[2/3] Product De-Risking: Additional Risks & Blind Spots
Hidden risks and overlooked weaknesses can disrupt even the best-planned product strategies. Identifying and addressing these hidden challenges is key to eliminating most types of risks.
In the previous article, we focused on the four primary risks that must be addressed when creating a product or innovation.
Now, we’ll look at additional risks and blind spots you’ll face, which may not be as obvious. Ignoring these risks might not necessarily be fatal for building a product, but it can have serious consequences.
Let’s return to the castle metaphor. For those who play games, you know that strong towers can provide excellent protection. However, they are just the foundation and won’t completely secure or protect you from all threats, especially smaller ones that might arise.
So, after securing the towers, it’s important to fortify everything else—building strong walls, digging a protective moat, and constructing a robust gate. Ultimately, this makes it harder for anyone to breach your castle:
It provides protection against various risks. However, keep in mind that even the best gates and fortifications cannot guarantee a healthy and prosperous kingdom. But that’s a topic for another part.
Today’s article will cover:
Additional Risks:
Founder Risk
Competition Risk
Timing Risk
Marketing Risk
Distribution Risk
Recruitment Risk
Location Risk
Blind Spots – Risks You Wouldn’t Expect:
Cultural Risk
Ethical Risk
One-off Risk
Synergy Risk
Game-Type Risk
Let’s briefly address each one and discuss what you can do to avoid them.
I’ll aim to keep this article shorter and more to the point, serving more as a checklist than a guide to addressing each risk. This is because these risks vary significantly from product to product and company to company. There is no one-size-fits-all approach like in the first part.
1. Additional Risks
These are risks that are not immediately apparent or directly tied to what you are creating, but it is important not to overlook them.
a) Founder’s Risk
Possibly the most uncomfortable yet most crucial risk. A founder of a law firm specializing in startup consultancy once told me that one of the most common issues in startups is disagreements among founders.
When I’m closing deals or building products, my first two questions are always:
Tell me about yourself.
What’s your “founder story”?
People often assume these questions are merely for breaking the ice or building rapport. In reality, founders often underestimate their importance and perceive them as just informal introductions.
While that’s partly true, these questions also aim to assess the level of risk founders might bring to the success of the product and which areas need to be addressed. Is the founder technically inclined? Then we need stronger design specialists. Is the founder a marketer? Then we should focus on the product and feasibility!
The founder story reveals how well the founders truly understand the problem and the chemistry they share. It identifies whether they are individuals who have experienced the problem personally (e.g., creating a festival safety app after a Travis Scott concert) or “industry mavericks”—long-term specialists in the field who know it inside out (e.g., digitizing measurement devices in industrial parks).
Founders often unintentionally undermine their own companies. The character traits and qualities that helped them take ideas from zero to initial success can later become obstacles to further company growth.
This is why investors often buy companies for their ideas but, when the company enters the next phase of growth, choose to replace the entire management team. This change ensures the company can handle new challenges and achieve further success.
Example 1: Adam Neumann – WeWork
Success: Adam Neumann co-founded WeWork in 2010, creating one of the most high-profile shared workspace companies, valued at $47 billion at its peak. He was praised for his vision of creating a “physical social network” and promoting a revolutionary approach to coworking spaces.
Downfall: Neumann’s unorthodox management style, extravagant spending, and questionable business practices, such as self-dealing and excessive risk-taking, led to a rapid decline. In 2019, WeWork attempted an IPO, but concerns over Neumann’s leadership, along with unsustainable financial losses, forced the company to withdraw. Neumann was ousted, and WeWork’s valuation plummeted, demonstrating how unchecked founder influence and risk-taking can destabilize even the most promising businesses.
Example 2: Travis Kalanick – Uber
Success: Travis Kalanick co-founded Uber in 2009, transforming urban transportation and scaling the business globally. Uber became a household name and disrupted the taxi industry, growing at an unprecedented pace.
Downfall: Kalanick’s aggressive “win-at-all-costs” leadership style fostered a toxic culture marked by harassment, discrimination, and legal issues. Scandals surrounding his behavior and Uber’s corporate culture, as well as a series of legal and ethical issues, ultimately forced him to resign in 2017. While Uber remains successful, Kalanick’s approach exemplifies how a founder’s unchecked influence can create significant reputational and operational risks.
Addressing Risks
Self-assessment: Reflect on yourself and analyze where your blind spots might pose a risk to the product, identifying your weaknesses.
Founders’ Agreement: Engage a legal firm to help draft a founders’ agreement. Leave nothing unclear or vague—human relationships are complex, and situations can be unpredictable, so it’s crucial to address potential issues from the very beginning.
b) Competition Risk
Is the market too saturated? Can you still stand out?
Is there no one in the market? Why? What’s behind that?
How quickly can competitors copy what you’re doing?
How easy is it to start a business in your field?
You must understand who you’re up against—your competition—but that doesn’t mean you have to copy them.
Snapchat, for instance, introduced the concept of disappearing stories, refused to sell to Instagram, and Instagram replicated the feature, practically destroying Snapchat’s dominance.
