the perspective of the end user who is different than those currently being served.
A third psychological barrier exists if an NPD effort is seen as being too risky (no one wants to be associated with failure) and teams will not focus on it until the risk is mitigated — either by new knowledge or through the experiences of others who have shown the new product can generate value.
A fourth reason is that a NPD effort may require the team to deviate from established social norms and traditions. For a professional services firm, “selling hours” is much different that “selling products” and business-to-business (B2B) marketing is much different than business-to-consumer (B2C) marketing.
The final barrier is tied to a product’s image. If there is a negative perception of it whether deserved or undeserved, barriers to adoption can arise.
All of these can be hard to overcome. Internal NPD teams and end-user customers may need to see an exponential increase in potential benefits before committing to it – incremental improvements won’t be enough.
Final Words…
Bias is amorphous – it’s hard to put hard edges around it and we don’t all perceive the factors of bias in the same way. This makes it hard to tackle but like in a personal support group, the first step is to recognize you have a problem.
When implementing the five steps noted above, they can mitigate bias, reduce friction and accelerate new product development efforts in your organization.