Insights

The Company knows all.  Since customers really don’t know what’s possible, let’s have the R&D team push the envelope with new and derivative concepts and products, and then have marketing and sales convince the customer of what they really need.

Success doesn’t always breed success.  Feeling a false sense of security in knowing exactly what customers want and need happens most frequently with companies that have had a major new product success. They become too surefooted and less market vigilant, so they seek to shortcut the process by developing solutions without much (if any) market validation.  This is especially true in developing a new generation of products or what I refer to as derivative products. The thought is, “We knew what the customer wanted in Generation X so why not add to it and update for Generation Y?” Mistake!

Guessing at what the customer needs is problematic on a number of fronts:

• Adding capabilities to the product invariably means a higher Average Selling Price (ASP) that customers may not be willing to pay.  The company is later forced to cut price and compromise margins to get sales (I’ve had a lot of input on this from CFOs).
• It makes too many assumptions and doesn’t take a fresh look at what customers may need (yes I know,  “Customers don’t always know what they want,” so it needs to be teased out through careful – but not necessarily costly – research)
• There is an underlying assumption that because the sales channels have figured out the current product, they can certainly find success with the new version. So when the channels have a hard time selling new versions, they are often blamed for being resistant or not working hard enough. This causes ill will and tension between sales, marketing, and product development.

We don’t need to go much farther today than RIM’s Blackberry, which was once the darling of business cell phone PDA users. Now RIM has had more than a few product design missteps and is left with a future that is cloudy.  As RIM continued to do what they always did well, competition raised the bar. Now the Blackberry is struggling to catch up and could well be left behind. One company who has had much success is Apple, and while Steve Jobs doesn’t openly admit to doing much research, the company does in fact study consumer’s usage needs, in high detail.

Folks in R&D can become lethal in developing products if they are presented with key issues and problems that are being faced in the use of various devices or any other products. I’ve found that if R&D is left with the mantra “Create baby, Create!” they will, but are then left to think only in terms of technical specifications and not in terms of customer needs. I’ve learned over the years that R&D folks work quietly but are intent on helping make a difference for their company. They would rather be working on something that has a chance of being a homerun than taking lots of swings and striking out.

My suggestion is that R&D should carve out 10% of their budget to invest in effective Voice of the Customer research. This investment, if applied properly, will have a multiplier effect on products and solutions that truly connect with the market. If companies think that marketing should do this, even if they do, the investment will come too late – after the product has been baked. Besides, marketing isn’t given a budget that comes remotely close to what R&D has to invest.

Trade shows are usually great events to present your offerings and to stay up to date on your market. Each day of a show there are many opportunities to visit with customers in sales and public relations roles. A lot of competitive intelligence and market insights can be gained from walking the show and talking to exhibitors and visitors.

Can effective Voice of the Customer (VOC ) be gathered at a trade show? By all means, the answer is yes. But VOC collection needs to be planned, and needs to follow the basic rules for the research method that you’ll employ at the trade show. Often this isn’t the case, and we hear examples of company representatives who list “participating in a trade show” as VOC, so they can check the box. As with our other VOC train wrecks, with trade shows we need to be watchful of what we are really doing, and not kidding ourselves that we’re collecting projectable information – unless we are following a protocol.

Hopefully by this fourth installment in the series on VOC, you’re seeing a pattern of behavior that should make you take warning. The goal of this series is not to deter you from reaching out to customers, but rather to be sure you don’t confuse customer contact activities with VOC. If you do, you’re likely to collect information that isn’t representative of the market and customer needs. So when the Doblin group did a study of innovation – particularly on the success of new products or services – they found a hit rate of only 4%. This is a pathetic statistic, especially for large companies that make large investments in R&D and have built substantial processes to commercialize their goods and services .

So why are leaders willing to spend millions and billions in innovation, yet almost nothing in VOC? Plain and simple, this is penny wise and pound foolish. Let’s position trade shows as ways to introduce, sell, and promote our products, and gain some level of competitive intelligence, but not conduct meaningful VOC.

Customer engagement by senior team members in a sales development support role is invariably helpful. It conveys a top level commitment to customers by meeting customers on their own ground. Often, long term relationships are fostered by these visits, and they help to accelerate the sales cycle.