First, understand your competition and the market, then carve your own path.
c) Timing Risk
Bill Gross, founder of IdeaLab, in his popular TED talk, discusses what drives the success of companies. Gross analyzed over 200 companies and found that the timing of a startup accounted for 42% of the difference between success and failure.
In an era of rapid technological advances and shifting consumer preferences, timing has become one of the most influential factors determining a product’s success. A product launched at the right time can achieve early market adoption, rapid growth, and even dominate its category. However, misjudging the timing can lead to lukewarm reception, lost investments, and irrelevance.
Some products fail because they are “too early”—for instance, technological products launched before the necessary infrastructure or consumer familiarity exists. Conversely, a delayed entry into a growing market trend can result in a product being overshadowed by established competitors already meeting customer needs.
A notable example of timing risk is Google Glass, the augmented reality glasses Google introduced in 2013. Although the technology was groundbreaking, the market wasn’t ready for the concept, and Google failed to adequately address consumer concerns about privacy and usability. As a result, Google Glass failed to gain traction and was withdrawn. Years later, companies like Microsoft with HoloLens found greater success in augmented reality by targeting specific industrial and professional applications where timing—and use cases—better aligned with market readiness.
Unfortunately, this risk is among the hardest to assess. Meta with its Metaverse could certainly share insights on this.
The only question you can truly ask is: Am I too early to the market, or too late?
d) Marketing & Growth Risk
Can you stand out in a sea of competitors? Will you be able to break through? If so, at what cost?
Is your customer acquisition cost (CAC) lower than their lifetime value (LTV)?
What growth strategies will you use? Which channel is best for your target audience? What type of content resonates most with them? Are you spreading your attention across too many channels at once?
Do you have a feature or something unique enough that others will want to talk about you?
You’d be surprised how many companies, even in the country I live in, were almost brought down by unmanageable growth and aggressive marketing.
A well-known example of growth risk is Uber’s rapid international expansion. Uber aggressively expanded into various countries, often facing regulatory and cultural challenges that strained its resources and led to legal disputes, conflicts with local taxi services, and reputational issues. The speed of its growth also posed challenges in maintaining consistent service quality. By prioritizing rapid expansion over sustainable growth, Uber faced significant financial and operational problems, highlighting the need for a balanced approach to growth.
Growth and marketing risk is a double-edged sword; while they are crucial for success, uncontrolled expansion or poorly executed marketing can create serious obstacles.
e) Distribution Risk
Does your product or company rely on distribution partners such as mobile operators, transportation companies, electricity providers, critical infrastructure, or the internet? If so, how crucial are they?
How difficult is it to secure this distribution partner? Sometimes it’s advantageous to have a contract or preliminary agreement in place before you start raising funds.
How hard would it be to replace this distribution partner if necessary?
f) Hire Risk
First, focus on identifying the key positions that are most critical for your product.
Can you attract the right, high-quality people? Are you interesting enough for them? Can you retain them in the long term?
What will you offer them in return for their trust?
Do you even have a plan in place?
g) Location Risk
Where are you located? Are you in the center of the action? Are you, as a tech company, situated in a tech hub?
How does your location and activity influence your chances of success? Are you a company selling jet skis but located at least 200 km away from any water?
Do you have skilled and talented people in your team for that specific area?
If your location puts you at a disadvantage in some way, do you know how to compensate for it?
Conclusion
This was a list of the fundamental risks you will need to address sooner or later.
Even if you think a particular risk doesn’t apply to you, at least review it and take the time to reflect on it.
1. Blind Spots – Risks You Would’nt Even Expected
The structure and types of risks discussed here were heavily inspired by an article written by Aakash on his blog Product Growth, so credit primarily goes to him. I enriched it with my own terminology, additional insights, and personal perspective.
a) Blind spot – Cultural Risk: More Than Just a Translation
The American market is considered the best not only because of its high standard of living but also because if you conquer one market, you can often expand to nearly all others using the same strategies.
In Europe, however, it’s like starting over each time, as every country is completely different and has its own unique characteristics.
As one of the most well-known footwear brands in the world, any business expert would expect Nike to succeed in the Chinese market.
However, in 2015, Nike inadvertently made a mistake when it launched a pair of limited-edition sneakers intended to incorporate Chinese cultural attributes into the product and demonstrate cultural awareness.
Nike offered the option to have a Chinese character embroidered on each shoe—on the left shoe, “fa” (wealth), and on the right shoe, “fu” (luck is coming). However, what Nike’s marketing team didn’t anticipate was that when the shoes were placed side by side, the two characters together translated to “getting fat.”
How to Identify and Avoid Cultural Risk
Market research with a local agency: Before entering another country, we always conducted our own research and hired an agency to validate our materials and strategy.
Team from diverse cultures: Build a team that includes people from different cultures, nationalities, or countries.
Use international testing platforms: When seeking potential users for testing, focus on platforms that operate internationally and specify a requirement for participants from various cultural backgrounds.
b) Blind Spot – Ethical Risk: Something That Can Leave a Lasting Mark
Many companies strive to grow and survive, often willing to take almost any shortcut, even if ethically questionable.
However, breaching ethical standards, even if legal, can have devastating consequences for your brand. Such risks can only be weathered by well-established, major brands.
