New product development
Regardless of which type of product you are developing, a systematic process for moving a new product from idea through development to launch is required for all but the most minor incremental products. A structured development process allows the information gathered from the customer in the early stages of the process to impact and drive the product decisions made throughout the development, resulting in the largest benefit for the organization. According to an early PDMA study of 383 firms, the top companies are more likely to use some form of formal NPD process, and 60 percent of firms use a Stage-Gate process. This value of a systematic approach to new product development been further confirmed by another PDMA study in 2012, where the best companies, as defined by those who had higher rates of product success, higher profits and more sales, were 30% to 50% more likely to have used a structured NPD process than those who did not. These organizations also initiated only four ideas for each successful market commercialization success, as opposed to the rest who initiated nine ideas to generate one commercial success. The conclusion is that the best do not realize more success simply from sheer number of projects, but by being more effective throughout the development process. The study also showed that for the best companies, more money was spent on the upfront activities that obtained information from the customer and market, including idea generation, idea screening, and business analysis, which allowed them to spend less on development, test and validation, and commercialization than other companies.
While the NPD process you use in your organization may be different than what I will use as an illustration, the concepts of how to use VoC in each area will apply whether you use fewer gates, more gates, or a different product approval process altogether. The key is to provide a consistent framework for new product development that also provides quantitative checkpoint criteria in line with the business strategy, a well-defined management decision process, and, most importantly, a method of linking the needs of the market and the customer with the development design and process optimization decisions during each stage of the development.
The following is a typical Stage-Gate new product development process, which I will use for the purposes of our discussion:
Figure 2.1: Stage-gate process
As you can see, a typical NPD process would include an Ideation stage, followed by Concept, Assessment, Development, and Readiness, followed by Launch. Throughout each stage, customer input through the VoC process is key to ensuring that the products you develop will actually serve the needs of the market (or, as a previous manager of mine would say, "This is where we'll see if the dogs eat the dog food"). After each stage, there is a decision gate where the organization must decide on whether to go or kill— that is, whether continue funding for this development or kill it and reallocate those resources to a better opportunity.
Stage 1 – Ideation
The first stage is Ideation. Ideation is the creative process of generating, developing, and communicating new ideas, and is often associated with concepts such as brainstorming or problem solving. While there is never a shortage of new product extensions or line extensions, more and more of management is focused on creating the next breakthrough idea that will catapult the organization to success. In most instances, coming up with new ideas for products or services is not a problem for most entities. Even when businesses are declining or are being downsized, there is never a shortage of new ideas. The problem for businesses is selecting the right ideas to pursue that will be consistent with the brand, align with the business strategy, and generate the proper short-term and long-term revenue. Making the right product and service selections is critical to the future health and vitality of the business, and is one of the most important decisions a business can make. While one can assume there is never a shortage of new product ideas, the quality of these ideas is often lacking, resulting in mediocre projects and lackluster results.
New product ideas in the ideation stage can come from a multitude of sources. One such source is often a technology-driven idea from the research and development department of the organization, where a new technological discovery is looking for a customer problem to solve. You tend to see a fair amount of these product solutions in engineering-driven organizations. You will also often see ideas come about directly as an outgrowth of the organization's product strategy, where management has decided on a new market segment or customer target. Another main area for ideas, and potentially the most damaging for the organization, is from the sales force, whose ideas tend to focus on one customer's short-term need with neither an eye toward the technology nor the market as a whole.
While there are a number of good ideas that do come from within the organization, the best predictor of market success is whether the ideas are driven by customer need. A good starting point is to ask your customers about their market or industry to see if there are changes or new market dynamics. Understanding the industry where your customers are working or competing in and the changes that are occurring there is key in identifying the emerging needs in the market and where to focus your internal resources.
The concept of VoC in the discovery stage is often less structured than what we will see in the later stages of development. Some of the questions to ask your customers in the discovery stage could be the following:
- What changes are occurring in your market(s) and how does that affect your business?
- What new opportunities do you see from these new market dynamics?
- What new difficulties or roadblocks do you see from these new market dynamics?
- How will you react as a business to these trends, both positively and negatively?
- What other outside influences could affect these market dynamics both positively and negatively, and how?
What we are trying to do with this line of questioning is to identify your customer's problems, unmet needs, and unarticulated needs. While there is less structure than the later phases of the VoC research, the critical point is to listen to the customer's problems (both articulated and unarticulated) and understand their business and processes.
