Your Anti-innovation Checklist


Dont-just-dont-150x150

Success in business is a wonderful thing. But it’s also a double-edged sword.

As companies experience success, their emphasis tends to shift to protecting and maintaining the status quo versus considering new opportunities and products. Unfortunately, clinging to what has worked in the past puts the brakes on innovation. It also puts you out of touch with your customers’ changing needs — a dangerous circumstance in today’s highly volatile markets.

If you’re trying to innovate but not having success, see if any of these apply to your organization. Consider these 10 Proven Ways Not to Innovate:

1. Stuck thinking. This occurs when individuals and teams get so locked into old ideas, attitudes, and assumptions that they don’t take the time to update them. If you haven’t asked yourself within the last three to six months, “What has changed about our customers, our markets, and our industry?” you’ve just taken your first step toward anti-innovation.

2. We’ve always done it that way. When the organizational focus shifts to protecting the status quo, people stop looking for new processes or solutions. When problems arise, people tend to default to the solution that looks most like what has worked in the past rather than exploring new ideas or different ways of doing things.

3. Playing not to lose. As leaders spend more time protecting current assets rather than defining and executing edge-centric strategy, the organizational mindset changes from “play to win” to “play not to lose.” This subtle shift in attitude has a profound impact on how decisions get made and how people behave at all levels of the organization.

4. Customer disconnect. Who has time to talk to customers anymore? We’re running as fast as we can just to get the product out the door! Besides, we know what our customers need and we know the best way to give it to them, right? You won’t hear this attitude spoken out loud. But if you look closely, you can see it driving behavior on a daily basis. If you’re not talking with customers, it also means you’re not listening. And if you’re not listening, it’s just a matter of time before you’re no longer relevant to their world.

5. The lone ranger approach. In many companies, one team or small department gets tasked with innovation. That’s like asking a single NASA engineer to develop a new rocket ship to take us to Mars. Innovation requires a combination of skills and talents from all areas of the organization. It does not flourish in isolated silos or hidden corners of the organization.

6. Failure not an option. Most organizations don’t tolerate failure very well to begin with. And once the mindset shifts to protecting the golden goose, failure becomes anathema to the organization. But failure goes hand-in-hand with innovation. If you’re not failing to some degree, you’re not trying or pushing hard enough.

7. Follow the leader mentality. Too often, attempts to innovate occur as a response to a new entry into the market or an existing competitor’s innovation. However, true innovation leads the way rather than attempting to catch up. Don’t ignore what your competitors do in the marketplace. But don’t let it drive your innovation efforts either. Figure out where your customers will need you to be in six months to a year and get there first.

8. Weak hires. Companies looking to protect their success often make a subtle shift in hiring. Rather than new ideas and new energy, people get hired for their ability to “come in and hit the ground running.” Which is another way of saying they won’t rock the boat. As the overall talent level begins to decline, so do new ideas, new thinking, and successful innovation.

9. Lack of know-how. Employees need to have the appropriate skills and abilities to discover, evaluate, and execute on the best ideas. If you don’t invest the time and money to constantly develop those skills, don’t expect people to innovate on a consistent basis.

10. Unrealistic expectations. As success begins to slip away, management often begins looking for that one “killer” product or idea that will save the company or at least prolong the life of the cash cow. This tendency to put all the resources into one make-or-break innovation effort usually ends in disaster and disappointment.

Remember, innovation should always link directly to your strategy. And it works when it becomes a way of life rather than a one-time event. Stop clinging to past successes, update your thinking constantly, and you will find it much easier to innovate and thrive in today’s hyper-paced world.

image credit: latimesblog

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Managing Innovation is about Managing Change


Innovation is about change. Companies that successfully innovate in a repeatable fashion have one thing in common – they are good at managing change. Now, change comes from many sources, but when it comes to innovation, the main sources are incremental innovation and disruptive innovation.

The small changes from incremental innovation often come from the realm of implementation, so the organization, customers, and other stakeholders can generally adapt. However, the large changes generated by disruptive innovation, often come from the imagination, and so these leaps forward for the business often disrupt not only the market but the internal workings of the organization as well – they also require a lot of explanation.

The change injected into organizations by innovation ebbs and flows across the whole organization’s ecosystem:

Bk-innovation-change

Let’s explore the change categories visualized in this framework using the Apple iPod as an example:

Changes for customers – Any disruptive innovation requires a company to imagine for the customer something they can then imagine for themselves. Go too far past your customers’ ability to imagine how the new product or service solves a real problem in their lives, and your adoption will languish.

