This is part 1 of a 3 part series for industrial enterprise business leaders on bringing your customers into the product development process. In this post we define the concept and basic methodology. In part 2 we will discuss common organizational objections and in part 3 we will outline how to overcome organizational constraints.
There have never been more dangerous words uttered in the product development process than “We know what our customers want.”
The graveyard of failed corporate initiatives is filled with the bodies of products with large investments of time and resources that failed to gain significant, if any, traction in the marketplace.
Our inability to adequately interpret feedback from our customers, combined with the difficulty in fully understanding all the forces at play in a complicated marketplace, creates an environment with a high risk that we will build a product or services solution that fails to deliver the value our customers need.
Henry Ford has been famously quoted as saying “If I had asked people what they wanted, they would have said faster horses.”
This quote has been abused over the years to sell the idea that customers do not know what they want until they see it. However, that attitude fails to account for the fact that we are just as bad, if not worse, at determining what our customers need than they are.
It’s difficult to determine just what percentage of new products fail. Depending on under what conditions and market you are looking at, you can find numbers ranging from 40-85%. No matter which numbers you choose it’s safe to say that the success of a new product is little better than a coin flip. Each one of those failed products was backed by a belief that they knew what their customers wanted and supported by a significant investment in resources that were ultimately wasted.
This risk only increases with the degree of innovation. The farther we are taking customers from the realm of what they have known and adopted, the worse we collectively become at knowing what they need.
The problem is particularly acute with industrial companies that are trying to adapt to the new digital environment that they now find themselves in. These companies have found great success over the last century in optimizing for sustaining innovation. Developing successive versions of their equipment that are faster, more powerful or cheaper to operate. These might sustain their market share and fend off competitors, but they don’t have the ability to radically re-orient the companies position in the market.
In optimizing for sustaining innovations, these companies have institutionalized practices that make bringing disruptively innovative products to market a difficult and risky proposition.
The question is then, how do we increase our odds of success? How do we establish our product development processes such that we can rapidly adjust course on projects that have low commercial viability and identify and nurture those that provide real value to our customers? The answer is to invite our customers into the product development process. To “conspire” with them to find and uncover ways to provide value that they will gladly purchase and support.
At this point you may be grimacing to yourself, instantly coming up with multiple reasons why that just wouldn’t be feasible at your company. If that’s you, then I encourage you to stay with us through part 2 of this series where we will address common objections we’ve heard in the marketplace.
This post is not meant to be an exhaustive treatment of how we view the product development process. It is meant to give a fundamental understanding of the basics around bringing customer involvement inside the product development lifecycle. If you’d like to go to the next level and discuss how to modify your product development processes to drive value for your customers then give us a call. We’d love to talk to you.
What does “Conspire With Your Customers” mean?
Conspiring with your customers is not just the process of getting their feedback, although that is a necessary component. The core concept we are proposing is much more expansive than that.
You should seek to bring your customers as far into the product development lifecycle as you can, as early as you can, and continue that involvement throughout each stage in the process.
You want to partner with them, to build trust with them. They should share their fears and dreams with you, and you with them. As one of our Zero Waste Engineering clients put it “I want us to eat, sleep, and breathe alongside our customers, and bring back their problems so we can solve them.”
The goal is a true partnership based on trust and transparency that drives value for both parties. It is a shift in mindset that drives iterative thinking and a focus on discovering and delivering value rather than developing requirements.
Ideally, your customer’s first involvement would occur right at the conceptualization of the project and be based upon a preexisting relationship of trust. The best case scenario would be if you sought to test a hypothesis on how a project could drive value for them based on a problem you had heard them express.
As an example, let’s say we manufacture bottling machines that are primarily used in microbreweries. We believe we can increase uptime by 12% on our machines by using real time data analysis to tailor the preventative maintenance schedule for the machines. At this stage we should be asking questions such as:
- Is uptime something our company sees as a problem?
- If so, how big of a problem is it for you?
- Have you tried to solve this in the past?
- How did those solutions work (or why didn’t they work)?
