Feature

posted 2 Aug 2005 in Volume 8 Issue 3

Masterclass

New product development for law firms

The first reaction of many a law firm to the concept of new product development (NPD) might be to assume it’s irrelevant. This step-by-step guide, however, aims to help firms use the principals of NPD to gain competitive advantage.

It is a widely held belief that being first to market with a product creates competitive advantage. Bringing new products to market allows firms to rapidly gain market share, maximise revenues and optimise profitability to greater effect than those who follow and produce ‘me too’ products. Some firms, however, prefer to avoid the risk of being first to market with a product. Who wants to be at the bleeding edge after all?

In reality, only an elite few will be first to market with new products. They will generally be those with a highly refined approach to managing new product development. A few particularly inspired innovators may also achieve first-to-market advantage, but they will generally be one-offs.

Whatever their attitude to risk – whether or not they seek to be first to market – most successful organisations generate more than 50 per cent of their revenue from products and services that they have launched within the preceding five years.

It is entirely logical, then, to argue that the professional-services world needs to adopt a managed and process-driven approach to new product development.

Surely, some of you may ask, we are in the professional-services business, so what have ‘products’ got to do with it? If it matters to you, read ‘service’ for ‘product’, for it changes little of the substance of this article. However, in my opinion, if a professional service meets all the criteria listed below, then it can be defined as a product. The advantages of a product are that it is much more readily capable of being delivered consistently, cross-sold easily and marketed effectively than an ill-defined service.

What defines a product?

A product:

Has a specific application;
Has a well defined set of features and functions;
Has a defined market;
Is economically feasible to develop, deliver and market;
Is capable of being delivered;
Is capable of being supported;
Has a clearly defined process for delivery;
Has clearly identified features;
Has clearly identified advantages;
Has clearly identified benefits;
Has, or will generate, evidence of the benefits clients will achieve (for example, cost/benefit analysis);
Has a formal specification sheet;
Has an associated, detailed product manual;
Is supported/delivered by fully trained and knowledgeable staff;
Has an associated price menu.

Essentially, the product manual should embody everything salient about the product, including a simple description, defined work processes, definition of the market it is suitable for, sales guidance and support materials (including value propositions, features and benefits), specification sheet and a pricing menu.

Service or product: Does it matter?

You can go into a number of major high-street retailers these days and buy shrink-wrapped products that match most of these criteria. Anyone can go into a shop or onto the internet and buy, for example, a trip in a hot-air balloon, a day at a health farm, or a drive in a sports car around a racing track. Are these service products or services wrapped up as products? It doesn’t matter.

What does matter is that this shrink-wrapped approach makes it easy for me to understand what I am buying and how much it will cost me. I also know that it is likely to be a well-structured experience that will be relatively consistent if I buy it again in the future. It’s easy to put it on the shelf or in the catalogue. It is also very easy for anyone in the shop to sell it. It’s also easy for me, a satisfied customer, to tell others about it, if I think they might want one too.

Of course, there is always a need for more bespoke products or services. However, I would argue that no matter how complex the product or service, there will be an element of procedure. Even a brain surgeon has certain well-defined procedures and processes in mind before delivering his or her service. In general, however, those services that start off as complex and high end tend naturally to become commoditised over time. Productising these as soon as possible in this lifecycle is potentially a rich vein to be tapped.

Of course, just as many professionals used to – perhaps still do – hate to think of themselves as having to sell their services. Many dislike even more the idea that they might be selling products.

As Anne Marcotty of business-development consultancy SWAM says: “Professional-services companies still have an aversion to the notion of ‘product’. To them it smacks of forcing a one-size-fits-all solution on to their clients.”

Those who are averse to the concept of products are in danger of missing a crucial point: clients want efficiency and consistency of delivery. “Both the process of developing a new product (or solution or proposition) and delivering it, requires a focus on robust methodology. It also requires a focus on the client’s real needs, rather than the firm’s competencies and experience. Paradoxically, it can lead to a more consultative approach to servicing clients,” says Marcotty.

A robust methodology, then, is essential to achieve competitive advantage through new product development. The objective must be to bring products to market that meet clients’ needs as quickly and cost-effectively as possible. How many good ideas get discussed endlessly, perhaps refined to perfection, but never properly launched – only then to find that the boat has been missed and someone else has got there first? The comment usually heard is “but their product is nowhere near as good as ours!”. To which, I would say, maybe not, but people are buying their product, it’s satisfying their clients’ requirements and it’s making money.