  • Customers had to try and imagine Apple as more than a computer hardware manufacturer, and begin to see them as a company to trust for reliable consumer electronics. They also had to imagine what it might mean to download music digitally (without any physical media).

Changes for employees – Disruptive innovations often require employees do things in a new way, and that can be uncomfortable, even if it is only your employees imagining what you are going to ask them to help your customers imagine.

  • Employees had to acquire lots of new knowledge and skills. Apple support employees had to learn to support a different, less-technical customer. Other employees had to how to effectively build partnerships in the music industry.

Changes for suppliers – Innovations that disruptive the status quo may require suppliers to work with you in new ways. Some disruptive innovations may require suppliers to make drastic changes akin to those they had to make to support just-in-time manufacturing.

  • Apple had to work with suppliers to source components at the higher volumes and shorter lead times required for success in consumer electronics. This meant finding some new suppliers who could handle the new volumes and market requirements.

Changes in distribution – Often big innovations disrupt whole distribution channels and this can cause challenges for incumbent organizations (think Compaq and big box retailers versus Dell Direct).

  • Going into consumer electronics meant that Apple had to build relationships with the big box stores including people like Target, Wal-mart, and Costco. They also had to build a completely new distribution system – iTunes – for distributing digital music.

Changes in marketing – New products and services (especially disruptive ones), can require marketing to find and build relationships with completely different types of customers and/or require marketing to speak to customers in a different way or to reach them through different channels.

  • Marketing had to begin moving the brand from computing to lifestyle, including changing the company name from ‘Apple Computer’ to ‘Apple’ in 2007. Marketing also had to learn how to connect with mass market consumers, and help them imagine how this new hardware/software combination would enhance their life – no small task.

Changes in operations – In addition to changes in the supply chain, the organization may have to adapt to disruptive innovations by hiring different types of employees, re-training existing employees, accounting for revenue in a different way, or going about production in a new way.

  • The Apple iPod was an experience sell, which highlighted the fact that Apple didn’t really have a place where they could help customers experience their products. This led to the opening of Apple retail stores. Apple’s finance and operations had to adapt to the change from low volume, high price items to high volume, low price items. Apple also had to build out a resource-intensive online operation that didn’t exist before (lots of IT investment).

Note that the chart has arrows going in both directions, but not simultaneously. There is a push-pull relationship. At the beginning of the innovation process the satellites influence what the innovation will look like (new production capabilities, new suppliers, ideas from partners/suppliers, component innovations, new marketing methods, etc.). But as the innovation goes into final commercialization, the direction of the change becomes outwardly focused.

You can see that as an organization is imagining how to take their creative idea and transform it into a valuable innovation in the marketplace, they also should be imagining all of the changes that are going to be required and how they will implement them. This is no small feat, but with proper planning, organizational learning, and adaptation over time, any organization can improve its ability to cope with and even anticipate the change necessary to implement its next disruptive innovation

Excerpted from Stoking Your Innovation Bonfire. You can read all four parts together by getting the book or downloading the sample chapter.

What Does the Crowd Know?


What Does the Crowd Know?

In one of my favorite movies, The Blues Brothers, the guys get themselves into a jam. They are supposed to play at Bob’s Country Bunker, and don’t really know what kind of music the audience enjoys.  When they ask the waitress she responds, “Both kinds.  Country and Western”.  Like the folks at Bob’s Country Bunker I happen to enjoy both kinds of innovation, internal “closed” innovation and external “open” innovation.  In fact I wrote a chapter in A Guide to Open Innovation and Crowdsourcing about the different kinds of open innovation.  Both have their uses and both have their limitations.  Understanding when and where to apply the different kinds of innovation will help you find the most relevant and valuable ideas.  Using these innovation types in the wrong way will frustrate your teams and reinforce the image that innovation isn’t effective.

Crowds, especially large, energized and homogeneous crowds, know a lot about a product or service. They know what they like about the product. They know what they dislike about the product.  They know what substitutes or alternatives exist and the strengths and shortcomings of the substitutes and alternatives.  But, as has been demonstrated time and again, crowds, and individuals have a hard time conceptualizing something completely new and different.  To quote Henry Ford once again, “If I’d asked my customers what they wanted they would have said a better horse”.  No one asked for a car, because it wasn’t within their worldview or perspective.

