March 27, 2007
Think beyond the product itself when identifying customer needs
Many products in the marketplace have reached or surpassed their functionality saturation point - that point where new features largely go unused and are no longer used as a competitive differentiator. Phones, many software applications, copiers, watches, cars, baby products and many other product categories have reached that point.
When trying to uncover customer needs for those product categories, product managers need to think beyond the product itself because it isn't the product itself that customers are buying anymore.
Take cell phones - some people are buying and using them as ultra-lightweight computing devices, comparing them to small notebooks when making a buying decision. Others are buying them as a fashion statement. In both cases it's not the phone needs that will lead to successful new products, it's all about understanding the current fashion trends and a user's mobile computing needs .
Or take the copier market - most copiers will have the same feature set as most other copiers in that price range and most will have a similar lifespan and lifetime maintenance cost. A small business owner may make her buying decision based on the financing options and upgrade plans that are available - in essence turning the copier selection and buying process into a financial product selection and buying process.
And how many people do you think buy baby products for their "product" features? Most are basing their decisions on safety factors - essentially buying safety products with a twist of fashion.
When looking around at product offerings in these categories, there is evidence that some companies are getting it. But there is also a ton of evidence that many product managers are still operating in the dark ages of "feature-itis."
December 15, 2006
Co-creation and Innovation
As part of an interesting consulting project for FAST Search & Transfer, we got the opportunity this week to interview their CEO - John Marcus Lervik. The full interview will be posted on the FASTforward Blog , where we are hosting a conversation on Enterprise 2.0.
One particular thing that struck me was when we asked him about their Innovation process. As you know, search is at the core of many things 2.0 - including Web 2.0, Enterprise 2.0, Community 2.0, etc. And staying ahead of the innovation curve in fast moving markets like that is not a trivial task. As it turns out, FAST has over 400 engineers, including 65 PhD's - a little more than 60% of their workforce is working on product innovation. And they do not stop there, they co-opt engineers from within their customer base into an extended innovation community - and as such they have a network of over 2,500 engineers driving their process innovation process.
If you have any interest in joining the Enterprise 2.0 conversation, drop me an email at symbiotic [at] emergencemarketing [dot] com.
November 9, 2006
Co-creation at P&G
In a program called Connect + Develop, P&G is trying to accelerate their internal R&D capabilities - provided by 7,200 R&D staff - by seeking to leverage ideas, talents and innovation assets of individuals, institutes and companies around the world. So they are not just trying to expand their innovation process to other employees besides their R&D staff, they are actually trying to expand it to include outside partners, customers, and even competitors.
Their primary focus is on ready-to-go innovations - solutions that have already been reduced to practice in some part of the world, and in disruptive ideas for their business categories. So in a way they are trying to identify lead users in their extended networks.
Some of the successes to date include Bounce, which was a ready-to-go technology acquisition, Spinbruch, which was a ready-to-go product acquisition, pump dispensers used for Olay Skin Care product, which was a ready-to-go packaging acquisition, and Swifter Dusters, which came from a partnership with a competitor.
Here is what A.G. Lafley has to say in his introduction:
I want us to be the absolute best at spotting, developing and leveraging relationships with best-in-class partners in every part of our business. In fact, I want P&G to be a magnet for the best-in-class. The company you most want to work with because you know a partnership with P&G will be more rewarding than any other option available to you.
Pretty powerful stuff!.
September 13, 2006
Most important trends for global business in the next 5 years
McKinsey quarterly just reported (requires subscription) on a survey which they conducted with executives from around the world. In it they asked those executives to identify the top three trends that would affect global business and how those trends would impact their company's profitability.
The top three trends to affect global business over the next five years are:
- the growing number of consumers in emerging economies
- the shift of economic activity between and within regions
- the greater ease of obtaining information and developing knowledge
Other noteworthy trends from the top 10 include: the increasing communication/interaction in business and social realms as a result of technological innovation (#6), shifting structures/emerging forms of corporate organization (#7), and more social backlash against business (#9).
Interestingly enough, the survey found that executives perceived the potential impact of those trends to be significantly larger on global business than on their own company's profitability - perhaps signaling a weakness in their ability to translate global trends into corporate strategy.
Another finding - perhaps predictable considering who was surveyed - is that 85% of the executives describe their business environment as more competitive than it was 5 years ago.
When asked what single factor contributes most to the accelerating pace of change in the global business environment today they identified the main reason as innovation in products, services and business models. Other interesting reasons were greater ease of obtaining information, developing knowledge (#2), and rising consumer awareness and activism (#8).
September 12, 2006
Open source beer...what is next?
In the last issue of Wired Magazine, Larry Lessig writes about a Danish artist collective, called Superflex, which started a new brewery that produces beer based on the software industry's open source model. The beer is aptly called "Free Beer" (or maybe it's going to confuse people who are not familiar with open source, as the beer is actually not free.)
The idea is that the beer's recipe is open and licensed freely. Anyone can make improvements, but when they do they must release the changes as well. Superflex maintains a log with all the improvements at www.freebeer.org. The project seems to be off to a good start - with their first batch of beer sold-out overnight and the company now trying to close distribution deals with other breweries.
If you operate in markets with many lead users, a term coined by MIT Professor Eric Von Hippel to refer to users who tinker and modify your product to better suit their needs, then an open source business model seems to make a lot of sense. It comes down to embedding user innovation directly into your product innovation process.
But do all industries have lead users? And is that the sole criterion for potentially rolling out open source business models? Some markets clearly have them. Think about scientific instrumentation markets, where scientists in labs, universities and hospitals routinely make custom modifications to products, so that they would work better within their particular research constraints. Does that mean that an open source business model based scientific instrumentation company could survive? Assuming that a company could get over the culture shock of giving up its patent protections on product innovations, and considering that every competitor could now offer the same instrument, is there a big enough market for that to happen in a sustainable and profitable way?
What could work is to put widely used sub-assemblies in open source - think for example of a lens motion compensation system. In this case the innovation could be embedded in all sorts of products - including scientific instruments but also consumer cameras and perhaps other products. By doing this you would not only ensure a large enough pool of innovators to make it worthwhile from an innovation point of view, but you would also address the market size and differentiation issues which are probably key to make this work in a profitable way.
