I have been remiss in pointing out that IdeaFlow contributor Joyce Wycoff has herself started not one, but TWO blogs -- Heads-Up! On Organizational Innovation! and Good Morning Thinkers. Joyce has been sending these out as email newsletters for some time (you can still sign up for that version at her Innovation Network site), but it's better to look at the blog versions, because there you can see the comments other people are making on the entries.

I want to point particularly to her Heads-Up entry on Gaining Customer Insights The Creative Way because there've been a lot of posts here about tapping consumer creativity and involving customers in the new product development process. Joyce writes about Staples' Invention Quest as a creative way to find out what customers want.

In The Innovators' Solution, Clayton Christensen says the point is not to find out what customers want, but to find out what jobs customers are trying to get done. Then figure out ways to help the customers get those jobs done. That could apply beyond new products, obviously -- focusing on "jobs" is a creative and efficient way to figure out how to streamline any process in which a company interfaces with its customers.

Courtesy of Hylton:

• Interesting NYT story about how consumers shape new product offerings in personal technology (reg reqd)


• Stories of inspiration, invention and design in products and services ranging from the iPod to Song Airlines can be found in yesterday’s NYT Magazine (reg reqd, and make sure you look at 'em this week before the links go away!)
  

In previous chapters, The Innovator’s Solution authors Christensen and Raynor explored a disruptive strategy of “competing against nonconsumption.” But in so doing, companies are faced with the immediate challenge of how to find and sell to the nonconsumers who can become your customers.  A case study with which many of us are familiar — how Sony scored numerous times with disruptions such as the transistor radio and the Walkman — illustrates the point perfectly.

The Sony case also illustrates another point made in this chapter, which is that disruptive products often require disruptive channels for sales and distribution.  This point is even more pertinent when you use the broader definition of channels that the authors are using: “A company’s channel includes no just wholesale distributors and retail stores, but any entity that adds value to or creates value around the company’s product as it wends its way toward the hands of the end user.” Example: computer makers such as IBM and Compaq are the channels through which Intel’s microprocessors and Microsoft’s operating system reach the end-use customer.

So if a disruptive strategy of “competing against nonconsumption” makes so much sense, the authors point out, why do incumbent companies do the opposite, which is “trying to stretch the disruptive innovation to compete against — and ultimately supplant — established products sold by well-entrenched competitors in large, obvious market applications”? The answer has to do with resource allocation.

Mistake No. 1 is to frame the disruption as an opportunity. Christensen and Raynor’s theory (much of which they credit to HBS professor Clark Gilbert) is that the disruption should be framed not as a potential opportunity for further growth, but as a threat to existing business that cannot be overlooked.  Framing the disruption as a threat allows for top-level resource commitments. Then the disruptive technology should be developed by an “autonomous organization” (another division, a spin-off company) that can frame it as an opportunity.

Mistake No. 2 is to promise big numbers in the future in exchange for resources in the present. “The very effort of trying to articulate a convincing case for resources actually forces the entrepreneurs to cram the innovation as a sustaining technology in the existing market,” because the biggest markets whose size can be substantiated are those that already exist. Then when the results fall short of the promised numbers – because the market of nonconsumers is not being effectively targeted – resources are cut.

The authors suggest that companies that try new-market disruption establish a parallel process in which to evaluate potentially disruptive opportunities, a process in which the go/no go decisions are made based not on numerical rules but on how well they fit the pattern for disruption already explicated by the authors. And even then, the best that can be predicted is that “the initial conditions are conducive to successful growth.”

Disruption is, after all, still a risk.

Back to Innovator’s Solution – Chapter 3, “What Products Will Customers Want To Buy?” is one that hits close to home for me, considering the business my team is in (and our company). But there’s a disappointment on the first page of the chapter: “Over 60% of new product efforts are scuttled before they ever reach the market, and of the 40% that do see the light of day, 40% fail to become profitable and are withdrawn from the market,” says Christensen. The disappointment isn’t just that the failure rate is high, but that the numbers are sourced (in one of those wonderful endnotes!) from a 1996 publication – the book Wellsprings of Knowledge by Dorothy Leonard (actually, the endnote says the book was published in 1996; Amazon says the hardback came out in January 1995 and a paperback version in 1998). In client presentations we’ve been using similar numbers that we’ve sourced from a 1998 Dun & Bradstreet study, but it’s disappointing to find even older numbers in a hot-off-the-press book.

In any case, Christensen points out that though the new-product failure rate is high, “failures are not really random.” They are a result of the difficulty of the task: How to connect disruptive innovations with the right customers to create a foothold in the market, then grow profitably along the sustaining trajectory. And identifying those disruptive footholds means “connecting with specific jobs your customers are trying to get done in their lives.”

Interesting discussion about market segmentation, which he defines as the “categorization stage of theory building.” And here’s correlation vs causation again – according to Christensen, “attribute-based categorization of either/both products or customers can reveal correlations between attributes and outcomes…but only…circumstance-based categorization (ie., segmentation schemes) tell causality – what features, functions, and positioning will cause customers to buy a product.

