New product development can be fundamental to the long-term success of software firms. But the process can be fraught with challenges, and the need for support and advice is key. Livingbridge talks to Mark Davison, ex-Chief Data Officer at Callcredit and a Non-Executive Director in one of our portfolio companies, Mobysoft, about successful product development. Mark has extensive experience of launching new products, including at Mobysoft, and has some valuable lessons and insights
New product development is fundamental to the long-term growth, success and attractiveness of any product focussed company. This is particularly the case with regards to software firms. R&D and innovation can often be limited to evolution of the current product set and while this is undoubtedly important, the ability to launch new products can be vital in generating growth and value.
Livingbridge has a strong track record of working with firms to develop new products as we understand the significant, long-term benefits it can create. It is higher risk but can expand addressable market, increase customer stickiness and strengthen competitive advantage. It can also help attract talent.
A great example of this success is Mobysoft, a market leader in predictive software for social housing providers. Livingbridge appointed Mark Davison, the ex-Chief Data Officer from Callcredit, as a Non-Executive Director to Mobysoft in June 2019. Mark has extensive experience of launching new products across his career.
Identify trusted clients and customers
Mark says: “Taking a new product to market can be risky but we would argue that firms have to embrace the risk. The world changes at such a pace that products can quickly become outdated, particularly with regards to software. But you can do an awful lot to mitigate that risk and maximise your chances of success.
“The most important thing is not figuring out the complete product you’re going to build, it’s establishing the direction of travel and then establishing the pace and cadence, and the support needed, with a good understanding of expected costs.”
“Another key element to establish early is to identify trusted clients and customers who will help test and fine-tune across the development process. Having a small group of advocates can be core to a successful roll-out. It’s really important you get that clear and upfront feedback as that will become an inherent part of your sales process later.”
Break the process down into phases
What do you do next when you see this opportunity? How can you take it from an idea through to successful launch?
It is important to break the product development process down into phases, where you can evolve an initial MVP (Minimum Viable Product) into something which is more fully featured and tailored to customer need. It is also important to think about establishing a series of quality gates – if a phase fails to meet the criteria, then question what you need to change before you invest in the next phase.
Failing is part of the process: most times it simply reflects a healthy and robust process and framework. Setting deadlines and a realistic but progressive time frame is also key. Speed is often of the essence when it comes to software development, with firms looking to establish that critical first mover advantage.
Build in-house or outsource?
Mark adds: “When you move on to build a new product, most firms are faced with the decision to build in-house or outsource. This is where I have seen most people making poor quality decisions. Getting somebody that thinks they know what they’re doing versus seeking expert advice can make a huge difference in solving a particular problem, with people often underestimating the opportunity cost of using existing in-house resource.”
Having supportive investors is also fundamental, believes Mark. New product development can require significant expenditure which might be hard to fund from existing cashflows. Where a quality investor shines is accepting the risks of a new product launch, and coming on that journey in lockstep with a business.
The value of somebody who has already trodden this path
“Don’t underestimate the value of paying somebody who has already trodden this path. Naturally, any investor wants to understand realistically what’s the size of the prize and what’s the cost – and these must be well thought through,” adds Mark.
“The conversations between Livingbridge and Mobysoft were at the tail end of their investment in the business. Other investors may have said, ‘we’re going to shy away from this because we’re the wrong side of the cycle’. Livingbridge didn’t say that at all. They recognised it’s the right thing for the company to be investing in – they absolutely understand the rationale and the value creation both for the firm itself and other potential investors. Not all investors think that way.”
Manchester-based Mobysoft is a market leader in predictive software for social housing providers. The firm’s core product, RentSense, is a Software as a Service (SaaS) based predictive analytics service which delivers accurate and prioritised workload to social landlords.
In September 2020, Livingbridge successfully announced the sale of Mobysoft to ECI Partners. During Livingbridge’s investment, Mobysoft’s customer base increased by c. 80% and its software solutions are now used by 145 social housing operators managing 1.7m properties.
This success was driven by significant investments in a number of areas, including a strengthened management team; new technology systems to enable the firm to manage and retain its growing customer base; new products designed to enable customers to spend more time with tenants; and a new, larger premises in Manchester, for Mobysoft’s growing number of employees.
- New product development is fundamental to the long-term growth of any software company. However, it is a high-risk process that needs to be carefully managed
- Firms need to develop a clear execution plan – a series of staged quality gates aligned with investment decisions and agreed criteria
Failing is part of the process: most times it simply reflects a healthy and robust process and framework. The secret is always failing fast and doing it cheaply
- Assumptions you make as you start the process of product development will naturally change and evolve. Refocusing, therefore, and flexibility are key
- Establish a small group of trusted customers who will help test and fine-tune across the development lifecycle. It’s really important you get that clear and upfront feedback as not only will it speed a better product to market, it will become an inherent part of your sales process later
- Don’t be afraid to outsource. Don’t underestimate the value of paying somebody who has already trodden the same path – you can unlock both additional capability and capacity
- Having supportive investors is fundamental – investors that will not only help fund a project but can add talent and resources who understand the long-term value that comes with successfully launching new products