Yochai Benkler, quoted in the article and author of The Wealth of Networks, has it right when he says: "we are in the midst of a quite basic transformation in how we perceive the world around us and how we act, alone and in concert with others."
August 15, 2006
The role of customer feedback in innovation
Over at the Fast Company blogjam, Dave Pollard looks at whether great product innovation really starts with the customer - and describes the whole issue as a chicken or egg question.
Involving the customer in product innovation is not an either or proposition - it is something that should always be done - but done in the right context. And when listening to customers companies need to realize that their mileage will vary depending on the type of product or the phase within the product life cycle.
In some product categories, people could care less about the products or the companies that manufacture them - making customer feedback useless at the least, or potentially dangerous if given too much weight.
Newer products that are still primarily appealing to innovators and early adopters have a different problem with potentially similar consequences. Assuming the product is successful, customers probably care about the product in this case. But their ability to innovate ahead of what is available will likely be several steps behind the ability of the team that came up with the innovation - and giving too much weight to customer feedback may limit the future product potential and give the competition an opportunity to catch up and out-innovate the incumbent.
Then you have more mature product categories where people care - probably the area that yields the most valuable customer feedback. Except that here too you have to be careful about how much weight you are giving to that customer feedback. If your goal is to grow your product revenue by 80% in the future, then you have to realize that "all" current customers only make up a fraction of your future customer base. Attaching too much weight to their feedback may eliminate a large number of future customers that do not share their profile. And according to Harvard Prof. Clayton Christensen's disruptive innovation theory, your trajectory of product improvement will eventually cross the mainstream trajectory of customer need - limiting your potential future customer base, and opening yourself up for a disruptive innovation.
All that being said, and according to MIT Professor Eric Von Hippel, in some fields there are a small number of "lead users" who invent new products out of necessity and who can be an important source of new product concepts. The kind of customer listening that is required in this case is very different from what most people think of when talking about customer involvement in product innovation!
August 3, 2006
You cannot outsource innovation to your users!
Kathy Sierra over at Creating Passionate Users has a great post on why you cannot count on customers/users to innovate for you.
Quoting from her post, she says:
In this Web 2.0-ish world we're supposed to be all about the users being in control. Where the "community" drives the product. But the user community can't create art. (And I use "art" with a lowercase "a" as in software, books, just about anything we might design and craft.) That's up to us...
Our users will tell us where the pain is. Our users will drive incremental improvements. But the user community can't do the revolutionary innovation for us. That's up to us.
Of course you need to listen to your customers, and of course the customer is in control of many things that used to be controlled by the companies marketing their products and services - i.e., information about the product or service that levels/changes the balance of power in buying situations.
But that does not mean that your customers are in control of designing your next breakthrough innovation! It will never happen...and those companies that try to "outsource" their product innovation to their customers will inevitably condemn themselves to a slow dead by innovation monotony and product insipidness.
In an interview with Peter Drucker many years ago in Context Magazine - Drucker adds a few reasons why you cannot or should not outsource your product innovation to your customers:
- 99.9% of your customers couldn’t care less about your product or service.
- 70% of the people or organizations that should be your customers are not yet (and therefore by letting the existing customers dictate what your next generation product should be - you might very well never be able to meet the needs of those 70% who will make up your needed growth)
- customers never buy what we sell
Where will your killer competition come from?
It is a fairly well documented fact that some breakthrough innovations come from spaces that are not originally considered to be competitive. Nevertheless, it is still fun to witness one of those shifts firsthand.
If you have done any traveling in densely populated areas lately you may have witnessed a few of them. Have you noticed how fewer people seem to be wearing wristwatches - especially young people? Where did the competition come from? Cell phones...A quick online check indeed validates that the worldwide market for wristwatches is down by 10-18%.
So what else is happening? Are there fewer people carrying laptops in favor of web-enabled cell phones with email capability? Are more people using their phone to take snapshots instead of compact cameras? A quick online check does not offer any validation of these trends yet - if indeed they are real trends. But could the cell phone disrupt the wristwatch industry, the laptop market and the digital camera space?
Do you know if your industry may be under siege by stealth competition like this? Are you even looking outside your space?
July 27, 2006
Whatever marketing becomes...
I do agree with many of the assertions in his reply regarding the poor state of marketing and especially product management in the Linux World and the Tech world in general. I would not, as he does, differentiate between marketing technology products versus marketing consumer electronics or consumer packaged goods. The role of marketing and the skill set requirement are very much the same across all industries. Having deep industry experience is an additional requirement layered on top of that.
Across all industries, marketers must play the role of "cultural anthropologist" to distinguish the real needs from the short term annoyances that people will find workarounds for by the time you can address them with either a new product or a new feature. They must also be able to interact, negotiate, and mediate with R&D, engineering, suppliers, competitors, partners, and other groups, to finalize "feasible" product plans that will meet the customer needs and include all the "relevant" innovations coming from those groups. And they need to be able to do that without being a gatekeeper or information traffic cop. In an age of rapid development and co-creation, they need to be comfortable in an environment where everyone can and should talk to everyone - regardless of organizational boundaries. Because, and within the constrains of not aggravating the customer, all of those groups need to have direct access to the customer to test and validate certain assumptions. Again, there is no difference in those fundamentals across industries.
Next they need to find ways to communicate with customers about the new products and services in the face of "attention" being the new scarcity. And while the solutions will differ from market to market, the range of options that need to be evaluated are the same across all industries. As part of that they also need to make sure that they set up the proper infrastructure to "listen" to market feedback on an ongoing basis instead of in episodic waves as they currently do.
Whatever marketing becomes will be enabled by technology. Wiki's, blogs, social bookmarking, technology enabled CGM, and many other new technologies are very powerful tools for companies to execute all the marketing functions - including all the customer touch-points - in different and better ways. Hopefully marketing will not become "defined" by technology, as that would make things much worse. Just take a look at what CRM did to sales and marketing...
Lastly, it is important to keep all things in perspective. What marketing becomes is not all that different from what it should have been all along...just take a look at what Peter Drucker said during the last three quarter century:
- "Because the purpose of business is to create a customer, the business enterprise has two--and only two--basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business."
