In my last post I discussed the upsides of Experience Based Innovation models. In this post I'll discuss some of the downsides.

As I mentioned before, in many products there are generally 4 places where innovation intersects with customers:

  • As you are are getting ready to release a product. Typically in the Alpha and Beta stages. This is exceedingly common.
  • In the middle of the product development phase, such as trying out prototypes under NDA.
  • Building a product jointly and/or for the customer, usually under a contract.
  • Working during ideation and strategy phases of the product.

For me, the top 3 downsides of Experience Based Innovation include:

  1. Risks for Non-Optimal Product Development - when you begin involving customers extensively in product development, inevitably those conversations lead to contracts for specific features and/or integrations. If your organization is very good at execution, you will take in the contract as a PS engagement. Once you take out the margin there will be a budget remaining for product development and implementation. If you have a number of partners who work with your team, then you can easily outsource the development work and minimize any impact to your normal product development cycles. In my experience it is quite rare for firms to be extremely disciplined at execution, and inevitably internal risks end up impacting normal product development plans. This ends up having cascading effects, sometimes pushing out critical features tied to business development plans.

  1. Loss of Control Threshold - As you begin working more with customers, organizations often cross a threshold in which they begin to lose control of their roadmaps. It is one thing to have a large customer advocating for features. It is entirely another if your customers transitions in to a partner with legal and political obligations. One-time contracts or more complex joint-ventures, if not structured correctly, can cause a significant loss of control over product roadmaps. Imagine if 50% of your roadmap is dedicated to partner obligations, 20% to maintenance and technical debt, and the 30% left represents the straw with which you have to satisfy all other demand. Any of the first two items have problems, that 30% is now 20%.

  1. The Evil of Bespoke Features - The last, worst thing about this kind of innovation is the possibility of introducing customer-specific, or bespoke, features. Features should almost always be built for commercial purposes and never for a single customer. When customer-facing innovation projects go incorrectly, often it is much harder to change directions, and as the economics of the deal push margin down it is very easy to do just the minimum to close out the deal. This choice introduces a bespoke feature.