Rapid De-Risking in Lucid's Product Development Org

In my job at Lucid as the VP of Strategy, I often hear: “Isn’t it scary to choose what will come next? That feels like a lot of pressure!” 

They aren’t wrong! These are big, important decisions that we are making as a company. But our process for prioritizing, testing, and de-risking ideas is rigorous, cross-functional, and actually really fun.

I’d like to share more about that de-risking process. I am going to use a hypothetical idea (not anything Lucid would actually consider) to demonstrate how we think about “de-risking”, or increasing our confidence around whether or not a concept is a path we should pursue.

Pretend that I have a new business idea I am really excited about: a baby clothing brand with built-in diapers. A traditional de-risking process might be sequential. Sometimes we start with what might be easiest, most fun, feels like we are making progress. It could look something like the process below. A traditional de-risking process would be sequential, as I’d start by considering the tasks that have to happen first:

Unfortunately, this method could leave me in a really challenging position. I could have invested in a beautiful website and production capabilities—and maybe even nailed the inventory management risk. But if nobody actually wants to buy the onesies with built-in diapers, or my manufacturing costs make it so my product is priced too high for what people are willing to pay, my venture will fail.  

Instead, when we are evaluating new ventures, we reorient the de-risking process. We first ask: what is the most important uncertainty? That answer should be targeted early, so we can quickly identify and systematically eliminate risks in the right order. 

The better way to approach this new venture would be to start with the ‘deal killer’ risks: in this hypothetical, that would be customer demand. At Lucid, we’d attack this by engaging in active primary research (most importantly talking to potential customers) and secondary research (deeply understanding competing alternatives). Essentially, we are hunting for any pain that parents might feel around diapers and baby clothing. Then we go about establishing how our new product idea could solve that pain. 

Once I establish that customer demand I’d move on to identifying the path-dependent risks. For example, if my customer demand research taught me that parents only want diapers built into pajamas and not into daytime clothing, that would dramatically impact what type of product mix and manufacturing capabilities I chose. 

After I have confidence that the deal killer and path-dependent risks are surmountable, then I can go and attack the less critical risks accordingly: 

The example I’m sharing is about risk evaluation in a macro sense for launching a new venture. But it’s also how we approach our product development process overall at Lucid.  

We outline our most important assumptions early. We test early and often and we find ways to test economically. We also make sure we are continually re-prioritizing those risks, as new information impacts the relative order of the remaining risks. 

My last advice is don’t be afraid of killing an idea. While killing an idea can feel uncomfortable, it’s actually just as valuable as proving an idea. Be proud when a wrong path is able to be identified early in the process! In this example, and as a Mom myself, I’d expect customer demand would have been pretty challenging to demonstrate. But who knows? That’s why we test early and in the right order.

Happy de-risking!