Crowds, especially large crowds, revert to the mean, and in this case they revert to the mean of their collective understanding.  What this means in general terms is that crowds are good if you are trying to understand short term needs, short term frustrations and incremental solutions.  On the other hand, crowds and crowdsourcing aren’t valuable if you are seeking radical or disruptive ideas, for several reasons:

  1. They can’t imagine a major change or the absence of the product or service
  • They have a vested interest in the existing product. They prefer slight improvements to radical change
  • They forecast the future to look a lot like the present and can’t image a reason for significant change
  • They don’t believe that companies will invest to create something radically new and different
  • I don’t mean to belittle crowdsourcing, and I know a number of firms that have used the tool reasonably well. After all, it is only a tool, and only one method or approach in a range of tools and methods lumped under the open innovation umbrella.  Appropriately used, it can have good value, especially for identifying acceptable incremental innovations or understanding the challenges and frustrations caused by an existing product.

    If you are looking for ideas outside of an incremental solution, or hoping that you’ll get a lot of ideas that are interesting and radical simply because you are asking more people the question, you’ll be disappointed in crowdsourcing unless you invite a lot of people who aren’t your customers or don’t think they need your product.  But then your team will have to deal with the kind of feedback that may be a bit more difficult to hear.

    If crowdsourcing is an important tool for innovation, then we need to use it effectively and appropriately.  Two main questions come to mind:

    1. What is it that the crowd knows that I don’t, and how can I use that effectively? 
  • What kinds of ideas and innovations can they imagine, and what kinds of ideas do I want or need?
  • If you are seeking radical or game changing ideas, or ideas with deep intellectual property, then this particular open innovation tool may not be right for you.

    image credit: wikipedia

    Link to the original post: What Does the Crowd Know?

    Rethinking the Product Development Funnel


    Rethinking the Product Development FunnelAs originally envisioned, the product development funnel implied that a well-defined product development process exists. However, the original funnel, and others that have followed, are increasingly seen as lacking. This article proposes a new funnel that addresses these missing elements.

    The icon of a funnel has been in use for several decades now as a visual depiction of the new product development (NPD) process. It works well because it implies that product development is, in fact, a refinement process that takes us from the earliest stages of a project – with a lot of fuzzy ideas and fuzzy thinking – to the final stage of new product launch. However, in reviewing the many funnels that have been proposed and used over the years, there is a growing realization that most are lacking in a few important ways. In this article, we will review some of these funnels, discuss their strengths and weaknesses, and ultimately propose a new one that addresses these weaknesses.

    Evolution of the Product Development Process

    One of the earliest attempts to create a “flowchart” diagram of the product development process appeared in Urban and Hauser’s 1980 textbook, Design and Marketing of New Products1. (See Exhibit 1.)

    Exhibit 1: New Product and Development Service Process

    New Product and Development Service Process

    Source: Urban and Hauser “Design and Marketing of New Products” (1980)

    Having been close to these authors at the time of their writing, it is evident that most of the real world examples that led to this flowchart came from the world of consumer packaged goods (CPG), a realm in which ideas were plentiful and most did not require any particular technical expertise to imagine – e.g. a new flavor of soup, a new brand of toothpaste, or a new dishwashing liquid. In this world, most of the action deals with marketing issues such as the screening of ideas, product positioning, advertising and messaging, and sales forecasting. The creation of prototypes to test was usually neither prohibitively expensive nor technically daunting, and so the process almost always included real world “test marketing”, i.e. launching the product in a small geographic area in order to test its viability before the major investment of a national or international launch. In this world, little attention was paid to the idea generation process.

    Next, in 1986, Robert Cooper published the first edition of his popular book, Winning at New Products2. In it, he presents a diagram of the product development process that breaks it into five stages preceded by a process he calls “discovery,” a process that includes idea screening. Only two years later did he give this process a name: Stage Gates®3, a name that he actually trademarked and is now in use at companies worldwide. (See Exhibit 2.)

    EXHIBIT 2: Stage Gates® NPD Process

    Stage Gates NPD Process

    Source: Cooper “Winning at New Products” (1986, 1993, 2001)

    Cooper’s “client” for this process diagram was usually either the research and development (R&D) director or a high-level NPD manager who needed to deal with a portfolio of products, all at different stages of development. What he advocated was a formal management review process in which product development teams were required to come before this high-level management committee to present their project so that management could make an informed decision, using consistent criteria, as to whether to promote a project onto the next stage of development or to kill it.

    Notice, however, that Cooper’s discovery process – which includes idea generation and screening – precedes the main Stage Gate process. At this earliest stage of new product development, little budget is required, and in many cases, no team has even been assigned to work on the project.