- "The aim of marketing is to know and understand the customer so well the product or service fits him and sells itself. "
- "The most important thing in communication is hearing what isn't said."
- "Quality in a service or product is not what you put into it. It is what the client or customer gets out of it."
And hopefully, what marketing becomes will also be heavily influenced by other disciplines besides technology - including sociology, anthropology, politics, economics, science, and others. Some of the best "field-specific" innovations have come from seemingly unrelated fields. Again, Drucker has a good example of that: "The new approaches to the study of history have, for instance, come out of economics, psychology and archeology all disciplines that historians never considered relevant to their field and to which they had rarely before been exposed....... By itself, specialized knowledge yields no performance."
July 6, 2006
Eager sellers and stony buyers - why sellers always overvalue their products
The June issue of the Harvard Business Review has an interesting article describing some of the latest findings in the psychology of new-product adoption (here - can be purchased or requires subscription).
According to the author, Prof. John Gourville, there are a few psychological biases in decision making that need to be considered when using Everett Rogers' "relative advantage" as a measure for successful product adoption.
Gains and losses:
First off, people evaluate attractiveness of new products and services not on an objective scale, but on a subjective/perceived scale which is based on products they already own. Every benefit of the new product compared to the new one is considered a gain, and every shortcoming is considered a loss. The kicker is that potential buyers give losses a much bigger weight than gains in their decision making process. In fact, multiple studies have shown that gains have to outweigh losses 3:1 before customers will adopt the new product or service.
The endowment effect:
Because of this loss aversion, people value what they have more than what they don't have. In fact, multiple studies have shown that people demand 2-4 times more compensation to give up products that they already possess than they are willing to pay for those same items in the first place!
Status quo bias:
The status quo bias explains why people tend to stick with what they already have, even when a better alternative exists. Studies have shown that the extend of loss aversion grows over time from a factor 2 to 4 - meaning that people's pain perception of giving up something increases over time and reduces their willingness to trade up.
But that is not all! Not only are consumers overvaluing losses and existing benefits of entrenched products by a factor 3, sellers are also overvaluing the benefits of their innovations by a factor 3. That makes the mismatch between what innovators think consumers desire and what consumers really want 9 to one!
So what is one to do? The author has a few suggestions. Come up with products that contain few product changes and require little behavioral changes and you will end up with an "easy sell." If your new product has considerable product changes compared to the incumbents - make sure that they require little behavioral changes. By doing so you may end up with a "smash hit." A high degree of product change combined with a high degree of behavioral change is much like the TIVO and those innovations are "long hauls." Doomed out of the gate are those new products with little product changes that require a high degree of behavioral change.
June 26, 2006
Lessons learned from the gaming industry
Neuroscience tells us that games shape behavior by leveraging our "primal response patterns," which are deeply embedded in our psyche, and by engaging us in "flow" - that spot where skills and challenges are somewhat in balance.
Based on that, there are 5 game dynamics that can make an interactive game more fun, compelling and addictive. They are:
- Collecting - the ability for people to collect all kinds of stuff and brag about it - be they weapons or other artifacts in worlds like WoW or Runescape, or friends in MySpace
- Points - both social points given by other players as well as ratings given by the system
- Feedback - whether visual or auditory, a way to tell a person how well they are doing
- Exchanges - especially social interactions, whether explicit or implicit
- Customization - whether customization of your persona or your environment. After you invested time personalizing your world, you are less likely to leave
If you can embed some of those game mechanics into your traditional software service or software application, then those too will become more fun, compelling and even addictive. Some of the software applications that have successfully embedded those features include Flickr, MySpace and even eBay..
Other write-ups about the points made during the session include:
[Tags: gaming industry neuroscience software+development ]
May 24, 2006
Meeting people's unmet needs through product design...
Tom Guariello over at the Truetalk blog has a funny post on the recent hype surrounding customer listening and meeting their "unmet" needs through design, and how many people, in this case the SVP of Innovation at Pepsico (or her flacks) misuse all this rich terminology - based on a originall rant by Niti Bhan at Perspective.
April 10, 2006
Founder CEO's drive higher returns than "professional" managers
Fortune Magazine's latest issue has an article on how Fortune 500 companies that are still run by the founders are tearing up the market.
While the Fortune 500 sample is small, there is other evidence based on research of an Ohio State University finance professor named Radiger Fahlenbrach that companies run by founder-CEOs outperform the broader stock market by 8 %. One of the reasons being put forth for this finding is that founders care more. The study further uncovered other interesting facts - namely that "founder-run companies have bigger capital budgets and invest considerably more in research and development than nonfounder-run firms."
Unfortunately, this is not a widely held belief amongst typical startup backers, who are too often rushing towards pushing founders to the side and replacing them with "professional management"- types to "babysit" their investment. There is no question that some founders are not CEO material, but before taking out founders from the executive team line-up, investors and board members should really look at complementing the weaknesses of the founders in other ways.
March 22, 2006
More feedback on hyper-specialization and innovation
Last week's post on hyperspcialization drew quite an interesting discussion, which is being summarized here.
Olivier Blanchard over at the BrandBuilder blog picks up the conversation and adds a lot of interesting examples of how a broader background may help you innovate better then by being overly focused. He also makes the following recommendations "... my advice to you if you're in a rut (or if you're looking for your next big idea) is to just relax and go outside. Take a road trip. Take the afternoon off and go ride a bike. Go into a computer store and find out everything there is to know about inkjet printers. Go pick up a graphic design magazine and hang out at a tea bar. Take a stroll through an antique shop or your town's hippest interior decorator's gallery. Read a book about something you've never read about before. Go have a drink with a friend or a colleague or a competitor" - something I believe Tom Peters recommended over 20 years ago.
Mohamad Mova Al 'Afghani over at NanoTechnology Law argues specifically about law in nanotechnology, and how a well formed legal platform for nanotech will have to be much broader than just one based on IP law. He also quotes Peter Drucker as saying "This is particularly important as innovation in any one knowledge area tends to originate outside the area itself..... The new approaches to the study of history have, for instance, come out of economics, psychology and archeology all disciplines that historians never considered relevant to their field and to which they had rarely before been exposed....... By itself, specialized knowledge yields no performance."
Chuck Frey over at Innovation Tools wrote about this in the past and agrees that we need generalists to connect the dots.
