Tackling Product, Distribution, And Innovation In High-Growth Markets
Background
Innovation coming from high-growth economies is mostly because of necessity. Systems are broken. Business models are not sufficient to solve the structural systemic problems. In an environment with a lot of systemic problems that present themselves mostly as entrepreneurial opportunities. Most startups always have to go back to the drawing board whenever they encounter an obstacle in the value chain. What is happening is that for every solution for the market. There is a series of value chain obstacles in the value chain that inhibits them from scaling. They almost always pivot to solve this problem requiring a redesign of products and reestablishing new distribution channels.
I have been deliberating quite extensively around these two key concepts, productisation, and distribution. Building technology products and services in high-growth economies come with significant risks and challenges. These have been extensively described including lack of infrastructure, bandwidth, a fragmented talent supply network, and consumers with limited buying power.
Startups almost always start from a point of strong technical expertise, problem-solving capability, and a great idea. The real challenge is understanding early on that technology just like talent and or an idea is not the product. The pitfalls of many innovations in high-growth markets are mostly related to copy-paste business models from developed markets. The misaligned value propositions with local market structures and dynamics are evidence of this. This has changed over the past decade, with Africa and Latin America seeing much more novelty in business model innovation. However, understanding that technology is only an enabler that leads us to products remains a challenging realisation for most startups.
Products are value-delivering vehicles. A product with a unique value offering immediately creates adjacent opportunities and possibilities. Market creating value.
The concepts discussed in this memo are primarily for the writer to crystallise and frame a structured thinking approach to business problem scoping, infrastructure, and process design required to create and distribute a value delivery vehicle.
Productisation – Preparing the bait
Productisation is about identifying a problem and designing processes to enable the profitable delivery of a solution – product. From an internal business perspective – productisation involves taking a skill or service that has been used internally and developing it into a fully tested, packaged and marketed product1. Other definitions state that productisation means translating a vision into a product that is usable and capable of global traction2.
As highlighted that products are value delivery vehicles. The key outcome of productisation must be a functional value-creating vehicle that solves a specific business problem. The key concept of productisation is to package a vehicle to deliver value by solving a specific business challenge. Understanding the business challenge is key and requires extensive exploratory approaches including customer discovery exercises, and market and competitor analysis. With this in mind, it is important to note something very important on what successful productisation can achieve. The productisation process should go a step further and enable the delivery of services and solutions.
Productisations’ primary goal is to answer specific questions about the business problem. This must include the key characteristics (features) of the value delivery vehicle. These questions are wide and deep. However, it is necessary early on to focus on strategic answers that position the product in the market. This makes product-market fit a key metric for monitoring productisation. With product-market fit achieved. The next goal is to ensure one harnesses the customer and stakeholder experience. Two things are achieved with this experience. Firstly improve processes and infrastructure. Secondly and importantly to position the business for a services and solutions value proposition. Why is it important to position for a service and solutions offering? one would think this impacts focus and takes away attention from the product. The success of the product as a vehicle delivering value depends on the market environment, key business problems, and competitors. Positioning for services and solutions is strategic in that it enables one to build an ecosystem of product users. These users create the basis of your distribution channels. Building processes and infrastructure to deliver value is one thing, but getting the product to the customer is another. Building robust distribution channels should be considered when productising. This is achieved by strategically identifying channels that will provide a pathway for your vehicle to deliver value. We discuss distribution next as a key for market-creating innovations.
Distribution – Delivering the bait
Distribution looks at how you communicate, demonstrate, and deliver the value (product). This process is concerned with identifying the correct channels and mediums to deliver your product taking into account the various factors that influence your value chain. So what is the right choice? This is a complex question depending in which markets you would like to deliver your product. Distribution channels at a very high level fall into three distinct categories, direct, indirect, and hybrid distribution channels. Direct channels are key during the early days of discovering product-market fit. With direct channels, you ensure maximum product penetration in the initial target segment. Direct channels create demand and they make your segment aware of your product and presence. This gives you time to establish a sustainable market position. Indirect channels are effective when a sustainable market position has been attained. Indirect channels leverage partners to expand on core services. At this point you minimise competition and instead position on delivering on your core competency using partners as a distribution channel. A hybrid is the best of both worlds and considers both direct and indirect channels, but this is only achievable after a sustainable market position. The hybrid approach provides more control over the customer experience and allows you to monitor value delivered directly through multiple channels, therefore, improving your productisation process.
Innovation – Keeping the catch
Delivering a product to market with appropriate channels is one side of the problem. Ensuring that your customers make your product their preferred option requires two things. Firstly, constant innovation, and secondly product improvement. Both these should be considered in the productisation and distribution steps. The key message here is to continue delivering value to your customer base but also make sure that you are ahead of your competitors in terms of product quality and superiority. This requires critical assessments and an almost real-time understanding of stakeholder and customer perception and experience. With a sustainable market position innovation becomes key with a primary objective of keeping captured customers and leveraging their experience to grow the customer base using their influence.
- Investopedia
- Artplusmarketing.com