How is Product Development Risk Different from Project Risk?
Project risk refers to uncertainties and risks encountered in the execution of a specific project. These generally fall into three categories: schedule, budget, and scope.
Product development risk refers to all the uncertainties and risks that can cause a product development effort to be unsuccessful. This can include project execution risks, but much more. In product development, we are searching for a product that is valuable to both the market and the company: product-market fit and business fit.
The figure below illustrates that product-market fit is influenced by the specifics of the product, the application of the technologies, the value to the targeted customers, and other impacts of the external environment (e.g. trends, regulations, competition, etc.). Business fit is influenced by the specifics of the business and how well it can deliver the product-market fit. The considerations in each of these areas are numerous.
Incremental product improvements pose little risk compared to new products that leverage new technologies, target new markets/needs and/or require business model changes. Any company pursuing organic growth is tackling product development requiring new capabilities, knowledge, and experience. And, new usually means increased uncertainty and risk.
The immediate challenge for companies is to identify product development uncertainties and risks. A framework helps a project team identify, evaluate and prioritize the most important product uncertainties and risks.