Gautham Gosh over at Gautham Gosh on Management also wrote about this in the past, in one posts pointing to Dave Pollard from How to Save the World as saying that: "We live in an age of specialization, where we are encouraged to narrow our interests and our activities, to focus and limit ourselves to doing things at which we are very competent. So parts of our brain get a lot of exercise and other parts very little. What's worse, this can actually narrow our comfort zone, the range of things we enjoy doing or thinking about and are competent in."
Steve Hardy over at Creative Generalist argues that ideas come from the confluence of multiple disciplines but that innovations are always the result of specialists.
In the comment section of the original post it was also suggested that perhaps hyper-specialization might have a negative effect on ethics.
Here are some other links on the topic if interested:
March 20, 2006
The end of the next big thing?
According to a CNET article, IBM's executive VP for Innovation and Technology Nick Donofrio said last week that "An era of inventions ended with the passing of the 20th century. The fact is that innovation was a little different in the 20th century. It's not easy (now) to come up with greater and different things. If you're looking for the next big thing, stop looking. There's no such thing as the next big thing"
Microsoft's Don Dodge over at Don Dodge on The Next Big Thing does not believe so - saying that "The Next Big Thing does exist...it just doesn't look BIG to IBM," and listing a whole bunch of companies he is working with that could be the next big thing.
Charlie Bess over at EDS' Next Big Thing Blog also chimes in, saying "Each organization will have their own next big thing. There will be some massive industry wide changes, but those are much more rare than the shift within a single organization — at least for most organizations."
History (especially tech history) is littered with predictions along the lines of "this is the end of ...(fill in the blank)" - and they have often been an indication that the author of the quote or the company they were affiliated with had reached an innovation impasse.
You really believe that there is no Next Big Thing? There will be Next Big Things for as long as humans do not screw up this planet. Saying that there is no Next Big Thing is like saying that we are the end result of evolution - millions of years were spent to this as an end result. That, of course, would have some serious implications.
But back to a more mundane level - of course there will be ongoing breakthrough innovations and a lot of Next Big Things. There are fuel innovations in the works that could lead to many next big things, there are management innovations that could lead to new type of organizations and governments that could eclipse existing organizations, there are innovations in the world of physics, and at the confluence of multiple disciplines, that could lead to many next big things. It is just all around us!
March 17, 2006
The importance of ideas and idea management
"There is no way to create wealth without ideas. Most new ideas are created by newcomers. So anyone who thinks the world is safe for incumbents is dead wrong."
--Gary Hamel, chairman, Strategos
(from the Fast Company Blog)
It is so true that many companies are really bad at idea generation and management. They typically fail to realize a few things:
- It takes a lot of ideas to get a few viable ones that lead to true innovations. Most products fail because the ideation process starts with too few ideas - and selecting from an anemic pool of ideas invariably leads to bad ideas being selected for new products or product features.
- Ideas do not always come "on-demand", and yet that is how most companies manage their idea generation process. They turn in on when they are ready for a new product cycle and off when they have a new product specification. It is a bit like turning on democracy every 4 years when we go for elections, only to turn it off again when the elections are over. Directed innovation can lead to some good ideas but in general people get great ideas off-cycle as well, and those are rarely captured. In fact, and in the consumer electronic space, most people have ideas about product improvements one or two weeks after they first buy the product. If they are part of the buyer group who purchases their product right after the launch of a new product, most of those ideas are likely lost.
- While it is unclear that all ideas come from newcomers, it is a fact that many breakthrough ideas originate from places that are not related to where the idea eventually leads to innovation. An example of that is how ideas from the biological world have led to breakthrough innovations in management. Most companies are not equipped to capture and manage this type of cross-boundary idea management
- Many good ideas come from recombining seemingly unrelated ideas together. While idea A and idea B may not have much merit on their own, it could spark a new idea C in someones mind that leads to a truly breakthrough innovation. In order to fully tap the power of idea recombination, companies need to involve a lot more people in the process than they typically do - both from inside the company as well as outside.
- Many people are actually bad at coming up with ideas unless they can react to some sort of straw-man. If you want to tap those ideas as part of the process, you need to jump ahead and develop simple prototypes of existing ideas to capture the reactions and associated ideas from those people. Most idea management processes don't allow for that. They have a commit phase before which nothing gets developed and after which everything is committed - no matter what other improvement ideas might come up.
Idea management is an important component of the overall innovation process. While most companies think of idea management as a funnel process - they tend to end up with a piped process where the pipe is slightly wider at the entrance than at the exit. What most companies fail to realize is that it should be a funnel process full of feedback loops and forward loops. Not only do they need to make the entrance of the pipe wider by getting many more people involved in the process and by being "always-on" for idea capture, they also need to focus on making the exit of pipe narrower by by killing more ideas in the process. Failing to do so leads to too many ideas being under-resourced - which again results in higher failure rates.
Considering that the tools which enable companies to build complex funnel processes with tons of feedback loops and forward loops are widely available - there should be no excuse for companies to mangle this process any longer.
March 7, 2006
hyper-specialization is not always the right thing to do
People and companies tend to hyper-specialize - getting to know more and more about less and less. While this Cartesian-based view of the world may have had it's benefits in the past, it is full of dangers as we move forward.
First off, hyper-specialization may very well stand in the way of breakthrough innovation. Indeed, most breakthrough innovations happen not at one level of specialization - but they increasingly happen at the confluence of multiple disciplines. People who have the capacity to scan across multiple businesses or vast amounts of information, and who can translate innovations from one field to the next are as likely, if not more, to come up with breakthrough innovations as the specialists.
Which brings up another important negative side effect of hyper-specialization. Hyper specialists know very much about very little - which means that they do not understand what happens in adjacent spaces. What should be valuable information coming from other sources within the company or markets now looks like data - with no meaning, nor the ability to influence the hyper-specialists' work. Worse, in hyper-specialized environments, you could conceive that the hyper-specialists will not understand the impact of their actions on the broader picture - which can have especially dire consequences when it comes down to environmental impact of innovation.
Even at a more fundamental level, hyper-specialization can have severe drawbacks for companies. For example, saying that you can never bring an inside sales rep outside because he or she needs a totally different skill set to succeed outside may lead to overall company moral issues that far outweigh the benefits of honing someone's skill sets in one area of expertise only.