Google (Project Maven): Google faced significant internal and external backlash for its involvement in Project Maven, a U.S. Department of Defense initiative using artificial intelligence to improve drone strike accuracy.
This project led to a cultural conflict within Google, as thousands of employees protested, arguing it violated Google’s core value of “Don’t Be Evil.”
The resulting controversy forced Google to withdraw from the project, highlighting how a misalignment between a company’s actions and its employees’ values can lead to significant operational and reputational risks.
This applies to all areas and represents real risks—ranging from system hacks, data breaches, exploitative pricing, unexpected side effects of a product, misleading marketing, exploitative algorithms, breaches of agreements, and many other threats.
How to Identify and Avoid Ethical Risk
Ethical Guidelines: Develop official documentation with rules on how to proceed in various scenarios during the development of new products or interventions.
Third-Party Audits: Use external agencies and firms to evaluate your activities. An outside perspective can often open your eyes and help avoid such problems.
Core Values: Just as Google once had the value “Do no evil” (which I personally believe no longer applies), implement similar principles into your corporate culture by incorporating them into a list of core values.
Transparency: Be transparent in all your activities, explaining why you do what you do and what you aim to achieve. At the very least, ensure transparency with your employees, investors, and sometimes even your partners.
c) Blind Spot – One-Off Risk: The Work Never Ends
Addressing risk is not a one-time task that you complete and then forget about. Many people mistakenly believe that it’s enough to deal with risks at the beginning and then never revisit them.
Risk is not a static area—it evolves and changes constantly. It’s an ongoing process.
It’s like telling a lawyer or accountant to check your plan once, thanking them, and then never needing their help again.
That would end very badly.
How to Identify and Avoid One-Off Risk
Checklist: Create a short checklist of these risks and review it regularly for every new project or initiative you undertake.
Regular Feedback: Establish a system for regular feedback, analyze data, measure everything, and evaluate results. Always make at least a brief note of what could go wrong and check whether you’re approaching that outcome.
Annual Audit: Conduct an annual audit of your activities. Review the list of identified risks and assess the extent to which they have materialized or not. Then analyze why these results occurred.
d) Synergy Risk
Nearly every time we embarked on building a new product or company and the client worked with multiple agencies, we identified it as one of the greatest risks.
A classic scenario is when a client hires one agency for research, another for design, and then hands it over to a development agency.
Everyone naturally wants to showcase their capabilities, and almost always the designer creates something that excites the client—until they find out how much it will cost and how long it will take.
Even Elon Musk recognized the importance of synergy between departments. At SpaceX, all teams—designers, product managers, and engineers—work together in one location. This way, everyone has immediate insight into ongoing work: designers see the effort behind their designs and how changes affect production, while engineers understand the rationale behind specific design choices.
How to Identify and Avoid Synergy Risk
Bring Teams Together: As mentioned above, ensure that all teams communicate regularly.
Culture of Openness and Sharing: Communicate and share everything happening within the company openly. Regularly provide context about what’s happening and why, so all team members have a clear understanding of goals and strategies.
e) Type of Game Risk
Clearly define your goal in advance and resist the temptations that will come your way. Many companies make short-term decisions that may immediately please investors but simultaneously reduce their chances of achieving long-term objectives.
A great example is the Hershey’s Kisses case study, which is even taught at Harvard.
Hershey’s Kisses are popular chocolate candies that have been a market staple for decades. However, there was a period when the company, in an effort to cut costs, made changes to the ingredients.
A manager at Hershey’s decided to regularly replace higher-quality ingredients with cheaper alternatives to save money. For instance, cocoa butter, a fundamental component of chocolate, was partially substituted with vegetable oils. These changes allowed the company to maintain profitability, but they subtly altered the taste and texture. While the candies still tasted good, the overall quality was no longer the same.
Even though the changes were introduced gradually and the product remained acceptable, loyal customers began to notice the differences after several such interventions.
The brand’s reputation, built on uncompromising quality, suffered, which was reflected in declining sales. Long-time customers who loved the original taste of Hershey’s Kisses stopped purchasing the product, leading to a significant drop in sales.
This case highlights the importance of maintaining product quality, especially when a brand’s reputation is built on it. While cost-cutting measures can improve short-term profitability, compromising on ingredient quality can damage consumer trust and result in long-term losses. It serves as a reminder that customers will notice when a product they love changes, even if the changes are subtle.
How to Identify and Avoid Game-Type Risk
Secure the Future: Invest heavily in research and development of innovative methods and technologies. Do not improve profitability by compromising on the quality of your service or product.
Be Clear About Your Direction: Set clear metrics and long-term goals you want to achieve. Avoid shortcuts on your way to reaching them.
If the way I approach things resonates — or if your product, idea, or strategy feels even slightly “off” — I might be able to help.
Let’s have a quick 20-minute call to find clarity together:
Last Words
As mentioned at the beginning, this document is meant to serve more as a checklist than a detailed guide. I recommend saving it and revisiting it regularly.
In the next and final section, we will explore unconventional methods for understanding risk and techniques to help you manage it more effectively.
See you in the next article.
- Peter