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The Innovator's Secret Weapon

The Innovator's Secret Weapon

The Innovator's Secret Weapon

Talk all you want to about the importance of strategy or operational efficiency, but the truth is that firms succeed because they offer a product or service that customers find irresistible.

Companies devote a lot of time, effort, and resources to achieve success but the bottom line is this: The product or service offered needs to be one that people want above all others. This means developing a product that holds more value to the customer than the money they're willing to pay for it and more value than competitors' products. A great product may not be all that is needed to ensure a company's long-term success—many seemingly great technical innovations fail commercially—but it is certainly necessary.

When we evaluate a new business plan, the first questions we ask are, "Who are your target customers?" and "Why would they pay good money to you, and not to your competitors, for your product or service?" Irresistible products do not just happen—they are developed through creativity and painstaking work. That's why new-product development is so critical to business success. A vital step in the process is understanding how your customers define value: It represents, as we describe here, a true "secret weapon" for innovators.

The Role of Voice-of-the-Customer

Once you have identified your target customers, you have to find out what they really want. The late Apple founder Steve Jobs famously said he did not really believe in focus groups or surveys because customers do not really know what they want until they see it. We think he was able to succeed with that attitude because the target customer for whom he was developing products was actually himself. Of course, if you are designing a product based on what you want, you need only to rely on your own instincts and experience as a customer. For the 90 percent of businesses that develop products for people other than themselves, however, it can be dangerous to assume you know what the customer wants—which is where capturing the voice of the customer (VOC) comes in (see figure 1).

Steps and inputs for successful product development

Traditionally, VOC is captured using various qualitative and quantitative methods. The most passive approach is simply to wait for customers to come to you and tell you what they want or what they do not like about existing products. For business-to-business products or services much of this passively gathered information comes as unsolicited feedback from sales or service personnel. Companies using a proactive approach gather voice-of-the-customer feedback through planned studies, first employing more qualitative or discovery-oriented methods. These methods might be in-depth customer interviews, focus groups, or ethnographic observation (studying how customers actually use a product or service in their own environment). Companies then often use quantitative customer surveys to develop a statistically significant fact base to validate customer needs (see figure 2).

How voice-of-the-customer capturing techniques support information gathering

Voice-of-the-Customer Shortcomings

The information captured through traditional VOC methods often includes several needs, or types of needs, which makes it difficult to compare and prioritize their importance or translate them into product specifications. We often see survey results that claim to show the relative importance of so-called needs, such as comfort, reliability, and safety. But customers view each of these needs differently—how one customer defines "comfort" will vary greatly from how another defines it. Even if you were to understand what each meant to each customer, what would you do with information such as "Safety is 50 percent more important than reliability according to our customers"? How do you best allocate product cost to deliver a solution that optimizes customer value?

Other needs are specific technical solutions requested by customers who are deeply familiar with the options. But while an "Intel Core i5 CPU M560 running at 2.67 GHz" may be one customer's need, how many others want it? How do you make trade-offs between filling this customer need and meeting those that are less specific?

Another kind of VOC feedback is about problems customers have with a product: It is too loud or the on-off button needs a prolonged push to activate it. This is helpful information, but in what context was the customer using the product? How important is it to make changes? Is the problem just a nuisance that customers can live with? Or does it mean they won't buy your product again?

The downside with using these types of information is that they lack a common descriptive framework that can be compared to other needs and easily understood by both the user of the product and the engineers who design it.

Desired Outcome-Based Innovation

As proposed by Clayton Christensen in his work on innovation at Harvard University and Anthony Ulwick in his book on outcome-driven innovation, the desired outcome-based VOC uses a framework of customer "jobs-to-be-done" and the "desired outcomes" for these jobs.1,2

The method is based on the assumption that customers buy a product or service to help them accomplish a specific task, such as the "job" of safely transporting passengers from point A to point B. Associated with each job-to-be-done is a desired outcome, which is the customer's ideal result of the job getting done. A desired outcome might be to minimize the jerking motion a passenger feels while being transported from point A to point B. It is important to ensure that jobs-to-be-done and desired-outcome statements use consistent, unambiguous language so as to be easily understood and readily translated into technical specifications (see figure 3).

Structure of job-to-be-done and desired-outcome statements

During data-gathering interactions, you can confirm desired-outcome statements with the customers themselves. After selecting the most relevant desired outcomes you can then conduct a quantitative survey to determine how important each desired outcome is and how satisfied customers are with their current product or service. You can then use the survey results to conduct brainstorming sessions to identify innovative design solutions. Combined with competitor and regulatory analysis, these innovations can be used to formalize a new-product concept using simplified quality function deployment (QFD), a means for linking customer needs with product-performance and product-function specifications.

Advantages of Outcome-Driven Framework

The structure and consistency of the outcome-driven customer-needs framework offers four advantages over traditional VOC approaches:

  • Directly identifies underlying customer-value drivers
  • Ensures innovation efforts that are more focused with clear articulation of required improvements
  • Makes it easier to translate customer language to engineering language
  • Provides a clear, supportable connection between future marketing messages and customer-value propositions

Here's a case in point. We were retained by a motor coach manufacturer to help design its next-generation product model. The manufacturer faced intense competition in some of its traditionally strong segments and had trouble growing share in others. It was obvious that gathering and analyzing customer needs was going to be important in developing a successful product that customers would value.

