If pressed, what would you say is the secret to product success? Certainly there are a number of things that go into making and selling products. Prioritization, design, manufacturing frameworks, marketing, service, cost of production, etc. Each of these elements needs to be optimized, and there are people, practices and tools that do just that.
Despite rigor in much of the product process, there’s still too high a failure rate for products. I’ll bet you’ve seen this in your own company: proposed products that received a lot of internal resources only to be killed off, or that launched and didn’t hit the mark with customers. As you can see, there’s a story to it:
Consider that first panel for a moment. A third of launched products fail. That doesn’t include the projects that were killed before launch. 32% of development resources are spent on products that get scrapped or fail in the market. To put that in perspective, imagine similar levels of failure in other venues:
- We miscalculated 33% of the accounting entries
- 32% of our inventory purchases were wasted
- Our marketing initiatives fail to sell anything or raise brand awareness 33% of the time
- 33% of our manufacturing capacity is chronically unavailable
Those levels of performance would be unacceptable in companies. Yet they’re considered part of the ‘art’ of innovation when it comes to product. The cost of doing business. Which is pretty sweet if you’re a product person…
OK, forget that. Let’s assume rational, ambitious people want to do better.
What works? Survey says…
In a survey of B2B firms, people were asked to identify the causes of failed products. The top answer was ‘lack of market analysis’. As in, did the market have the need, did the feature address it if so, and did it do so better than competing products? The next answer was that the ‘product didn’t satisfy customer needs’. There’s a pattern here.
Flip the analysis…what are the top success factors? All three are specifically rooted in understanding customer needs:
- Product directed at customer needs
- Staying close to the customer
- Product adds value to the customer
Notice that pattern again? Products that succeed are designed and developed with customer insight.
Factors that make customer involvement successful
Researchers in Sweden conducted an analysis of firms’ product development efforts, classifying the products as successful or not successful. They tracked these product outcomes against the types of interactions the firms have with customers. Note they tracked product development efforts as incremental innovation. They separately tracked radical innovations as well.
For incremental innovation – i.e. the daily work of product managers – they were able to identify three factors that separated successful products from the rest. Factors that affected the “absorptive capacity” of the company to assimilate customer needs.
Engagement frequency: The more often a company communicates with customers, the more successful were it product releases. Communication can be oriented toward understanding needs, or for feedback on design iterations.
Two-way communication: The nature of the communication dictates its value. If the company does all the talking, it’s not going to learn much. The more the communication is a dialogue, the better the outcome for the product.
Needs in context: The more the insight is captured as part of a broader view of the activity, the better that insight is. Top insight is gathered as the customer experiences using the product. It’s also valuable to understand the why for insight. If the suggestion or need is in isolation, it can be hard to understand the core need.
Now, who is in charge of getting this insight?
Chief Customer Development Officer
Think about this. For marketing, it’s clear who owns that activity, and you can see processes, systems, people and priorities for it. Same goes for manufacturing / development. And design. And supply chain management. And distribution. And financial analysis. And human resources. And so on…
But where are the comparable processes and people dedicated to understanding the customers’ needs? Who plumbs the jobs-to-be-done and analyzes the key outcomes customers are seeking? The work of understanding customer needs, in one sense, is everybody’s responsibility. It’s what makes the company grow. But if something is everybody’s responsibility, it’s really nobody’s responsibility.
It’s an important question, because the degree to which one stays close to the customer is a primary basis of success or failure in product development. As a function, what would you call this work? Customer Needs Whisperer? Voice of the Customer-ologist? Actually, Steve Blank has it covered with customer development:
Before any of the traditional functions of selling and marketing can happen, the company has to prove a market could exist, verify someone would pay real dollars for the solutions the company envisions, and then go out and create the market. These testing, learning and discovery activities are at the heart of what makes a startup unique, and they are what make Customer Development so different from the Product Development process
Steve Blank, The Four Steps to the Epiphany
While Steve Blank’s excellent book is targeted at entrepreneurs who need to do the hard work of validating an idea, the mindset underlying customer development is well-suited for the need to stay close to customers. Hence, the notion of the Chief Customer Development Officer. And the product management team sits at ground zero in the customer development activity.
What distinguishes customer development from the current mentality in most companies? Cribbing from a Jack London quote:
You can’t wait for customer insight to come to you. You have to go after it with a club.
This is a change in mindset for many. Be proactive in understanding customers. Make communicating with customers a meaningful percentage of the weekly schedule. Don’t settle for inbound inquiries. Or only focus groups on an already-designed product. Or quarterly customer council meetings. Really own the customer development activity.
It’s worth it, as here are five concrete benefits of employing the customer development mindset:
- Develop understanding of what success looks like for the customer
- Customer becomes invested in the success of the product
- Elevate customers’ awareness of what’s coming
- Discover opportunities for growth due to underserved JTBD
- Reduce uncertainty due to lack of information
You only get these by being a proactive customer development officer. In a future post, I’ll examine the different ways engage customers in the product development process. Because there are many.
(Cross-posted @ I'm Not Actually a Geek)