If you are close enough to the customer, and he is willing, it may also be a worthwhile exercise to work with the customer in applying Porter's five force model to their industry. In the Porter Five Force model, we work with the customer to understand the effects of the following market dynamics on their business:
- Barriers to entry
- Bargaining power of suppliers
- Bargaining power of buyers
- Threat of substitutes
- Competitors
An effective VoC methodology to deploy during the ideation stage, if you have the time and money, is day in the life research. With this research, you spend time observing and, if fortunate enough, participating in the customer's day. This gives the researcher an ability to observe nuances and innuendo, which may otherwise have gone unnoticed by the researcher or even the customer. This research can be as short as an hour, spent observing how a customer installs a new piece of equipment, or could take months of observation, where you are observing an operator or staff of employees. If you are in a B2B market, focus on the customer's workflow and how she uses your product to perform her daily tasks. Look for changes that could be made to make your customer more efficient and effective. Also make sure that you collect any information about your product during the observation, both what the customer likes as well as what they do not like when interacting with your product. This research technique, also called anthropological research, will be covered in more detail in Chapter 3, Laying the Groundwork.
NoteMake a note An interesting side note worth sharing is the additional benefit from anthropological research in the area of unintended consequences that many do not see. By observing your customer and how they use your product, you will often find that the customer uses your product in a way that it was neither intended nor designed for, but the customer had a need that was not fulfilled and had to resort to a solution that you were not even aware existed. |
If you are fortunate enough to be in an industry where there are obvious leaders or innovators and you have the good fortune to have a good relationship with one or more of them, I would highly encourage you to use them as part of your VoC research in the Ideation stage. Often, the leaders and innovators are where they are because they have led the market in their own products or solutions. As such, they often have needs and problems that are well ahead and beyond the needs and problems of the larger market. By addressing the needs, problems, and unarticulated needs of this customer segment, you are able to get a jump on the future needs of the larger market. One-on-one interviews with this group will often lead to significant product breakthrough, but if you are in a position to host a workshop with multiple lead users and your key in-house marketing and engineering teams to define their problems and future product concepts, I think you will find it can be worth the incremental time and expense.
The Concept stage of a new product development will take the ideas you have gathered in the Ideation stage and sort and prioritize those ideas into a list of the ones that are most worthwhile investing in. The purpose behind the first gate between the Ideation stage and the Concept stage is to take a first pass at the long list of ideas and determine which ones should be considered for additional investment. As we pass through this gate we decide whether this idea is worthy of going to the Concept stage of development, where we will invest additional time and resources getting a preliminary view of this product, from both the business side of the organization to begin to define the product and opportunity and from the technical side of the organization, where we begin to define the technical feasibility and risk.
Gate 1
Gate 1 is considered a preliminary commitment to the project. It often has a handful of key deliverables the project should or must meet before moving through the gate, often including strategic alignment, opportunity size, market attractiveness, competitive differentiation, technical feasibility, and fit to the organization's capabilities. The gate deliverables are tenuous at best, and further research is required to flush these out in more detail in a later stage.
Just as the Ideation stage has a gate allowing the project to pass to the Concept stage, each later stage will have an accompanying gate allowing the project to pass to the next stage of the process. In the interest of brevity, for each of the following stages, I will also describe the information required to exit and pass through the gate as the project goes to the next stage in the development process as part of the stage description.
Stage 2 – Concept
The concept stage is the first time we allocate resources to the project with the intention of determining the project's business and technical worth. This is not meant to be a time-consuming nor expensive stage, and often, the stage is bound by organizational direction to spend no more than x days or x hours on doing the preliminary assessments. In this stage, we typically have three key deliverables.
The first two are a preliminary technical assessment and a preliminary financial assessment. In the preliminary technical assessment, we perform a limited technical feasibility study and highlight possible technical risks, which should be done with the development team. The financial assessment is a "back of the envelope" financial analysis looking at estimates of expected sales, costs, and investments. It is designed to be a reality check as to whether this investment has any possibility of providing a return to the organization.
The third is a preliminary market assessment. The market assessment provides a limited view into the market dynamics in an attempt to determine if the proposed product has the possibility of commercial success. The preliminary market assessment typically will attempt to define market attractiveness and potential market segments, target markets, and growth opportunity.
While much of the Concept stage is done with minimal costs and mostly desk and internet research, there is an opportunity, and I would recommend that you consider this option, to inject some limited VoC into the development at this point. It is worthwhile to expose this early concept to a handful of key customers who understand the market this product will play in and can provide some early feedback on the concept. These customers can also provide some insight into the overall market and attempt to solidify some of your assumptions of market attractiveness, segments, and growth rates. This will be less structured than later VoC initiatives and is only meant to be exploratory, but there is nothing like direct customer feedback when looking to move a project through the various gates and stages within an organization.