January 31, 2006
The fuzzy front end of innovation
Renee Hopkins Callahan and Gwen Ishmael have recently released a great white paper on the benefits of "staying in the box" instead of focusing on thinking "outside the box" during the fuzzy front end of innovation.
December 6, 2005
5 tips for managing creativity from Disney...
The Wall Street Journal yesterday had an article (requires subscription) on Disney's new CEO, Robert Iger. In a sidebar, they list his 5 tips for managing creativity:
- Don't take a hierarchical approach
- Don't create an approval process that's unduly rigorous
- Be careful not to water down or lose people's passion
- Let those directly in charge make decisions
- Put the spotlight on the company, not the individual
I am sure they meant innovation rather creativity...but one way or the other - great advice!
November 30, 2005
Don't call me stupid...
Grant McCracken has a brilliant reply to "It's the Purpose Brand, Stupid" - an article published in the Wall Street Journal yesterday by Clayton M. Christensen (HBS), Scott Cook (Intuit) and Taddy Hall (Advertising Research Foundation) .
While I agree with the authors of the article that "to build a product that people want, you need to help them do a job that they are trying to get done", and that many companies are building the wrong product by not following this simple rule, I also agree 100% with Grant that taking that to the next level and start talking about "purpose brands" is somewhat ludicrous.
I love it when he points to the costs of building true purpose brands:
"Some costs of the Purpose Brand proposition: Pucini becomes entertainment, indistinguishable from Disney. There is no difference between time keep devices called Patek Philippe and Timex. Ford makes the same thing as Volkwagen. All business schools, mark you, Dr. Christensen, are pretty much the same. Intuit is only a couple of features different from Microsoft Money. Most of all, Mr. Hall, there is no longer any such thing as advertising strategy. Now, it's sell the function all day long. (And to think that marketers and agencies actually fund the Advertising Research Foundation!) "
No reason to wonder what Grant really thinks about the authors...it's clearly stated in his post: "The three wise men are a wrecking crew. "
November 21, 2005
Startups succeed if they gain credibility and if they mimic existing structures...
According to management-issues (via A PR Guru's Musings), a new HBS Working Knowledge interview with Assistant Professor Muktu Khaire reveals that startups succeed if they can acquire "intangible resources such as legitimacy, status, and reputation". I buy that...
In that same interview she also argues that "mimicry of existing organizations' structures and activities to a certain extent is essential if new ventures wish to gain legitimacy."
Better yet is to find a way to sell a product that does not require the buyer to change the way they to do things in order to use your product - yet will transform the way they do those things dramatically once they start using it.
That being said, I am not sure that mimicry is the only way for new ventures to gain legitimacy. While it makes it easier to sell, there are radical new ways of doing things that have found relatively fast adoption - think search engine marketing, or downloadable music, snowboarding, just to name a few.
November 8, 2005
Please - don't split marketing even further
[warning: rant coming] The latest issue of productmarketing.com has an article on "where does product management belong in the organization?" Very shortsightedly the author recommends that product management should have its own exec reporting directly to the CEO. He calls it the VP of market problems...and describes the VP of marketing as the person who owns collateral, sales tools, lead generation, and awareness programs.
Come on - give me a break! This is such industrial revolution-like reasoning...If that is how your organization looks like you do not fix that by hiring a VP of product management, but you do it by firing your marketing department. Besides the fact that it is idiotic to still believe that they are "in charge" of lead gen - the marketing exec has to be the person in the organization that owns how the company behaves in the marketplace. And that includes defining the offer that you bring to market. Product management is not just a "marketing function" - it is marketing. It is at the center of everything you do in the marketplace.
The biggest problems with companies is that marketing is as fractured as it is. It is because the marketing departments are siloed that we witness all those weird company behaviors these days - where the left half of the company behaves totally different from the right half. We do not need more division of labor...we need less!
Sure enough - the product strategy has to be on the CEO agenda. No question about that! But it has to be on the agenda as part of the overall market strategy - not as another independently measured "thing". And companies need to realize that there are different types of new products - some which belong on the executive team's agenda day in and day out, and some that don't. And to believe that product management should be driven by fixing "market problems" is not just ignorant - it is a dangerous assumption for any company to hold. I can just hear the next sentence - "if your product looks more like an aspirin than a cure for cancer, you will fail!"
All that being said - the development of a product, much like all the other marketing functions, is not a one person/department affair. It is clearly a cross-functional activity that crosses all departments in a company. And just like with any cross-functional projects - different people have to take the lead for different components at different stages of the project.
Of course - just by reading the intro to the article's side bar: "I have found that the key to success in technology companies is an understanding of Star Trek" - and how companies should evolve from Start Trek the Original Series to Star Trek The Next Generation - I should have known about the quality of the article and skipped it instead of getting all wound up about it...really - he missed all the wonderful lessons from Star Trek Enterprise and Star Trek Deep Space Nine!
[end of rant]
October 24, 2005
The importance of "suspending" stories on innovation
No, this is not another post on the importance of stories that fit into people's mental framework to get your message accross - but rather on the constricting effects that stories can have on our worldview and our ability to see differently.
This weekend I started reading the book Presence - co-authored by Peter Senge (MIT), Otto Scharmer (MIT), Joseph Jaworski (Generon Consulting), and Betsy Sue Flowers (U of TX) - a fascinating book on many levels.
One of the things that really struck a cord with me was how stories can have a very limiting effect on what we can see around us. Our mental frameworks - from who we are, to how we are supposed to interact with one another and nature, to what an economy is , a firm, a job - are all based on single stories or scenarios, acquired through education, culture, and various other sources, which we accept without thinking. Unless we can suspend those believes and evaluate alternative stories and scenarios, it is very hard to innovate, change, or see things differently. Having a group of people that share those same basic stories leads to groupthink - which as we have witnessed over and over again - can potentially lead to dangerous situations.
Examples given in the book are that of Brian Henry's - an economist who came up with the law of increasing returns by challenging what an economy is - or that of the South African Government - which was successfully able to transition from apartheid to a multicultural democracy with little bloodshed, based on developing and evaluating collective alternative stories and scenarios about their future.