The client's customer-needs-collection methods had been varied, which made it difficult to compare requests. Many customers had specific technical requests, but sales and engineering did not always know the underlying reasons that customers had those needs or how common the needs were. Simply put, the company needed a better way to identify and analyze customer needs and translate them into product concepts.

We gathered and analyzed customer needs as defined by customer jobs-to-be-done and desired-outcome statements. We prioritized product-innovation opportunities based on our analysis of the importance and degree of satisfaction related to desired outcomes, then helped the client translate important and unsatisfactory desired outcomes into new functional and performance specifications. The end result was a product concept that delivered a much-improved competitive value proposition (see figure 4).

Translating customer needs into an irresistible product or service

Managing Challenges

One challenge common to many business-to-business products is arriving at a precise definition of the customer. In our bus company case study, for example, was the new product going to be targeted at the bus owner? Was the purchasing director the important customer? What about the driver, the maintenance staff, even the passengers? In this case, for each target segment we selected the customers who had the greatest impact on the purchase decision and focused on understanding and satisfying their needs.

To better facilitate customer in-depth interviews, we broke down the job steps in all the major job phases. The goal was to get interviewers to imagine they were the customers and consider specific details relating to each phase of the buying and usage process rather than rely on vague concepts such as "reliability" or "comfort." We then listed each customer's jobs to help the interviewer direct comprehensive questions about real customer needs, even those of which the customers themselves may not have been consciously aware.

To ensure that our interviewers maintained consistency in the needs statements they defined during customer interviews we conducted extensive internal training. We also undertook several pilot interviews to ensure that the interviewers had learned the techniques required to extract and validate desired-outcome statements from customers.

Using a quantitative survey, we validated the importance of and satisfaction with the customer-desired-outcome statements. One challenge was determining how deeply to delve into customer needs. For a complex product such as a long-distance motor coach there are many complicated systems and operating steps, or "jobs-to-be-done." To keep the survey scope feasible, we limited the number of customer-desired-outcome statements to be tested for each customer to between 50 and 75.

Some Unexpected Results

Using the outcome-driven VOC techniques we identified six value-proposition innovation areas and discovered design solutions that significantly improved the value proposition of the new bus compared to previous generation and competitors' bus models. Some customer needs were not surprising, such as fuel efficiency, which the company already knew about and had many ideas for improving. As a result of our joint study, however, the company's engineers were able to realize fully the extreme importance of this desired outcome and the level of dissatisfaction their customers had with current products on the market. Within six months of the study's completion, the company developed a new product platform that reduced fuel consumption by 10 percent through improved aerodynamics, reduced vehicle weight, and a recalibrated power-train control system, to name just a few innovations.

Thanks to the outcome-driven VOC assessment techniques, we helped the company identify other new value propositions that the engineers had not thought of before but were able to incorporate into the new product. For example, we learned that bus passengers wanted a clean, germ-free environment, something they believed the current products lacked. So the engineers designed an "air refresh" indicator to let passengers know that interior air was being constantly exchanged with fresh outdoor air. (In fact, air was well refreshed in the older buses—the passengers just didn't know it. Now, in the new buses, they are aware of it.)

Another example is an innovative feature for drivers. During ethnographic observation, the team noticed that many tour bus drivers used the underside baggage storage compartment to nap during rest stops. The team investigated and found that tour bus drivers wanted to rest in a cool, secure environment, and that the cramped driver's-seat area didn't accommodate this need. So the engineers designed a movable divider panel behind the driver's seat that allowed the seat to tilt back into the first row of passenger seats. Now drivers can easily recline and nap in safe, air-conditioned comfort while waiting for passengers to return.

By applying the desired-outcome-based customer-needs framework, the company developed a new product that increased customer value by 8-10 percent, as measured by satisfaction in the desired outcomes customers said they most valued. At the same time, by reducing unimportant attributes and redeploying resources to deliver the more valued customer-desired outcomes, the team reduced product cost by 3-5 percent. Many of the design changes identified could be adopted across other product lines, further increasing the impact.

Define, Translate, Communicate

Customer needs are best defined by two factors: the jobs customers want to get done, and those jobs' desired outcomes. Capturing desired-outcome statements in the structured, systematic way described allows for easy comparison, prioritization, translation into innovative design specifications, and communication with customers, using language that resonates with them. This is the innovator's secret weapon, a framework for measuring customer value that allows you to create innovative products your customers will be happy to pay for.

 

The authors wish to thank their colleague Frank Zeng for his valuable contributions to this paper.

1 Clayton Christensen, Scott Cook, and Taddy Hall, "Marketing Malpractice: The Cause and the Cure," Harvard Business Review, December 2005
2 Anthony W. Ulwick, What Customers Want: Using Outcome-Driven Innovation to Create Breakthrough Products and Services, McGraw-Hill, 2005

January 2013
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