Service design has a strong emphasis on deep customer research. And in the service design context, customer research means that you actively find out how your service would fit into someone’s life and what problems it solves for them. In addition, you will find out what kind of business model would be acceptable and probably even the pricing level. There is a lot of data that you can get using ethnographic or qualitative research.
Startup Post-Mortems: Identifying Gaps
In 2018, CB Insights released its top 12 reasons startups fail report and it included this one visual below. Using the information of 111 startup “post-mortems” they were able to ascertain what critical failures they had. Startups are coached generally using the Lean Startup methodology which does little and very shallow customer research and prioritises building and launching. Looking at this data (and these outcomes) with a service design lens allows us to see where service design can help to mitigate at least 6 of these fatal issues.
3 Common Failure Themes
Analysing the graphic by CB Insights, the 12 reasons can be categorised into 3 failure themes
Whether it took too long to get to market, they burned through their cash, there was no market need for the “solution”, or there were pricing issues or business model issues, the lean methodology says launch fast, fail fast, regroup. It also does cursory customer research like setting up a “dummy” web page to collect interested parties’ email addresses to gauge interest. But with limited information available, it is hard to understand what people are signing up for or what they expect.
Service design’s focus on deep customer research combined with prototyping will make some of these reasons for failure much less likely. It can help to address some of each of the three areas of problems.
6 Issues Where Service Design Can Help
Service design can help if you want to limit wasted time and/or money on these 6 top issues:
- No market need
- Got outcompeted
- Failed Business model
- Pricing/ cost issues
- Product mis-timed
- Poor product
As you can guess, some of these failure points cross over and are part of two of the three problem themes.
With Timing, service design can help determine early on if the product or service is mis-timed.
With Money, service design research can help determine early on
- if you are using the right business model (how do customers expect/are willing to pay for this service?)
- what people are willing to pay for
With Market, service design tools and methods can help determine early on
- how they feel the solution will fit into their life,
- what real problems they are trying to solve
- how they currently solve the same or similar problems (this will also give you insights into why they purchase from competitors, etc.)
These insights will help you make the right investments and decisions at the right times. Understanding that the right decision might be when it is time to pack up and go home. If the market is not ready for your solution or your technology, you can save a lot of time and money by figuring that out early in the process. The same research may also tell you that this solution won’t work or that the technology is not a fit for something but may reveal other opportunities.
Start Research at the Beginning of the Development Process
The pre-launch or idea phase is where research starts, but it does not stop here. Once the customer research is done and a low fidelity prototype is done, then it is time to “hit the streets” again and do some testing and research. Using research along the way will help to alleviate most of these 6 customer/product related problems and help to reach the elusive product-market fit earlier.
When you prototype your ideas and concepts early enough, you have not made huge investments into their development yet and this means that the time you invest is less, the learning timeline is shortened, and you get a tested concept onto the market much faster with fewer problems. This saves time and money. And it also makes sure that the market is ready for what you are offering, because you have already asked and tested it.
The Problem of Sunk Cost
Unfortunately, many times, businesses continue down development routes that aren’t looking promising because of the concept of sunk cost. Identified in the late 1970s and early 1980s by Behavioural Scientist Richard Thaler, sunk cost explains why some people make irrational decisions and have “a greater tendency to continue an endeavour once an investment in money, effort, or time has been made”. When very little preparatory research is done before spending a lot of time, money, or effort on a project, it leads down avenues that may not be successful in the long run.
Being able to mitigate these failure points as much as possible, is the aim of service design and deep customer research. Your research may end your dream of that project in the short term, but it will help negate much bigger losses in the medium-to-long term.
If you want to learn more about how to conduct good quality, early research for your idea, you can check out Metropolia’s free Service Design Sprint MOOC (Massive Open Online Course).
Pamela Spokes works as a Service Designer in Metropolia’s RDI team. Originally from Canada, Pamela has years of experience in university admin focusing on international recruitment, marketing, and the international student/staff experience. With a Bachelor’s from Canada, a Master’s degree from Sweden, an MBA in Service Innovation & Design from Laurea, and her AmO from Haaga-Helia, she is interested in purposefully designed experiences that are centred around the user. Don’t be surprised if she knocks on your door to talk about learning co-creation methods through intensive learning experiences.