    The earliest use of a literal “funnel” that I was able to find appeared in Wheelwright and Clark’s 1992 textbook, Revolutionizing Product Development4. (See Exhibit 3.)

    EXHIBIT 3: Earliest Use of a Literal Funnel to Describe NPD Process*

    Earliest Use of a Literal Funnel to Describe NPD Process

    Source: Wheelwright & Clark “Revolutionizing Product Development” (1992)

    Their diagram consists of three major stages, which they label Investigations, Development, and Shipping of Products5. As with the previous two, the emphasis at the start is on screening of ideas. Little is said as to where the ideas come from or how they are generated.

    At approximately the same time, Michael McGrath, one of the founders of the consulting firm PRTM, published his book, Setting the PACE in Product Development6. McGrath’s first stage deals with Concept Development, usually a piecing together of ideas into a full product description. Similar to Cooper, McGrath advocates a periodic management review process that he calls Phase Reviews.But in almost every other way, they are the equivalent of Stage Gates. (See Exhibit 4.)

    EXHIBIT 4: McGrath’s PA CE® NPD Funnel

    McGrath’s PA CE® NPD Funnel

    Source: McGrath “Setting the PACE in Product Development” (1992)

    One other noteworthy thing about McGrath’s process is that he includes the development of a formal “business case” as a major phase before the project moves onto formal development. As with Cooper, his focus is with a portfolio of projects which need to be weeded through periodically. And again, little is said about where the ideas come from. They clearly precede the entrance to his funnel.

    A similar diagram was put forth in 2005 by MIT’s Center for Innovation in Product Development (CIPD)7. It has some of the characteristics of all of the preceding diagrams – a literal funnel, with multiple projects proceeding in parallel. But once again, the “discovery” process falls outside the funnel in a stage called “Opportunity Identification and Idea Generation” with little advice about how to go about it. (See Exhibit 5.)

    EXHIBIT 5: MIT ’s CIPD Take on NPD

    MIT ’s CIPD Take on NPD

    Source: MIT Center for Innovation in Product Development (CIPD, 2005)

    What’s Missing?

    All of these diagrams represent important contributions to the field of NPD. But all are lacking in at least one important respect: They begin just after the point in the process where the idea has already been generated. Once the idea has been put forth, they all deal quite well with the process of concept generation and evaluation, design and engineering, etc.

    Unfortunately, it is in these earliest stages of the NPD process that practitioners have the greatest difficulty and where researchers have placed their greatest emphasis in recent years. In fact, they have given this segment of the process a particularly colorful name: The “Fuzzy Front End” of NPD. Certainly these stages have become less fuzzy during the past decade, but they are still the most challenging and least subject to a clear “one-size-fits-all” process.

    As stated earlier, the purpose of this article is to propose a new funnel – one that gives greater emphasis and better definition to the “Fuzzy Front End.” Many of these activities require some form of market research. The validity of that conclusion should not be lessened by the fact that the focus of my work over the years has been in this area.

    A “New” New Product Development Funnel

    The process that has evolved in my work and that of my firm during the past decade or so consists of five major stages: Discovery, Definition, Design, Development, and Delivery. In each stage of this process, the product developer is faced with the need to answer a series of difficult questions listed below.

    Discovery

    • What is the opportunity that we might want to pursue?
    • Who is the customer that we want to target?
    • What are their major problems, from a high-level perspective, in achieving the task they have chosen to undertake?

    Definition

    • What detailed needs must we satisfy?
    • How should we measure how well we’re satisfying them: that is, to what specifications should we design?

    Design

    • How can we satisfy those needs: that is, can we come up with better features and solutions than those that already exist?
    • How do we describe these features and solutions to our customers such that they will find them compelling and believable?

    Development

    • Which of these prospective features or solutions are actually worth investing in?
    • Which should we actually include in the final product?
    • If we do, how much will people be willing to pay for them?

    Delivery

    • The final shakedown process: Can we reliably produce it, sell it, maintain it, and make money doing it?

    Our funnel, shown in Exhibit 6, focuses on the activities that product developers must go through in order to answer these questions satisfactorily. Many of these activities are quite daunting. They require strong analytical skills, technical skills, discipline, intellectual honesty (with oneself), creativity, and of course, a little luck!

    EXHIBIT 6: A “New” New Product Development Funnel

    A “New” New Product Development Funnel

    Source: Visions Author Gerry Katz, Applied Marketing Science Inc.

    Navigating Through The Funnel

    The new funnel shown in Exhibit 6 lays out a series of activities that companies typically go through and that I believe is more representative of what really happens. The most important difference between this funnel and the ones presented earlier is that we have added two new levels at the top. Together, these two levels attempt to better describe the “Fuzzy Front End” and attempt to more explicitly define what it takes to get through them.