The book is illuminating in many other ways as well. As a trained engineer in systems dynamics it was not surprising to read about the need to understand the whole system or process - rather than it's parts. What was a little bit more counter-intuitive is their recommendation to try to understand the system from within rather than from the outside.
Another, rather intriguing fact, that I picked up from the book is that we have three neural nets - one in the brain, one in the heart and one around our gut. So thinking from the heart and having a gut feeling are realities after all...
October 9, 2005
Some supporting material for the new innovation wave
Business 2.0 has some interesting stats that support the new dynamics of innovation which I wrote about last week. You can find it in their hottest new trends article - specifically in the 5th trend: Everything Old Is New Again (may require subscription).
Think about this - web server hardware that cost $25K in 1995 can now be bought for $1K. One terabyte of storage that used to cost $1M can now be had for $30K. They do not mention labor cost - but I know that many people involved with this wave are working well below market rates.
October 7, 2005
Outsourcing innovation - of course!
I came across an entry on outsourcing innovation over at EDS' Next Big Thing Blog.
If you want to be innovative as a company, I think you have no choice but to externalize all your innovation processes and outsource some pieces of it. You have to look at innovation as a layer on top of every single process that your company has. Some processes are core competencies for your company and some are not - but they are for others.
If a process is not one of your core processes, outsourcing innovation there should be a no-brainer. And if you happen to innovate yourself in those spaces - try selling the innovation. But don't let it go to waste as most companies do - or try to build on it yourself.
Even if a process is core to your business, say product innovation for products that you bring to market, you should still try to involve outsiders - customers, partners, suppliers, competitors, etc. - into your innovation processes. And you should constantly be on the lookout for outside innovations that could be bought or innovations from within that may not fit some of your minimum business criteria - i.e., minimum market size - but that might have value for outsiders.
September 6, 2005
Product innovation and the impact on revenues and margins
What happens when your product lifecycle decreases by 10% every year, while your new product introduction success ratio decrease at the same time, and increasing competitiveness means decreasing margins on new products in general?
The key to survival - according to John Hagel at Edge Perspective - is in rapid incremental process innovation.
While I agree with that, I also believe that companies have a lot of room to increase their new product introduction success ratios. Most errors leading to new product introduction failures can be tracked back to the front end of the product lifecycle - that time when you get your market requirements and your ideas. For most companies that whole process is an un-managed black box. People build product without sufficient ideas or with the wrong market requirements - a formula for disaster.
August 26, 2005
Launch a Web 2.0 company
There is a great post on "This is going to be big" about launching a web 2.0 company (thanks Hylton for the pointer).
Some of the 10 steps to be successful are great:
- solve the smallest problem still worth solving
- get a responsive and chatty audience
- launch stuff every day
- don't hold users against their will
- be mindnumbingly simple
- get people hooked on free
- don't waste your money on marketing
- don't overfund
- no one sucks
The don't waste money on marketing and the don't overfund are especially ringing true for me. So many companies are talking about raising money, but when you ask what they would do differently with the money - they don't have a good answer.
This is the wave where you can have one man bands host millions of users every month (true story). And if you believe Business Week (here - requires registration) - the web 2.0 companies so far have been built on $60M of venture money vs. $19.9B for the wave 1.0.
It's a fun time to be around - that is for sure.
August 17, 2005
What global executives think about technology and innovation
McKinsey finished a survey during which they interviewed 9,600 businesses. They surveyed both technology executives (CIO, CTO), and their business counterparts (here - requires subscription).
The findings are interesting:
- 79% of technology execs see technological innovation as a critical global trend and a profit driver, while only 71% of their business counterparts believe that.
- 80%-90% of IT budgets go to IT operations and maintenance -with the rest allocated to projects to improve overall business performance
- 53% of tech execs cite the ability to innovate as the most important capability for growth - with innovation around current products as the most important action - 43% and 25% respectively for their business counterparts
- The roles are reversed when it comes to developing new products - 19% of the tech execs see that as the second most important action while 22% of their business counterparts see that
- 43% of tech execs see automating business processes as a way to achieve greater operating efficiency, while only 29% of the business execs share that opinion
I am surprised that the numbers are not higher. If you believe the Product Development Management Association's or Prof. Cooper's Product Development Institute's numbers that 50% of revenues and 40% of profits come from new products, and that 75% of all new products fail - then you'd expect execs to rate new product innovation actions way higher than they did.
August 8, 2005
Fast Company Blogjam on Innovation.
There are many great posts on innovation over at Fast Company's Blogjam. Like this one, where Jim Canterucci ponders whether innovation can both be top down or bottoms up.
Personally I believe that you need both. Obviously you cannot have innovation without innovative people in your company, but you could put a ton of innovative people in many companies and never have an innovation come out of it.
A minimum requirement for organizations to become truly innovative is to let their innovators connect and network across company boundaries and hierarchies. The problem is that hierarchies, layers of middle management, corporate cultures, and employee procedures are often time standing in the way of innovative people being able to turn organizations into innovative organizations.
New top management teams with a mandate to turn companies into innovative organizations may find that changing cultures in short order may be virtually impossible without braking a lot of glass - like getting rid of many intermediate layers.
Fortunately, and with some of the new web technologies (blogs, wikis, tagging, social networking tools, etc.) companies that want to change fast can do so by creating virtual networks of people that bypass the traditional company boundaries and hierarchies, and where if necessary, new rules of engagement may apply. For fairly large companies where it may take a long time to change adverse innovation cultures and practices, that may be the only way to go - creating a new parallel workplace. Of course, your physical organization could continue to stifle innovation - and you have to keep a watchful eye on that. But the advantage of moving the new rules into a parallel digital workplace is that it's transparent.
August 1, 2005
[maybe not so obvious]You cannot really know your customer
Doug over at Solution Junkie picks up on my earlier posts and adds a couple of valid points - your customers don't know your products, and they will often try to give you solutions instead of needs. Very true...
This whole thread reminded me of an interview that Context Magazine did many years ago with Peter Drucker (here). In it he says that it is very hard to know your customers - yet the only way to compete is by doing it in their context - which most companies do not understand.
In the interview he starts by stating the obvious, although many people just cannot accept this – 99/9% of your customers couldn’t care less about your product or service.