So, what does a robust methodology for new product development look like?

Clearly, you need to create something that is suitable for your own firm’s culture and way of operating, but the following provides something of an example.

A robust methodology: The new product-development process

Stage one: Concept generation

Ideas for new products should be generated in two main ways:

1. Reactively – when ideas are put forward from partners, employees, clients and intermediaries. These need to be formally considered and, if appropriate, developed;

2. Proactively – to use mechanisms and processes to actively stimulate new product ideas. These mechanisms may include:

· Creating cross-functional, new product-development teams of your brightest and best people, tasked with generating ideas both individually and using group-brainstorming/creative-idea-generation (ideation) techniques;

· Client user groups – actively engaging with ‘lead user’ clients to uncover their needs/ideas;

· Competitor monitoring;

· Market research (primary and secondary) into client problems and needs.

These techniques should be used to identify and define problems correctly and identify possible solutions (new product concepts) for pushing through to stage two.

Stage two: Concept screening

This is an initial sifting of new ideas, whether proactively or reactively generated. Criteria for initial screening include:

Attractiveness to market/potential demand;
How easily competitors are able to copy the new product;
The level of strategic fit;
The degree of brand fit. A new brand may be needed;
What is your level of competence to develop the product/service and can you afford to develop it?
What impact will the new product/service have on our existing products?
Does it solve a real problem for clients?
How different is it to anything else available?
Do you have a suitable lead champion, innovator, sponsor who will see the product through to launch?

Stage three: Concept definition

Having passed through screening, product concepts need to be defined and developed. A product concept is defined if:

It is possible to reduce the concept to a format that passes the fax test. A product concept must be capable of being defined in about 20 words. The definition should be clear enough that if it was faxed without any further words of explanation, the recipient would be able to understand the concept;
An outline product specification exists;
Outline work processes have been identified and documented.

Stage four: Business justification

The product-concept sponsor should arrange for a full business justification to be undertaken including:

Product-development costs (including time);
Market size;
Potential demand;
Detailed launch costs;
Cost-benefit analysis from the client and firm’s perspective;
Evidence that it will solve real clients’ problems/needs;
Intellectual property - management issues.

GO/NO-GO DECISION POINT

Based on the business justification and general satisfaction with the definition of the product concept you will have reached a go/no-go decision point. You either proceed to stage five or, if you are not satisfied, then the product concept should be archived.

Stage five: Product development

At this stage, the product concept is developed fully into a product. A product can be described as developed only if it meets the criteria described at the beginning of this article.

Stage six: Resource planning

If there is sufficient confidence in the product to undertake a pilot, consideration must now be given to capacity and resource planning for full production. This will include:

Liaison with operations manager or HR people as appropriate to identify the resources within the firm that are available for allocation to this product;
Training-needs analysis;
Recruitment plan, if necessary, including number of people required and job description(s).

Stage seven: Prototype/pilot testing

In most cases, the product will need testing. Having sold the concept into a suitable pilot/test-bed client environment, the product should then be prototyped/piloted. Characteristics of this stage include:

Agreement made with test client regarding confidentiality, intellectual property, licensing, MI capture, period of pilot, definition of success/failure, review process etc.;
Regular feedback to NPD team on performance at key stages throughout the pilot;
Full review to NPD team of pilot and learning points at end of process – including independent assessment of client’s experience;
Further development points/refinements identified and submitted back into stage five for development and repeat within reason as required.

Depending on the significance of the product refinements identified during the pilot stage, it may not be necessary to re-pilot/test before launch, but consideration should be given to doing so.

GO/NO-GO DECISION POINT

A go/no go decision will again be made. If the product is not found to be feasible/beneficial to the client, it will be closed and archived. If it is, however, proceed to stage eight.

Stage eight: Product launch

This stage involves:

Developing a clear marketing and sales plan (including timetable/milestones) in association with the business-development team;
Allocating responsibilities for each element of the sales and marketing plan;
Executing the product launch in line with the budget costs outlined in stage four;
Regular reporting to NPD team on progress.

Stage nine: Product review/lifecycle management

Periodically (every three months during year one and perhaps annually thereafter) new products need to be assessed in terms of actual against predicted sales and performance. This should be undertaken by the NPD team in association with the product manager. Refinements/developments/mid-term refreshments to be identified and made as required.

Making it happen

There is no magic in this. The trick is to implement the methodology and manage the process rigorously. Also bear in mind that all the skills required at each stage of this process are not necessarily freely available inside professional-services firms. You may wish to consider taking advice or employing external assistance along the way.

