Less can be more: Preparing for the recovery in uncertain times

With contributions from Graham Hill, CustomerThink and Associate Partner, Strategyn UK

Faced with tough decisions that can make or break their company’s future, it is little wonder that innovation managers are seriously fretting over their product portfolios, go-kill decisions, new projects, resource allocations and go-to-market timescales. 

Latest forecasts indicate it may be the end of 2010 before the recession bottoms-out and growth starts to return. So far, many companies have responded to the unprecedented trading conditions by slashing costs, cutting employee numbers, conserving cash and reducing investment in all new initiatives as though their survival depended upon it. This may be necessary for now but in the longer-term, companies may already have gone too far by postponing or cancelling key innovation projects that had the potential to plant green shoots and drive long-term business success. Whilst riding out the “perfect storm” may be the watchword for some, scaling back too heavily could bring serious consequences for the longer-term.

I recognise that making such critical decisions in times of high economic uncertainty is not easy. Crucially, it hinges on knowing - with a high degree of confidence – which pipeline projects or platforms should get the axe and which should receive any remaining investment to secure market growth once recovery arrives. But exactly how can these decisions be made? Well I suggest the answer can be found in developing one critical capability that many companies still lack - that of acquiring, assimilating and commercially applying a far deeper understanding of unmet customer needs with which to review an existing pipeline of innovation projects and make critical growth planning decisions. Let me explain.

Acquiring, assimilating and commercially applying a far deeper understanding of unmet customer needs

The problem with what still passes for innovation in many companies today is that it is not innovation at all, but rather ‘invention’. Companies that invent rather than innovate tend to measure the success of their efforts by the number as well as the quality of new ideas they generate, their ability to develop and market experiment these ideas quickly and then speed them to market with a fanfare. Summed up by the mantra - “if we’re going to fail then at least let’s fail fast” – this accepted culture of risk-taking and mistake-toleration cannot be sustained in a downturn when cash is king and certainty is in short supply.

Let’s look at some evidence that compares the performance of invention with innovation. Goldenberg et al (2001) tracked the performance of 197 new product introductions. They then categorised them according to how the products were originated, whether through ideas, need spotting, market research or in response to events. They identified that the least successful new products were most likely to have been born from internally-generated ideas – or what they term, mental inventions. Such inventions had only a 25% success rate. By contrast, the most successful new products originated from capturing and understanding unmet customer needs or events then responding to them with appropriate solutions. This approach succeeded in between 50% and 90% of the new products originated in this way.

If you can identify and cut out those projects destined for failure – those that don’t meet customers’ important unmet needs – you can easily trim the wasteful parts of your innovation budget. Put simply, understanding unmet customers’ needs is fundamental to innovation success.

Here are some questions any innovation manager should ask of their current project portfolio:

1. Do you know exactly who will be the likely target customer or target segment of your concept / product?

2. Do you know the market size of the target buyer / segment?

3. How will this market size change at the time of launch?

4. Will the concept / project address known, quantified important unmet customer needs?

5. Do you know what these unmet needs are without ambiguity?

6. What improvement in satisfaction in needs will the project / concept achieve?

7. Do you have the optimum number of features and functions on the platform matched to unmet needs?

8. Have you defined a clear value proposition for the concept based on unmet needs?

Getting started - today

Using the jobs-to-be-done and outcomes approach devised by Strategyn, here are some specific activities those responsible for innovation can perform to address the above questions:

1. Reassess customer needs to discover changing priorities (e.g., cost versus convenience, simplicity versus complexity). Adjust pricing and positioning according to new customer priorities.

2. Reassess how customers buy your products and the channels they use. Make it easier for them to buy and discover a new point of market differentiation.

3. Determine if you are truly messaging to your product strengths. Reassess current value propositions, informed by a solid understanding of customer needs.

4. Focus your innovation efforts on your most profitable customers. Protect them by adding related jobs to existing platforms or by satisfying their outcomes better. Innovate along their new priorities.

5. Refocus your concept generation efforts by adding discipline to the inputs used. Go outside the firm in a more systematic way.

6. Bring in top customers and lead users at the concept generation stage once opportunities are known, not before.

7. Pull previously cancelled concepts back from the “pipeline bin” and reassess them again using unmet customer need inputs.

8. Add adjacent jobs to current platforms to quickly and cheaply extend market offerings.

9. Undertake a competitive disruptive assessment against core jobs and top outcomes addressed by existing platforms in the market or new concepts. Determine the ability of new entrants to address core jobs and outcomes faster, cheaper, more conveniently or at a non-central location.

10. Understand how current jobs-to-be-done served by existing products will evolve post-recession. Start preparing future scenarios and inform them with expert opinion and new customer inputs.

Goldenberg J., Lehmann R. Donald, and Mazursky D., "The Idea Itself and The Circumstances of Its Emergence as Predictors of New Product Success", Management Science, Vol. 47, No. a, January 2001, p. 69-84.

Comments

[danlatorre]

Thanks for sharing this, excellent post outlining the issues and actions around building a rigorous set of customer needs and the context around them. The trick of course is getting approval in hard times to spend on what seems like product & customer research that is, or seems, several steps removed from the revenue line. I think the research comparables, to show the value of design/methods, is the best way to speak to some form of "ROI" on innovation projects.

The paradox we face in new product development is that often there isn't enough time & money to do it well the first time, but often enough time and money to do it over, and over. Ha!