    Discovery
    The discovery process comprises four key elements:

    1. Exploratory Research

    Exploratory research is usually a completely informal activity. It can involve informal discussions with customers, attending conferences or trade shows, and especially poring over previous studies that are likely to be sitting on shelves gathering dust. Most companies have a wealth of information already in their possession that no one has paid any attention to for years. This is usually a good starting point, because it is likely that someone in the organization has dealt with problems in this arena before, and exploring past thinking often provokes new thinking for the current environment.

    2. Secondary Sources

    The goal of secondary source research, as described by Abbie Griffin, is to “get smart inexpensively.” Until about 15 years ago, this almost always required library research. But the web has completely revolutionized this step. It is remarkable how quickly you can assemble a great deal of useful information from secondary sources, most of it completely for free. There are also many syndicated studies available – i.e., reports written by various consultants or industry associations that cover an entire industry or market segment in great detail – often for a very reasonable price. Again, the underlying assumption is that somebody, somewhere has researched this question before, and if you can assemble enough facts that no one else has quite pieced together just yet, you can often find some great opportunities. Web research is a skill that requires some experience, and ironically the people who have the most are usually your youngest employees, because they’ve been doing it since they were in the third grade! In general, the younger you are, the better you are at web-based secondary source research.

    3. Ethnography

    Ethnography, in a nutshell, is research by observation – watching customers actually use products and services to accomplish various tasks. While there are many uses for ethnography, the most common and useful is as a form of discovery. Some practical constraints that must be dealt with, but if you can get around them, ethnography is often highly instructive. These constraints may involve issues of privacy (e.g. defense-related industries, healthcare, or personal care), or they may involve the so-called “Hawthorne Effect,” the phenomenon that observation may alter behavior. But until about 20 years ago, most product developers rarely if ever got to see their products in actual use – a fact that is hard to believe in today’s world.

    4. Online Communities

    The use of online communities has exploded in the past few years. They go by many names: social networks, communities of interest, communities of enthusiasts, user-generated content (UGC), etc. While many question their value as sources of new ideas, they have already proven to be great sources for problem identification. By following what customers are talking about online, companies can get great insights regarding what problems they ought to consider addressing. If you are in a widely used consumer product category, there is likely to be more content already available than you could ever wade through. But if you are in a business-to-business category, the available content might be quite limited. For those cases where the amount of content is overwhelming, there have been many attempts to use artificial intelligence algorithms to try to wade through and make sense of the data. The jury is still out as to their usefulness. But even a cursory reading of what is being talked about on-line can be a great form of discovery.

    Definition
    The definition process comprises three key elements:

    1. Target Definition

    Once a company has completed its discovery process, it is time to put a stake in the ground. This usually begins by explicitly identifying what market or population it wishes to target for a prospective new product or service. This target definition can be extremely broad or extremely narrow, but it is important to
    be as explicit as possible, because this will drive almost all of the development activities going forward. For instance, we could define our target as “users of home office printers who generate fewer than 500 pages per month” or “physicians who treat at least 20 diabetic patients per month.” The target definition usually involves some form of market segmentation, although the segments could be based on personal demographics, company characteristics, geography, products used, technology maturity, or any of several other criteria.

    2. Needs Assessment

    This is the stage where Voice of the Customer (VOC) research is called for. The acronym VOC has become badly bastardized in the past five years. For many, it has become a euphemism for almost any kind of customer contact or market research. Many now use the term as a synonym for Customer Satisfaction Measurement (CSM) or Customer Relationship Management (CRM) techniques. In truth, the term came specifically from the field of NPD. It is defined as the process of gathering, organizing, and prioritizing customer wants and needs. To the naïve, this simply means asking customers what they want. But such an approach almost always backfires, because it assumes that the customer will be able to tell you about the exact features or solutions you ought to include in your new product. Unfortunately, most customers aren’t all that creative, and so they simply play back all of the features and solutions that already exist in the marketplace, which rarely leads to anything more than a me-too product. Experienced practitioners in this area make a clear distinction between needs and solutions to those needs. The need is the benefit that the customer is trying to derive when using the product or service – the job or task he or she is trying to accomplish. The solution is the way in which the product delivers that benefit. If asked using the proper techniques, the customer is usually able to articulate the former quite well. It is only the company’s job to come up with the latter.