He continues by saying that companies amass an enormous amount of information about their existing customers, yet 70% of the people or organizations that should be your customers are not yet. So if you want to understand the customer, those people who are not your customers yet are the key ones to understand.
He also believes that customers never buy what we sell – and that most of us do not know that!
Yet in order to win he says:
"There are very few companies in the world that can turn out superior products ahead of what the competition offers. And you can't get business any more by being cheaper. Not for very long. Quality, service, yes, you can still differentiate there. But fundamentally you have to differentiate yourself by structuring yourself within the customer's business. You have to understand it."A conundrum anybody?
[stating the obvious] Don't "listen" to your customers - "watch" what they're doing!
80% of new products fail! 90% of the reasons for failure can be tracked back to the front end of the product lifecycle - that time when you gather ideas and requirements from which you decide what to build (both numbers can be validated through many sources - including PDMA, Coopers, etc.). Actually, and according to the Conference Board, a full 25% of product failures can be attributed to misread customer needs.
Why do you think this is happening? Of course, you have the occasional clueless product manager, who cannot extract anything meaningful from the marketplace - or worse, who draws the wrong conclusions from the information gathered.
But the main reason may in fact be that the customer is giving you the wrong information! Either intentionally or not - yep, some will lie to you!
Let's take the unintentional case first. Most customers do not think as much about product usage as you would like them to, yet they will try to please you and answer all your questions - often times giving you the wrong information. Some do genuinely think that they know what they want - but at the end of the day, they are wrong (i.e., someone may tell you that they want a calendar as part of their product, when in reality they want to find a better way to manage meetings - which can better be solved in some other way).
The second case is the one where they intentionally mislead you. Take dating services as an example. There are usage models in there that are not socially acceptable - yet may happen to be the most profitable. If you interview people, they will not readily tell you their needs in those areas - in fact, they likely will lie to you and tell you that they would not use features in those areas.
So how do you solve this problem? You don't ask your customers what they want - you watch them use your product and infer from that. You become a modern anthropologist instead of a interviewer. And that of course, requires a different skill-set!
July 10, 2005
Did you know the US Honda Accord is 2" wider than the European/Japanese model?
According to the Boston Globe today - that is indeed the case.
The reason? Because drivers here are "expanding"...
June 30, 2005
New product development & entrepreneurship
Joe Kraus has a great post on how it took $3M to start Excite and only $100K to launch Jotspot (here - via O'Reilly Radar). The reasons he lists are hardware being 100X cheaper, software infrastructure being free, greater access to global labor markets, and search engine marketing.
That is so true! The new environment also allows for "micro-businesses". I know many people that have self-funded and launched online applications that would have required a full staff, funding, and offices before.
$50-100K gets you a long way these days!
June 29, 2005
Baby Gender Mentor
As I was driving to a meeting today I heard Robin Young at Here and Now talk (here) about this new product - the baby gender mentor. The product costs less than $300 and reveals the gender of a baby with 100% accuracy only five weeks into the pregnancy. Oh - and its like a home pregnancy test - it only requires a finger prick.
Having read about the horrible results of sex selection in countries like China - my first reaction was one of disgust. How could a company be so unethical as to launch a product that could eventually lead to wars. That is indeed one of the accepted potential outcomes of a society with a large imbalance between the number of males vs. females.
But as I thought about it some more, I realized that if that company were not to do it, someone else probably would - concluding that there must be a better way than expecting "self-policing" on the product manufacturers' part. So maybe this is where we should have our Government step in? Nah...look at the stupidity of the stem cell research "virtual" ban imposed in this country. Referendums? Probably too complicated. Economic boycotts - maybe... at first, that seems to be the best form of self-regulation - relying on the intelligence of crowds to not buy goods that they do not approve of. But in the face of big corporate ad spending and its opinion-forming capabilities, somehow that solution seems to be flawed as well.
When your ethics are not the same as mine - that makes for very difficult conversations...
June 28, 2005
For most software companies hosted offerings are the way to go...
I was chatting with the new CEO of a software startup (a restart really) who was complaining about the fact that his product team never realized the importance of having their product available as a hosted solution rather than as an installable one.
In most cases I believe that software startups should offer their products as a hosted offering. In this case especially - where the application is primarily used by sales and marketing departments. The reasons for that are pretty straightforward. First let's look at the main barriers to adopting new technology (see here for more details - based on Rogers):
- perceived risk
One interesting dilemma about hosted applications is whether they should become your only offerings. I am of the opinion that they should - especially if you are an emerging company. First of, and if you are a startup, you do not have the resources to manage two business models. But perhaps more importantly, I do not believe that the two models can coexist under one entity. The needs and characteristics of both offerings are too divergent - both internally as well as for the customer - to be positioned as "alternatives."
Back in the late 90's, when the 1.0 ASP models came out, there was a lot of religion about not outsourcing or hosting mission-critical data outside the firewall. That issue has largely gone away by now. Most companies' IT departments have developed certification programs for hosted applications. Which brings up another great advantage for hosted applications - they do not need to become a part of the IT roadmap - giving you and your customers a chance for speedier adoption and demonstrating faster that you can do well on the last bullet as well.
June 15, 2005
Beware of "top down" disruptive innovations
Nicolas Carr over at Strategy and Business (here - free, requires registration - via Ideaflow) argues that companies should not just be paranoid about bottoms-up disruptive innovations as those described by Harvard Prof. Clay Christensen in his innovator's dilemma set of books, but that they should also be on the lookout for top-down disruptive innovations.
Unlike bottoms-up disruptive innovations, which requires an incumbent player to give up their high-margin products and markets in order to capitalize on them (an unlikely event according to Christensen) - top-down disruptive innovations are higher end than what is currently in the market and therefore come with higher margins.
Examples listed in the article as top-down disruptive innovations include Fed-Ex, Wang, iPod, and satellite-radio.
While I buy the Fed_ex story and perhaps also the Wang story, I am not sure that the iPod is a top-down disruptive innovation. Isn't it the logical outcome of the bottoms-up disruptive innovation that MP3 players have been going through in the last decade? Doesn't it follow a classic innovator's dilemma curve? I think so...
April 29, 2005
Innovation – what do you do?