In other words, customers “hire” products to do specific “jobs,” so it’s best to segment the markets to mirror the way customers experience life. The critical unit of analysis is the circumstance, not the customer, which to me suggests qualitative, not quantitative, research. My instincts tell me this is right. And it actually also “fits” with the way we already structure our ideation projects, so that makes me all the happier about it!

Bottom line: One disruptive strategy is to compete against “nonconsumption” for “nonconsumers.” Traditional quantitative market research won’t identify these folks or the jobs they are trying to do. The best way to determine this market is to observe what people seem to be trying to do, then ask them about it. And only after you have identified those needs would you then move into quantitative research to determine the size of the market. Until you know what’s needed, you can’t figure out how many people might have that need.

"Voice of the Customer" will be held Dec. 8-10 in Coconut Grove, Fla. This conference, which is the only PDMA-endorsed "Voice of the Customer" event, incorporates VOC findings throughout the value chain, from new product development and brand strategy to product launch in the B2B or retail space.

On the agenda: Professor Gerald Zaltman of the Harvard Business School (author of How Customers Think) and conference chairman Dr. Joseph Plummer, EVP of McCann-Erickson Worldgroup will present - for the first time publicly - their marketing survey findings on the newest corporate top-line priority: Creating Consumer Demand.

Please note: IdeaFlow is a media partner for this conference. That means we're involved with the conference, though no actual money is changing hands! If you register because you saw this, please let them know.

"Voice of the Customer" will be held Dec. 8-10 in Coconut Grove, Fla. This conference, which is the only PDMA-endorsed "Voice of the Customer" event, incorporates VOC findings throughout the value chain, from new product development and brand strategy to product launch in the B2B or retail space.

On the agenda: Professor Gerald Zaltman of the Harvard Business School (author of How Customers Think) and conference chairman Dr. Joseph Plummer, EVP of McCann-Erickson Worldgroup will present - for the first time publicly - their marketing survey findings on the newest corporate top-line priority: Creating Consumer Demand.

Please note: IdeaFlow is a media partner for this conference. That means we're involved with the conference, though no actual money is changing hands! If you register because you saw this, please let them know.

In previous notes I’ve commented that a recurring theme at Convergence was how customer needs play a very important role in a company’s innovation and new product development efforts. A specific presentation on this theme was “Customer-Centric Innovation: Turning Consumer Pain Into Innovative New Products” by Tom Kuczmarski and Scott Lutz (contact info at link isn't current for Scott, but it's a good description of him!).

Tom quoted a 2003 best practices study his company did: 85% of CEO respondents said conducting customer problem/need identification research prior to ideation is the most important driver of new product/service success in their organizations.

A main reason why research for new product development should focus on consumer needs and an understanding of consumer’s lives – rather than product and service attributes – is that the resulting ideas are more likely to be true breakthroughs.

This makes absolute sense to me. If you focus on needs, you’ll come up with new products that meet those needs. These products may or may not resemble current offerings, but at the very least they shouldn’t be so far out in left field (a common problem with unfocused new product development efforts) that they don’t still meet those needs, since that was the objective.

On the other hand, when you focus on researching what consumers do and don’t like about an existing product, the best you can expect is incremental improvement suggestions.

For those in the B2B world, the exploratory research needs to focus around understanding companies and the roles your customers play in their companies, Tom says.

One more point Tom made about starting with pain – your new products are more likely to be profitable if they enable the solution to a problem on which consumers place a “higher need intensity.”

Scott’s portion of the presentation focused on the “evergreen” themes, ongoing consumer needs that many successful new products address: family, health, pleasure, energy, balance and community.

To uncover more focused needs than these, and to drill down into these evergreen themes and uncover specific needs, you need qualitative, not quantitative, research. In my opinion, these qualitative tools – depth interviews, lead-user interviews and ethnographic research – are the best ways to uncover the fears, wishes, anxieties, desires, frustrations and needs by which consumers express their pain. Quantitative research won’t be nearly as revealing, because it’s not exploratory.

Having noted all of that – you may recall that I had a conversation here last month with Andy Hargadon, author of How Breakthroughs Happen: The Surprising Truth About How Companies Innovate, that takes this idea one step further. Our conversation was about how consumers can be an “open source” for new product ideas. I said then, using consumers for ideation, especially those screened for past product category usage, makes sense from the point of view that the consumers have both domain relevant knowledge (as potential users of the new product) and have creativity skills.

Relating this back to Tom and Scott’s presentation – let’s say you start with some qualitative research around discovering actual consumer pain (cognitive dissonance!). You’d use that as a starting point for ideation, as Tom pointed out in the presentation. But then let’s say you are doing that ideation with consumers who have usage experience in that product category. Their own “pain” is the specific domain-relevant knowledge that keeps them on focused on actual usable ideas, and their creativity is the spark that makes the ideas good.