    3. Design Specifications

    One of the most difficult challenges in NPD arises from the natural tension that often exists between marketing and engineering. It usually plays out when someone from marketing describes a customer need, and the engineer says, “Just give us the spec!” The problem is that customers speak in soft
    customer language, and engineers need to design to hard technical specifications: that is, something that is measurable and controllable in the design such that they can objectively decide which of several alternative designs will best deliver on the customer need. This dilemma requires that the need be “translated” into a technical specification. Customers can give us clues as to how they evaluate these things, but this process usually requires a good deal of technical expertise. So for example, if the customer says he or she needs a “powerful computer”, shall we try to increase the level of MIPS, RAM, or some new spec? To do this intelligently, we must get a really detailed understanding of how customers define soft concepts like “powerful.” Quality Function Deployment (QFD) deals with this exact phenomenon. But whether you use a rigorous technique like this or not, this translation into design specs is something that your engineers will need one way or another.

    Design
    This stage involves the structure of the product or service.

    1.Ideation

    Whereas all of the earlier funnels started with ideation, in our funnel, ideation takes place only after navigating through the “Fuzzy Front End.” The reason for this is that ideation works better when it is focused on the right problems. Rather than just asking almost anyone – employees or customers – for new product ideas, when a company has given careful attention to all of the activities in the “Fuzzy Front End,” they begin ideation focused on an empirically identified set of unmet or poorly met customer needs. In this way, the brainstorming can be focused on particular problems, whether they are about technical issues, engineering problems, business process improvement issues, marketing, maintenance, or manufacturing. For example, if customers identify the issue of their windshield wipers failing to work well in icy conditions, a team could ideate on new solutions to this problem, such as the use of different materials on the wipers, or ways to melt ice off of the windshield or the blades.

    Clearworks - Customers, Connections, Clarity

    The brainstorming process has been the subject of a great deal of innovation in the past five to 10 years, mostly due to the advantages afforded by the web. Whereas traditional brainstorming has always been a face-to-face process, the web obviates the need for co-location, allows for anonymity (which removes politics from the process), and lets the process proceed asynchronously, providing “soak time” – i.e., the ability for participants to think before having to respond. Another area of innovation in brainstorming is the use of creative incentive systems that reward both creative thought and collaboration. Contests, games, and other forms of reward have been shown to add a combination of competition and fun to the process8.

    2. Concept Development

    Once ideation has been completed, the company is ready to piece together the best ideas into one or more “concepts.” A concept is simply a description of a new product or service that the company might consider creating. A concept can be conveyed in many forms, ranging from a simple one-sentence description to a multi-paragraph description to a photo, a drawing, a model, or even a working prototype. While many concepts look like a primitive form of advertisement, the emphasis is on facts, features, and benefits, rather than on creative marketing communication. The goal is to convey what is new and different about the envisioned product in a way that is compelling and believable to customers. The chosen form is usually dictated by what it will take to explain the features and benefits of the new concept. In general, the more complex the concept, the more detail will be needed to convey it.

    3. Concept Evaluation

    Now that we have one or more concepts, it is time to take them to customers for evaluation. The first question is whether to do this qualitatively or quantitatively – or both. This decision is based on many factors, some dealing with practicalities and others with personal preference. In general, B2B products are evaluated qualitatively, while B2C products are more often evaluated quantitatively. But there is significant value to both approaches. Much of this decision has to do with the difficulty and expense of recruiting a sufficient number of customers to participate in market research. Most consumer products simply have larger populations from which to choose.

    Development
    Finally, we come to the development process.

    1. Feature Trade-off

    Once team members have settled on the details of the product they would like to build, it is time for bench engineering and IT development to begin. We have now settled on a target market and population, identified the key unmet needs, decided what specifications to design to, brainstormed on the features and solutions that would best address those needs, and evaluated those ideas with real customers.

    But there is at least one major decision that remains before the company can decide on whether the major investment in design and engineering is warranted: If we are actually able to create these features and solutions, will it be worth it? And to answer this question, we need to try to figure out how much people will pay for a given feature, solution, or benefit. Many product developers like to simply ask customers how much they would pay for a given feature. But this technique has always proven to be of little validity, because customers usually “game” the system by “low-balling” their answers. After all, if a car dealer were to ask you how much you’d be willing to pay for a given vehicle, would you actually tell them the truth? The best way to answer this question is with the use of a market research technique called conjoint analysis, created by Paul Green and V. Srinivasan at the University of Pennsylvania’s Wharton School in the mid-1960s. The term is actually a contraction of the words considered jointly.