A lot has been written up recently on idea management and innovation. “DON’T Ask the Users What They Want!” says Tom Evslin – arguing that "the very best ideas come from smart people realizing that a new use of a new technology can create a compelling new capability" (here and here). Only get your lead users involved says MIT Prof. Eric Von Hippel (see here). Get your ideas by using new technology (rss, search, etc.) to set up continuous environmental scans (and don’t forget internal sources) – says Dave Pollard (here)
The solution to ideation and innovation is much broader than that:
- Why limit yourself to getting ideas from a small subset of people? It is true that you may not get your category busting ideas from your customers, but considering that 80% of new products are new versions of existing products – why not listen to all of them for good product enhancement? It doesn't cost much anymore, and who knows, maybe the next “iPod-class” idea will come from one of those people you least expected it from.
- And don’t forget to include all your employees! A.G. Lafley, CEO of P&G had it right when he was quoted in Fortune last year for saying: “…P&G of five or six years ago depended on 8,000 scientists and engineers for a vast majority of innovation. The P&G we’re trying to unleash today asks all 100,000-plus of us to be innovators. We actively solicit good (product) ideas…”
- Environmental scans, especially continuous ones, for getting ideas are indeed the right thing to do. But unless you can increase your marketing staff by a factor x, you will need to leverage the people within your organization as well as those outside of your organization to make that work. Those communities need to help you make the best content (re)bubble to the top.
Today’s technology can help you achieve this in a very cost effective way – both from a technology deployment point of view as well as from a human resource point of view. And it can create huge side benefits – both on the innovation side of things as well as on the social side of things!
April 21, 2005
Decision Analysts (a market research and consulting company) released a white paper titled “In the box innovation” (get it here – free but requires registration) – via Corante’s Idea Flow and also Innovation Weblog.
The paper posits that too little effort is spent on idea generation in new product development while too many resources are being spent on the idea-to-product process. With an idea-to-successful-product ratio of 1.5% (based on a Dunn & Bradstreet report), they suggest that companies should spend more cycles on idea generation. And when they do that, they should not just focus on getting out-of-the-box ideas from their creative employees – a common practice amongst companies that have formal idea management processes.
Instead, they recommend that companies use directed innovation methods to uncover new ideas. Directed innovation is when you ask a group of people to brainstorm within a fairly narrow focus area. The hypothesis, which they try to confirm through an online innovation project conducted late last year (and described in the paper), is that if you use directed innovation you will generate more ideas, more innovative ideas, more “relevant” ideas, and more actionable ideas. The case study which they use to make their point involves two groups of people who were asked to brainstorm on a new chocolate product, one receiving much more directions than the other. Note that the people they recruited were not your average consumer. Here is what they have to say about those people:
“Our Imaginators™ panel consists of everyday consumers who have been recruited based on their high levels of idea-centric creativity, their ability to come up with many original ideas for new products and services, and their skill in elaborating on those ideas as well. Potential panelists must undergo a creativity evaluation and score within the top four percent of the population before they are invited to join.”
First – I agree with the authors that most companies should spend more time on the idea generation and the idea-to-concept part of the product lifecycle. It is during that part of the lifecycle that you determine all the factors that will affect the overall life-cycle cost of your product. And it is also that part of the process where most errors that lead to market failure can be tracked back to (i.e., misread customer needs, bad ideas, bad market timing, etc.).
I also agree that if you rely on brainstorming sessions to generate ideas you will get more ideas in a directed way than in a non-directed way. For most people it is easier to react to something than to create something out of the blue.
But what I don’t understand is why you would limit yourself to brainstorming to generate ideas? And when you do use brainstorming why not allow for both directed and undirected brainstorms? And why keep the process to a select group of “creators” like that?
Idea management should be an ongoing activity that involves not only all employees but also customers, prospects and partners. If you treat idea generation as an episodic process that needs to be turned on and off only when you are ready for a new product, I contend you will miss lots of excellent ideas. And if you limit yourself to the creative types you will miss out as well.
Besides “directed” innovation there is also such a thing as “emergent” innovation – the water cooler type of innovation – which happens when a set of people share/critique/build upon ideas and thoughts with one another. Emergent innovation does not only benefit from the contributions of creative types, it also benefits from good “critics/reviewers”, and good “scanners” (those are the folks that can connect seemingly disparate pieces of information), just to name a few.
In the past it would have been too expensive to set up such broad idea gathering and management initiatives. But with the advent of the web, blogs, wikis, rss, discussion boards, tagging, customer-centric application software, etc. - it should be possible to have large, ongoing, multi-channel conversations in the marketplace at a very low cost.
Oh yeah...one more thing. If in the process you end up with workable ideas that do not fit your corporate objectives – sell them!
April 14, 2005
Product innovation - lead users vs the rest of them
Eric Von Hippel – one of the leading academics in product innovation released his latest book – Democratizing Innovation as a free PDF under the creative commons license. (book download here). If interested, there is also a great interview by Peggy Anne Salz with Von Hippel at the Feature (here - via smartmobs).
If you are not familiar with Eric Von Hippel’s work, it can best be summarized as follows. Within your user base, there are so-called lead users. Those are the customers that go all the way to modify your product so that it works perfectly in their environment. Von Hippel posits that if you could tap those people (and usually you can because those users are not really interested in doing product development for your product – they want something that will fix their problem), it is in essence as if you were outsourcing your product innovation process free of charge. Von Hippel has many books and articles on the subject and all are interesting reads if you are into this field (look at his bibliography here).
While I am a big champion of listening to and involving your lead users (if you can find them) in the new product definition process, I don’t think you should stop there. There are other sources of ideas that may very well lead to product innovation as well – think of all your customers, all your employees, all your partners, etc. In the past it was hard (and expensive) to engage into conversations with all those constituencies. But with today’s technologies (blogs, wikis, forums, tagging services, etc.) your cost of engaging a large number of people in conversations about your products and in engaging them in sorting what’s good and bad is virtually zero (ok - I'll admit - I am an optimist). In the process you will unleash other sources of innovation – such as context-shifting (when an idea from one discipline is repurposed for another), emergence, "new-to-the world" random ideas, and others.
And as a side benefit you may end up with a more “militant” employee base, customer base, and partner base from which to build your future business.