- Can we quantify the potential impact of the problem and solution concept to the organization in monetary terms?
- Who are the stakeholders involved in managing the production process?
- How does your company integrate and adopt new technology?
Here are some examples of things we might learn at this stage that could affect the structure of the solution we would design.
- “We overprovision our production capacity. If capacity increased on the bottling line it would go unused unless we invested in additional fermentation tanks.”
- “Our workers are unskilled. They’d need additional training or guidance on how to accomplish the type of preventative maintenance you are talking about.”
- “We’d need to get permission from IT before we get a system like that on our network. They have pretty strict security requirements for systems like that.”
- “We schedule all our maintenance on Saturdays unless it’s an emergency that takes down the line. So it doesn’t matter when you would tell us that something needs to be done. It’s not getting done until the following Saturday unless it’s an emergency.”
This information should be used to generate a hypothesis of the solution. Sketch out how you believe that a system can meet all the constraints you have discovered in your information gathering. Show it to your customers, get feedback, start to sell it to them if they are interested enough. This might involve mockups, semi functional applications, flow diagrams, or a variety of other tools. You might even choose to “mechanical turk” your solution using a simple spreadsheet on the backend. Be creative, but limit your investment. We are still primarily seeking information.
Having something that allows them to visualize a solution will drive additional thinking from your customers. Constraints that didn’t occur to them will seem obvious once they can see a mock-up of the solution. Or perhaps additional ways that the solution can drive value may become apparent. This may take several passes to get it right before you try to build a functioning solution. Changes cost you almost nothing at this stage. Test as much as you can.
Continue this through as many iterations of hypothesis, testing and validate/adjust as you need to in order to truly understand the problems and have confidence in making the next level of investment.
One of our Zero Waste Engineering clients in this stage signed a 12-month engagement with a customer for free consulting supported by a bare bones system in exchange for guaranteed access to people and systems. What has emerged is a true win-win. Our client’s customer is getting real value and outstanding customer service, while giving our client the access they need to build a product that will give them even more value – and a nice ROI for our client.
As the vision for the product becomes clear you will eventually need a more functional version of your solution. Even at this stage you should start as cheaply as possible. Hold it together with duct tape and gum, metaphorically speaking. Bring your vision into the real world. Start getting your early adopter customer to buy it. Despite everything they’ve told you until they are paying for it it does not have real value. You will continue to learn a lot about what the system needs to do and how you need to sell it once the customer is handing you money for it.
The process of building then becomes iterative, as we gradually make the solution real, and then scalable, we are in constant communication with our customers. We seek to continually tweak and improve as early as possible – when the cost of a change is low – in order to optimize the solution. Our progress is driven by real revenue, not projections. When we finally unleash our sales force, they have data driven results and a solution that has been refined over many iterations, as well as the much higher chance of success that this entails.
Who are the customers we should be working with?
Start with your revenue driving customers. The Pareto Principle holds true for many companies, 20% of their customers drive 80% of the revenue. Focus on the 20%. Design your solutions for them. They drive your revenue, respect that.
Within that 20% of customers they will have different profiles, some are very conservative, others are more forward leaning. Avoid companies and individuals at companies who are technology enthusiasts. You don’t want people who want the technology for the sake of having the technology, they will skew your results. You want to work with people who are open to new technologies or solutions, but who are pragmatic enough to realize that the solution needs to drive real cost savings or revenue and be able to be adopted by their organization within the constraints they face.
The right customer will be excited to work with you because they realize that it is good for both of your organizations. They are interested in the long term relationship that can be built between your companies and understand the benefits of making their voice heard in the development process.
When done right, this process and the associated customer relationships become a strategic advantage for your company. While other companies are investing in half formed ideas destined for failure, you’ll be investing in your ability to critically analyze customer needs and drive value.
What we describe here is a radically different process than most industrial manufacturers use. In part 2 we will discuss common objections, but even if we overcome the objections and are excited about the concept, there are still significant organizational hurdles to overcome in attempting to implement. In part 3 we’ll discuss how to get started inside a system that has been built for incremental innovation.