Learning from the lessons of experience

Keoghs is not a typical law firm. It is predominantly an insurance law firm dealing with defendant litigation and counter insurance fraud measures, coupled with a growing company/commercial practice. The firm’s roots in insurance litigation mean that it has had to respond over many years to the huge buying power and demanding standards of insurance companies. To thrive in this market, firms like Keoghs have been driven to adopt a truly corporate style of management and to fully embrace the value of processes and systems.

As a result, compared to my personal experience of working in other law firms, at Keoghs I have found that the organisational and cultural hurdles to introducing rigorous business processes are relatively low. Keoghs is inherently receptive to this type of approach. That said, even in a receptive environment, introducing change and new processes is not a trivial exercise.

I can imagine some readers thinking ‘that’s all well and good, but it won’t work in my firm’ or ‘it wouldn’t work with a securitisation team’ – among many other possible objections. So what, typically, are the kinds of issues you can expect to experience in introducing an NPD process in your firm?

Resistance to the concept of introducing an NPD process

This is usually the result of failing to articulate the case for the exercise convincingly, failing to anticipate and overcome objections, and/or failing to secure support from the top of the organisation. There is no stock answer as to how to deal with this – it depends on the culture and values of your firm. Find a way of communicating with your people, which appeals to them. It may sound trite, but try developing and using the ‘brain surgeon’ analogy I alluded to earlier – it can sometimes engage even the strongest of egos.

In some environments, you may find it better not to talk in process terms at all. If that is so, don’t launch your NPD process with a big bang. Try just taking a team of people, preferably one which is already working on a new product idea, and lead them through the process, making it as enjoyable and as painless as possible. Achieve a good result, rapidly. By doing this, you will soon have others clamouring to benefit from the approach themselves. It doesn’t matter if they do not even realise that they are going through a formal NPD process.

The dominance of negative thinking

Even if you get the process off the ground, you may find that newly created ideas are few or are severely criticised and nipped in the bud at a very early stage. Lawyers are trained to work within an adversarial legal system. They are trained to look at the weaknesses in an argument. The concept-generation part of the NPD process has to be conducted in a safe environment, where half-formed ideas are built upon rather than crushed. Whoever leads the NPD process needs to control the environment for idea generation. Pick the people you work with carefully. Use some of the many available brainstorming and creative-thinking techniques that help to control negative thinking and allow ideas to have the space they need to be developed. Criticism, of course, is essential, but control it and restrict it to the right parts of the process. For example, concept screening, concept definition and business justification involve a critical element. But too much negative thinking applied during the idea-generation stage is clearly counter productive.

Being too perfectionist

Often, without an NPD process that is well managed, new product ideas are formulated, kicked around, refined and developed to the ninth degree. This is often done with fear of presenting a product to a client that isn’t perfectly formed. The result is that at best you delay revenue being generated from your new product. At worst, you miss out as others beat you to it. Perfectionism can creep back into even a well-managed NPD process. The best way to overcome this is to ensure you work collaboratively with ‘friendly’ clients who understand you are piloting and developing an idea that could lead to mutual benefit. This rapidly speeds up product development and takes some of the fear out of the process.

Simply getting it wrong

By way of example, when I first introduced this concept into Keoghs, one of the early products we worked on ‘took off’ far more quickly than we anticipated. The product was developed and it sold beyond expectations. But, I had failed to link together the sales and operational sides of the business. This naturally created internal stresses for the legal team concerned in dealing with a new and unexpectedly high volume of work. I soon realised that there was a basic flaw in my NPD process. There was no capacity or resource-planning stage. I rapidly corrected the process and it now positively requires communication between the ‘sales team’ and the operational teams. Rapid corrective action often creates a long-term improvement out of a short-term problem.

It is also easy to go wrong through trying to impose an NPD process mechanistically. You can gain improvements even by cherry picking elements that will work for you. For example, every firm will benefit by having a clear definition of their products or services and well articulated features and benefits.

Keeping up the momentum

Even after some initial successes, it can be hard to keep up the momentum of a good NPD process and team. Make sure you train others in how to run the NPD process so everything does not fall on one person’s shoulders. Canvass ideas from everyone – you might be surprised where good ideas come from. Reward people for good ideas and celebrate successes.

Tim Percival is business development director at Keoghs. He can be contacted at tpercival@keoghs.co.uk