emergencemarketing.com

At last week’s Web 2.0 workshop and also with some clients recently I started noticing how people mix up communities and work teams - a distinction which I think is worth making.

Work teams work on projects which have a beginning and end, they usually have well-defined roles in those project, and they get paid for doing that work - it’s their job. To use Dan Ariely’s metaphore, they are evaluating what they do and how much they contribute in their market framework.

Communities are mostly self-organized around a shared passion or around the need for people to help others and be helped. There are few pre-defined roles, and people usually do not get paid to participate - it’s not their job. In the most successful communities, people evaluate their contributions in their social framework.

So why is that important? Because they require radically different motivators in order to work.

Take an innovation initiative within a company. There may be a core set of people in marketing and product development whose job it is to innovate. If at some point you want to externalize that innovation process to include communities with all your employees, customers and prospects, you will need to understand that the motivations of those communities are very different from those of your core innovation team. It’s not their job to innovate and they are likely to be very busy as it is. You could of course pay them to give you ideas, but considering the incentives usually used in communities that is more likely to result in poor ideas than good ones. In order for this to work you need to appeal to a higher social motive - like helping out.

Now if you can instill a higher level of passion in your regular work teams, they too will start performing at a much higher level…

Most people believe that leading innovators start off with a larger pool of ideas than those who consistently perform poorly in the marketplace. While this is certainly true – if you only start with a few lousy ideas you will end with a lousy product – there is another, and perhaps more important, characteristic of a successful new product innovator’s idea pipeline.

They kill ideas faster!

While successful innovators start with a lot more ideas than those who do not continuously innovate, some studies say twice as many; they also kill ideas faster and fund fewer candidates in the actual product development stage. That ensures that the products that actually have a chance to succeed are not underfunded. If you cannot shoot the marginal ideas fast enough, the potential winners will not only be underfunded, they will also lack the corporate attention to let them succeed.

A new report jointly produced between Forrester Research and Heidrick & Struggles paints a bleak picture of the (d)evolved CMO (Chief Marketing Officer). You can download the report here, but only after agreeing to become a “lead.”

While two thirds of CMOs want to get a higher involvement with business strategy development and increased P&L responsibility, the reality is that far too many of them are in fact disconnected from where the real action is.

Some of the findings are mind-boggling:

• Only 45% of CMOs have responsibility for product, service or solution development. Only 37.5% are responsible for pricing.
• Only 27.5% are in charge of sales  training.
• Only 25% are responsible for in-store buying experiences.
• Only 12.5% are accountable for the activities associated with customer service and support.

How can you be the Chief Market Listener and not be in charge of what customers say after they buy your product? If you are the Chief Market Officer, how can you not be in charge of deciding what gets sold in the marketplace and how much it will cost the buyer to acquire it? And if you are the Chief Customer Officer, how can you not be in charge for the in-store customer experience? The sales training issue is either a cause or effect for the ongoing rift between most sales and marketing department…

But wait, it gets worse…here is some data about their top objectives:

• Only 27.5% have “increase customer life-cycle value” as one of their top objectives.
• “Innovate” is an objective for only 40% of the survey takers
• Only 27.5% have “increase customer retention” as an objective

And just when you thought you got the extend of the sorry state of CMOs, you find this:

• Only 12% consider “personal knowledge of your customers” as one of their top 5 competencies to their personal success.
• Only 17% consider technology savviness to be one of those top 5 skills

Thankfully (sarcasm intended), more than 65% see people management as one of those top skills. But wait a minute…isn’t it leadership characteristics that get you into the C-suite? Management skills are so Industrial Revolution/last century skills…

Other interesting tidbits from the report include:

• On a scale from 1-3, with 3 being the most important, CMOs found marketing measurement (2.55) to be way more important than customer community development ((1.89) and social computing/web 2.0 tools (1.73).  That goes hand-in-hand with the fact that 92% have advertising as one of their main responsibilities.
• There is room for new industry marketing organizations, conferences and publications. Those three resources come in dead last in a list of 16 resources that CMOs ranked most valuable to their professional career development.

 The recommendations from the authors to improve the situation?

• Spend more time on career development
• Seize the opportunity to lead the organization towards customer-centricity
• Build credibility through the marketing team and leadership contributions.

How about not accepting the CMO job if it does not mean you are really the Chief Market Officer, or the Chief Customer Listener, or the Chief Voice of the Customer Officer, or the Chief Customer Lifecycle Value Owner?

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.”

[Tags: innovation product management new product development product innovations new products customer needs]

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.

[Tags: innovation product development co-creation Fast Search]

Procter & Gamble documented their product co-creation process in a white paper (pdf) (click here for the web site - via John Winsor).

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!

.

[Tags: innovation co-creation product innovation P&G]

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).

[Tags: macroeconomic trends business trends product innovation consumer knowledge rate of change mckinsey]

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.”

[Tags: open source business model product innovation innovation lead user]

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!

Related posts:
- You cannot outsource innovation to your users!
- Where will your killer competition come from?
- Whatever marketing becomes…

[Tags: customer feedback marketing product innovation innovation customer listening marketing innovation]

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.

Bingo!

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

[Tags: customer control innovation product innovation outsourced innovation]