26 February 2014
The Benefits of Lean Innovation and the Pareto Principle
Product Development and innovation is one of the leading elements of any successful business. Harnessing and utilizing the collaborative efforts of a product development team to create and implement new ideas is essential to stay competitive in any market. There can, however, be a tendency to “overthink” when it comes to innovation in the sense that in the drive to maintain a competitive edge, those creative minds who are trying to innovate end up striving for perfection and more often than not end up “overshooting” their target.
There is nothing wrong with wanting to be perfect when it comes to developing a product. After all, customers are looking for perfection when they buy products, even though they know, either consciously or subconsciously, that there is no such thing as a perfect product. But in striving for perfection there is an important principle that innovators can easily lose sight of and that is the Pareto principle.
The Pareto principle, named in honor of Italian economist Vilfredo Pareto, as it related to product innovation states that roughly 80% of the benefits that customers are looking for in a particular product will be delivered by only about 20% of that product’s features. That being the case, there is such a thing as “lean innovation” which has the Pareto principle as its foundation. Lean innovation doesn’t strive for perfection as its ultimate goal for a product. It looks for that 20% that is going to give the product its highest value to the customer and finds ways of enhancing and amplifying those features to bring the product as close to perfection as possible.
The best way to implement this philosophy in regard to product development and innovation is to follow three specific steps:
1) Identify the features that give the product its value; the aforementioned 20%.
2) Develop those features into a version of the product that can be tested in real-time, real-world situations.
3) Continue to develop the product based on the results of that testing until the product meets initial expectations, i.e. until it is as close to perfect as it can be.
Lean innovation makes for a much more realistic approach to product development. Teams spend less time and energy trying to create the perfect product and instead collaborate with the goal of finding the 1 out of every 5 features in that product that will provide the most value for the customer and working to amplify those features so that a product can be created that is as close to perfection as possible. The resulting products will be less expensive, easier to understand and use, and will be closer to what customer are looking for.
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