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November 20, 2004

Carrots or New Products

In an earlier posting I warned you to Beware of Carrots.  I'm not a big fan of vegetables unless they are in a big bowl of Burgoo, but the carrots to be most wary of are the kind that come in the door looking like new product ideas.  It goes like this - out of the blue you get a call and the person on the other ends says "If you build this product I know I could sell/buy hundreds off them!"  You ask about their budget and they say "Uh no, I don't have any budget to fund the effort, so you build it and THEN I'll sell/buy them."

It's like the little boy riding his donkey who gets the donkey to go wherever he wants by holding a carrot dangling from a stick in front of the donkey's nose.  The donkey catches on that he's not getting any closer to the carrot so he just doubles his efforts hoping to catch it.  It's so easy to be a donkey when a new product opportunity shows up unannounced.  So how do you avoid it?

Don't be the Donkey

Herb Morreale talks about products being Strategic or Opportunistic.  I like to say "we act like the company we want to become" so over the years we've been getting better and better at planning and communicating our strategies and plans for the future.  You have to have a strategic plan if you are going to have strategic products.  Does the product idea really move the company closer to your vision?  Is the idea one of the obvious choices given your strategy and your company's capabilities?  My industry is just beginning to shift from pure custom applications to more packaged products, so our Vonetix product was clearly strategic when we had the idea for it years ago.  It helped move Gold Systems from being a pure custom applications company to one that now gets much of its revenue from products and it is driving new growth.

An Opportunistic product opportunity can be great for a company, but it is much more likely to turn out to be a carrot.  It starts with someone saying, "I know this wasn't on the product roadmap, but it is a GREAT opportunity!"  Start warming up the carrot radar, but don't stomp on the idea yet.  It might truely be a great opportunity.  If your Big Partner comes to you and is serious (as in they put real money and effort in) about a new product line that only you can build, then assuming it at least supports your strategy, then it might be worth going for it. 

But back to the carrots.  Another sign of a carrot is that there is Big Money involved, but you won't see it until the product is done.  A sales person says "I have Big Corp, Monster Corp, and Huge Corp ready to sign so you need to commit, build a demo and agree to a (ridiculously) short development plan."  Now MY sales people don't do this because we've perfectly communicated our strategy to them.  (OK, we're still working on it but they really are good about this.)  Carrots usually come from someone else's sales people in my experience.  The worst partnerships are the ones that generate more carrots than revenue which is why we try to keep our partnerships to a minimum.  Remember during the bubble when everybody partnered with everybody?  It was a great time for carrots.

Opportunities and new ideas are exciting.  That's one reason you are in business.  I try hard not to be a wet blanket when a new idea is presented that looks more like a carrot than a new product.  (OK, I'm still working on it) Maybe what we need is a checklist for identifying carrots.  Here's my start at it:

  1. Does the product idea fit your strategy?  Really?
  2. Did the idea for the product come in suddenly over the transom or did it bubble up from a lot of thoughtful consideration and customer contact?
  3. Is the person bringing the new product idea to you carrying a bag of cash or at least a plan to meaningfully partner on the effort?  Or are they asking you to take all of the financial risk?
  4. Does it sound too good to be true?
  5. Is there a Massive Sense of Urgency?  Sometimes the fastest people are going in circles.  Or as my friend Marty says "Their hind legs go faster than their front legs."
  6. Is the idea coming from an established partner (inside or outside your company) or did you meet the person when they called to tell you What a Great Idea they have for you?

This list is incomplete, and good product ideas can still violate one or more items on the list, but I haven't yet had a successful idea that failed every one of the tests.  I have seen plenty of carrots that failed every one of the tests.

Years ago a doctor got me to spend a lot of time on a "self-diagnosis" system using AI to let people call in and diagnose their own medical problems using only their touch-tone phone.  It violated every test on the list.  I just realized there is another test to add to the list:

    7.  Does the idea sound ridiculous when you talk about it later?

On the other hand, sometimes what looks like a carrot turns out to be a real opportunity.  In the early nineties I flew to Salt Lake City to talk to a small group of people in an office that looked like any other bootstrapping start up.  There were boxes of stuff everywhere and it looked like the place was in chaos.  Their business plan was to enter an established market and be Better, Faster, Cheaper.  (Don't you have to choose two of the three?)  They were going up against companies with lots of money and established names where others had tried and failed.  It sure looked like a carrot to me.  If I'd done my homework better I would have realized that David Neeleman and his team had a very good chance of getting JetBlue off the ground.  David, I apologize for ever mistaking JetBlue for a carrot!

November 20, 2004 | Permalink


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Can't you just say what you mean? I don't really understand all this.
But I like the way you do it. I can surely learn a lot on your sites.

Posted by: Misty | Jun 18, 2005 12:24:09 AM

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