Booz Allen Confirms User>Driven Processes More Important than Big Budgets
The consulting firm Booz Allen Hamilton does a study of innovation each year at the largest corporations in the world hoping to describe what works and what doesn't. In their 2006 study I think they tried a little too hard to add value by breaking the successful strategies they observed into different categories. All of them really came down to intelligently listening to your market, but they nonetheless presented some good principles and at least one good story of corporate User>Driven behavior.
One key principle they uncovered was that it was more important what process you use to develop products and services than how much you spend on it. "As in years past," they said "we found no statistically significant connection between the amount of money a company spent on innovation and its financial performance." What they found instead was getting close to customers was the key thing.
"It's engineers and marketing product managers spending hours and hours on job sites talking to the guys who are trying to make their living with these tools," said John Schiech, President of the DeWalt division of Black & Decker, one of the subjects of the study.
DeWalt has grown from $150 million to over $2 billion in sales of their power tools since 1991 by listening closely to current customers. In field studies, for example, they observed that builders couldn't cut large crown mouldings in one pass using traditional 10" miter saws. They brought the first commercial 12" miter saw to market, priced it a premium, and quickly found themselves with a best-seller.
Plantronics also practices market listening through focus groups and shadowing of both their corporate and consumer telephone headset customers. BAH had no specific tales of successful innovation at Plantronics, but described their process of applying "strategic filters" to help choose which products to bring to market. Those filters are all related to the expected financial performance of the products over the next 1-3 years.
The largest of these companies, Siemans AG, uses these same market listening techniques in their individual divisions but adds a greater layer of oversight, allowing them to pick and choose where to invest based on heir perception of longer term market trends such as the movement to personalized medical care, the need for portability, urbanization and other changes in demographics.
BAH tries to cast these companies in different roles, saying they are driven by customer needs, market needs and technical innovation, respectively. I don't see that in these examples. I think each company is actively researching and responding to market needs and the differences are really just in the time-horizon each is planning for. It should be no surprise that the larger companies are looking farther out.
In the Siemans study, BAH does quote one executive saying "You've got to be somewhat skeptical of what they [customers] see as the technical solution, and instead depend on your own core set of people who can creatively link new technology to the future market." BAH seems to think this is unique to Siemans and other technical innovators thinking long-term. This is no different than what DeWalt did with the miter saw, though. DeWalt's customers didn't ask for a bigger saw, DeWalt observed the current practice of cutting each piece of molding twice and came up with a solution that saved their customers' time. It may have been a more obvious extension of a current product, but the process of innovation in that case, like the others, was driven by observing unmet needs in the market.
This study just reinforced for me a few key principles of good product design:
- Pick your target market, both in terms of whom you are targeting and when you plan to bring the product to market
- Determine the needs of that market, ideally by studying first-hand the problems they face or that you believe they will face in your target time-frame
- Design your product to solve those problems in a way that can be brought to market affordably and profitably
Bruce McCarthy
in Good examples, Research, Product Management
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Reader Comments (2)
It seems so basic, doesn't it, that innovative and profitable products can be created when companies pick their target market, determine the needs of the market, and figure out a way to solve those needs and make money. It's amazing at how often companies miss the mark.
The fine folks at Pragmatic Marketing have been focusing on this lately with their new Tuned In blog / book / webinar series / etc. They have a lot of great examples and stories that reinforce these principles.
Jeff Lash
Blog: How To Be A Good Product Manager
Learning from customers means that you have less to teach them later. The amount of teaching you must do gets distributed into the marketing communications, sales process, and post sale support. It delays the time to return for the customer. It drives up the TCO, and the intrinsic costs of using the application. Teaching limits the value derived from the application. Teaching reduces the likelihood of upgrade sales, the locus of wealth creation in software startups.
Learning reduces a vendor's training and documentation costs, things to be minimized unless your company sees training and professional services as a profit centers. Learning reduces ambiguity and results in higher quality requirements.
Getting clients to pay for custom gigs, in which you build the client's visualization, provides you with a time to learn while someone else pays for it.