1. Mitigating Risks in New Businesses and Product Development

Introduction: Understanding the Key Risks

When developing a new product, feature, or business, one of the most important processes is product discovery. During this phase, we need to quickly distinguish between good and bad ideas for both the user and the business. At the same time, we must ensure that our solutions minimize risks.

In his book Inspired, Marty Cagan outlines four key risks that every product faces. These are:

1. Value Risk
2. Usability Risk
3. Feasibility Risk
4. Business Risk

In this document, we will explore these risks and how to mitigate them using guiding questions to help you through your discovery process.

1. Value Risk

This is the most critical risk and the first that needs addressing. Value risk refers to whether users will choose your product and whether it will bring a return for the business. This risk focuses on whether your product or feature is worth developing and if it solves a real market pain point.

Key Questions to Ask:

• Are our customers willing to buy this product?
• Do users see enough value in the product to use it regularly?
• Is there sufficient demand for this product or feature?
• Does the product solve a real pain point?

By asking these questions early, you can determine whether your product idea is something worth pursuing before spending resources on development.

2. Usability Risk

Even if your product solves a real pain point and customers are willing to pay for it, it will fail if it isn’t usable. Usability risk deals with whether your users can interact with and use your product effectively. This is about reducing friction and ensuring that users can complete key tasks without difficulty.

Key Questions to Ask:

• Can our customers easily use our product or feature?
• Are the user flows simple and intuitive enough for users to understand?
• Does the interface make sense and help users complete their tasks?
• Is there too much friction in the process of performing key tasks?

By focusing on usability, you ensure that your product delivers value without frustrating users with poor design or complicated workflows.

3. Feasibility Risk

Feasibility risk addresses the question of whether the solution is technically and operationally viable. Can you build the product with the resources you have? Do you have the technical architecture or infrastructure to support it? This is a straightforward, but crucial, risk to evaluate early in the process.

Key Questions to Ask:

• Can we build this solution with the resources we have available?
• Is what we want to build technologically feasible?
• Do we have the right architecture to support what we’re trying to build?
• Do we have the necessary infrastructure to scale the product?
• Can we build this within the required timeline?

Mitigating feasibility risk ensures that your team can actually deliver the product on time and within the constraints of your existing resources.

4. Business Risk

Lastly, business risk involves ensuring that the product aligns with the overall business strategy and model. You need to evaluate whether this product will generate revenue, fit the company's strategy, and not introduce legal or operational risks.

Key Questions to Ask:

• Will this product generate positive revenue or return for the company?
• Does the solution align with the company’s strategy?
• Does the product introduce any legal risks?
• Are there any potential negative impacts on other areas of the business (e.g., sales, marketing, or customer success)?

Mitigating business risk means ensuring that the product fits within the broader context of the company and its long-term strategy.

Using the Lean Canvas to Mitigate Risks

One of the most useful tools for mitigating product risks is the Lean Canvas, which helps structure your thinking around three key areas: product, user, and market.

1. Product Risks

Product-related risks can be mitigated by focusing on the following sections of the Lean Canvas:

• Problem: Is there a clear problem that the product addresses?
• Solution: Does the proposed solution effectively solve the identified problem?
• Value Proposition: What unique value does the product offer to users?
• Key Metrics: How will success be measured?

2. User Risks

User-related risks can be addressed by focusing on:

• Customer Segments: Are we targeting the right customer segment?
• Early Adopters: Are we engaging early adopters who are most likely to embrace the product?
• Channels: Are the channels we’ve chosen effective for reaching our customers?

3. Market Risks

To mitigate market risks, consider:

• Existing Alternatives: What other solutions are available, and how do they compare to our product?
• Revenue Streams: How will the product generate revenue?
• Cost Structure: What are the key costs associated with building and scaling the product?

By using the Lean Canvas, you can systematically address risks in each area of the business before moving forward with development.

Conclusion: Strategies for Mitigating Risks in Product Development

Mitigating risks is a continuous process that spans from product discovery through to development and beyond. Whether dealing with value risk, usability risk, feasibility risk, or business risk, the goal is to minimize uncertainties and ensure that the product will be successful both for users and the business.

Use frameworks like the Lean Canvas and guiding questions to assess potential risks early on. By addressing these risks head-on, you increase your chances of building a product that delivers real value and aligns with both user needs and business goals.

This understanding sets the foundation for your next steps in product discovery, where you will learn about methodologies and tools to validate and refine your product ideas.

Keep evolving, keep testing, and mitigate risks at every stage!