    The underlying idea is this: If you were to ask customers whether they wanted this or that feature or benefit in a new product, they would likely tell you that they wanted everything and all at the highest possible level. But that is not how product choices are actually made. In the real world, people are forced to make trade-offs. So, in conjoint analysis, people are given choices between several different configurations of the product that explicitly force them to make these trade-offs. And if we give people enough different choices using a carefully constructed experimental design, we can determine the weight they put on each attribute. For instance, if you were asked to choose between a sport utility vehicle (SUV) that gets 17 miles per gallon of gasoline and costs $30,000 versus a sedan that gets 26 miles per gallon and costs $25,000, you are implicitly being forced to make trade-offs between body style (SUV vs. sedan), mileage (17 mpg vs. 26 mpg), and price ($30,000 vs. $25,000).

    Many people use conjoint analysis as an elaborate way to determine the importance of various customer needs. But this is not really what Green and Srinivasan had in mind. Conjoint was intended to be used to determine the importance of various product features – including price. In fact, conjoint analysis is probably the only valid method in all of market research to determine how much someone would pay for a given level of a given feature. And its best use is after needs assessment and ideation have been completed. The goal here is to determine how much people would pay for a new feature or solution. Taken together with cost and volume estimates, this is the key piece of information needed to decide whether to invest in this new feature or solution.

    2. Prototype Evaluation

    Once R&D and engineering have developed a working model of the product, we need to put it into the hands of some real customers to determine whether it works and whether they like it. Most companies do this in several stages. First they might conduct alpha testing: i.e., putting it in the hands of some of their employees or a handful of highly trusted customers. The goal here is to get some initial feedback without revealing the product to the world just yet. If successful, then the next stage is called beta testing. Here we distribute the product more broadly to get more extensive feedback for fine tuning, a practice that is particularly popular with software manufacturers. Finally, we do gamma testing, the equivalent of what the packaged goods companies call test marketing: i.e., real sales of the product, but in a limited fashion in terms of geography or some other characteristic.

    Delivery
    This stage of NPD, involving positioning and launch of the new product, is more critical than it may seem. Many companies falter here. (See the Visions article on a study by Booz & Company in the March 2011 issue9.)

    The product is almost ready to go to market now, and this is where messaging and marketing communications become critical. How will we communicate to potential customers about the availability of our new product? What makes it different and better than existing solutions? When we do go into actual production, can we produce the product at an acceptable level of quality and reliability? And can we provide the needed level of service to maintain the product once it’s in customers’ hands?

    Strengths and Caveats

    What makes this funnel different from the ones we examined earlier is that this one attempts to give greater definition and emphasis to NPD’s “Fuzzy Front End.” It also puts ideation in its proper place. Rather than assuming that it somehow just happens before the product development process even begins, this funnel strongly suggests that ideation shouldn’t even be attempted until after a needs assessment has been completed. This helps to focus the process on ideating about the right things – the key unmet needs in the eyes of customers. Furthermore, if conjoint analysis is to be employed to evaluate pricing and feature trade-offs, it is placed “deeper” in the funnel where it was originally intended to be used.

    Admittedly, there is a deliberate emphasis here on activities that are best addressed with market research. But such a bias is not out of place given the high degree of risk in NPD and market research’s proven role as a way to mitigate that risk.

    One Final Note: Just as there have been more advances in the early stages of the product development process, it is becoming increasingly clear that “Product Launch” has become the new stepchild of NPD. There is still relatively little hard research on this final stage of the process, and perhaps greater attention should now be paid to the “Fuzzy Back End” of NPD.

    Endnotes
    1. Urban, Glen and John R. Hauser, 1980. Design and Marketing of New Products, p. 33. Englewood Cliffs, NJ: Prentice-Hall, Inc.
    2. Cooper, Robert G., 2001. Winning at New Products, p. 130. Cambridge, MA: Perseus Publishing.
    3. Stage-Gate® is a registered trademark of the Product Development Institute in the USA; see www.pro-dev.com.
    4. Wheelwright, Steven C. and Kim B. Clark, 1992. Revolutionizing Product Development, p. 112.New York, NY: The Free Press.
    5. Wheelwright and Clark’s three-stage process is most similar to the process used today in the PDMA’s Body of Knowledge, although the latter refers to them as Discovery, Development, and Commercialization.
    6. McGrath, Michael E., 1996. Setting the PACE® in Product Development, p. 38. Boston, MA: Butterworth-Heinemann.
    7. Hauser, John R., 2008. Note on Product Development, p. 3. Cambridge, MA: MIT Sloan Courseware.
    8. Toubia, Olivier, 2006. “Idea Generation, Creativity, and Incentives,” Marketing Science 25, 5, September-October: p. 411-425.
    9. Jaruzelski, Barry and Kevin Dehoff. How the top innovators keep winning. Visions, Vol. 35, No. 1,
    p. 12. March 2011.

