This technique helps decouple the risks around physical delivery of a product from a digital component of the product.
This technique helps decouple the risks around physical delivery of a product from a digital component of the product. We can sell a physical version of the product or service, even if our final product will be digital. Selling the physical form first may be easier, riskier, or more complicated. As a technique, this works best for software and information-based or data-based products that historically have had a physical component. Alternatively, it works well if we want the end product to be decoupled from a computer or smartphone.
Many industries have seen a convergence of their existing products with a digital component. Information or software add extra value to an existing product type. In his Harvard Business Review article, Mark Bonchek says, "Digital business models are a bit of a misnomer. It’s not digital technology that defines them; it’s their ability to create exponential value. The music and video industries, for example, weren’t redefined by converting analog to digital formats. Just ask Sony about Minidisc players and Netflix about their DVD business." Founders who want to de-risk assumptions around using a particular delivery vehicle for a product or service will be well-served with this technique.
While it can be used in different areas, here are a few examples of when/where it is best applied:
The benefits of taking this approach are:
This is a common pattern in enterprise lean startups, particularly with bigger companies having a lot of legacy processes.
Note: This is not the same as Randy Komisar's analog/antilog thought experiment for formulating a value proposition or identifying a problem. The goal here is to gather actual user feedback, based on something physical that approximates the final form of the product.
Can vary widely. It depends on how long both the physical and digital forms of the product will take to build, and what exactly you are trying to test.
Digital is not good for its own sake. Make sure that you are adding useful features and benefits as you add to the product's complexity.
Over-engineering/gold-plating: Sometimes a good physical product feature will solve the problem better than fancy software and engineering.
Over-focusing on technology: If the tech is proven or low risk, test the business model first (especially customer needs).