    image credit: www.mathmarketing.com

    Link to the original post: Rethinking the Product Development Funnel

    Why Apple’s products are ‘Designed in California’ but ‘Assembled in China’


    Assembled-china-cjr

    Look at the back of your iPhone, or your iPad, or on the bottom of your Mac. You’ll see the following words embossed somewhere: “Designed by Apple in California. Assembled in China.” Many Americans, all the way up to the President himself, have wondered why Apple has outsourced virtually all of its manufacturing overseas. At a dinner with several top US technology executives last year, President Obama asked Steve Jobs flat out what it would take to bring those jobs back to the US. According to Jobs, there’s simply no way for it to happen.

    Is Your Leadership Innovative?


    Is Your Leadership Innovative?

    Are your leadership actions impeding innovation?  Are your change initiatives successfully implemented and delivering the benefits you expected?  How is YOUR behavior impacting their ability to delivery results?

    Innovative Leadership – Critical to Create a Culture of Successful Innovation

    Many traditional leaders spend more time perfecting their golf swings than they do updating their ability to lead in this interconnected and dynamic business environment.  The leaders who consistently implement innovative change continue to improve their leadership skills, including the level of self-knowledge and introspection that provides a feedback loop for ongoing improvement.

    Innovative leadership is the type of leadership that allows already successful leaders to raise the bar on their performance and the performance of their organizations.

    An innovative leader is defined as someone who consistently delivers results using the following:

    • Strategic leadership that inspires individual goals and organizations vision and cultures;
    • Tactical leadership that influences an individual’s actions and the organizations systems and processes.
    • Holistic Leadership that aligns all key dimensions:  Individual, culture, action and systems.

    While others differentiate leadership from management this definition includes both because, to fully implement innovative change, the organizational leaders need to both set the strategy and be sufficiently involved in the tactics to ensure innovation and changes happen.  This does not mean micro managing – it means an awareness and involvement in key elements of the innovation and change process. This includes continually growing and evolving leadership capacity and actions, leading and implementing culture and system changes within the organization.  It also means others seeing key leaders involved consistently in meaningful ways.

    Let’s look at an example of a leader who faced a change she had not previously faced in her business.  She runs Working Partners, an organization focusing on creating drug free workplaces.  She built a strong successful business and yet, external pressures changed her market.  The government provided many of these services at a lower cost.  Being a very innovative leader, she worked with her immediate team and sought external input on possible options.

    As of this writing, she is launching multiple pilot projects that will enhance and/or change her company and its offerings.  They will take the results of the pilots and determine how to refine the course of the business to ensure long term organizational success and customer service.

    It is important to note that some of these pilots reflect small changes based on distribution channel and methods of delivery.  Others seem radical and include significant expansion of the organization’s mission.  Because the founder, Dee Mason, is proactive and open to exploring a broad range of changes, she will find a series of innovations that allow the organization to thrive.  Part of her success in making significant change will include looking at the entire system to make holistic changes including how she herself leads the organization.  This is one of the qualities that is unique to innovative leaders, they are continually looking at who they are in the context of the organization and they continue to change and grow as they change their organizations.

    What are specific qualities that differentiate an innovative leader from a traditional leader? In our time of rapid business, social and ecological change, a successful leader is a leader who can continually:

    • Clarify and effectively articulate vision
    • Link that vision to attainable strategic initiatives
    • Develop themselves and influence the development of other leaders
    • Build effective teams by helping colleagues enact their own leadership strengths
    • Cultivate alliances and partnerships
    • Anticipate and respond to both challenges and opportunities aggressively
    • Develop robust and resilient solutions
    • Develop and test hypothesis like a scientist
    • Measure, learn, and refine on an ongoing basis

    To further illustrate some of the qualities of innovative leadership, we offer this comparison between traditional leadership and innovative leadership:

    We keep hearing that the world is changing and it is.  The question for you is what will you do to lead the thinking and changes in these times rather than talking about how tough it is?  Will you be an innovator or a barrier to innovation?  The Innovative Leadership Fieldbook provides easy to use tools and reflection questions that lead you through a six step process to become a more innovative leader.

    image credit: worldcup.org

    Link to the original post: Is Your Leadership Innovative?