While customer visits are positive, just visiting does not constitute gathering Voice Of The Customer (VOC). Nonetheless, all too often company leaders seek to interject what they heard into the product development process, and over-steer the offering array of products, services, and features. While leaders usually get an earful from customers of what could be done to enhance the product, it’s dangerous to take the direct leap to implementation based on a few data points.

All too often, leaders relate their key takeaways from the customer visit through their own biases, processing and filtering the “lessons learned” through their own experience and emotional involvement with major product-to-market initiatives. While executive experience is valuable, it can distort the real needs of the marketplace, miss key points, or even worse selectively repeat only the parts that reinforce or justify existing plans – despite inherent flaws in those plans that unfiltered, unbiased VOC would expose.

Real VOC means collecting customer data in way that follows fundamental market research guidelines.  The approach to VOC and the means of collection will vary based on the objective and needs of the research initiative. Most B2B companies underspend on VOC because it brings with it the stigma of market research, which I grant you hasn’t always delivered the value that’s been promised and needed. If applied effectively, VOC should be a lynchpin for successful decision making, and in turn, better results.

I raise this issue because stories are legendary of senior executives changing course on a product offering based on a few customer visits. So, I say, let’s not confuse customer relationship building with true VOC. If only leaders would self-check on this behavior, and be sensitive to the damage they can cause.

A favorite way to gain Voice of the Customer (VOC) for new and derivative products is to have engineers visit key customers. Let me be clear up front: I’m not knocking the need to interact with customers in their environment and learn from them, and it’s helpful for those developing solutions to better understand and connect with end users. My issue is that many B2B companies rely too heavily on a few interactions between engineers and customers, and they use this narrow input to justify products, to determine key product-related attributes, and to gauge overall market acceptance. Here’s why this is really dangerous:

1. Putting the cart ahead of the horse.  Often the understanding of customer environment and needs analysis isn’t actually performed by product engineers.  Instead, the discussion between the customer and the product engineer leaps headlong into a review of the solution and how it will benefit the customer – in other words, not gathering information, but selling a preconceived idea.
2. Biased data collection.  Because product engineers are not trained in proper data collection protocols, bias is introduced by the engineer – in terms of what is asked, how it is asked, and what data are actually recorded – compared to other sampling methods delivered by professional researchers.
3. Lack of listening and objectivity.  How objective do you think the engineer is going to be to alternative viewpoints from the customer? How effective will a product engineer be in relaying dissenting views to the internal product team?
4. Over-generalizing narrow input to a broad market. Rarely is a product designed just for one customer. So, how are the products attributes based on these engineering field trips and a  sampling of a few interactions going to be received by a broader market?
5. Over-attention to Technical features.  Getting the technical viability right is only a part of the solution set in making the product easy to buy. Technical feasibility is often straightforward compared to commercial viability.

Engineers acting in the name of collecting Voice of the Customer are almost always well-intended, but beware of the limitations. We regularly see technology companies using these engineer field trips as the centerpiece of VOC for finalizing the solution set.  I have a client that has been developing a new product platform since 2001, and has had many changes and reversals in the development and needs delivery process. It’s no wonder why:  they’ve never actually talked to customers to reconcile the gap between their lack of market success and the technical roadmap. So a product that was due out in 2004 as an update to a 10 year old platform still hasn’t been commercialized. They have invested about 120 engineering person years since the project started. Besides the lost time, there is their on-going lack of a presence in the market, and huge revenue shortfalls because they are continuing to sell a tired-old product platform that doesn’t compete. The opportunity cost in this case is in the hundreds of millions of dollars, which is staggering.

So why haven’t they invested in effective market research? Because they see themselves as technology leaders who can effectively impute customer needs. While we’ve enjoyed a great relationship with this client in many other areas of their business, it’s been difficult to get this headstrong organization to see the value in effective voice of the customer. Do you think for one minute that Apple and 3M would make these kinds of colossal mistakes? Is your organization so inwardly-focused that you can’t step back and see the logic of using better alternative ways to generate results?

Another lesson learned here is that, in organizations in which Product Management resides in R&D, product features and functions may be locked-in before Marketing can influence them. To avoid this, I recommend that the Product Development organization has a line item in their budget for gathering effective Voice of the Customer for new product introductions using third-party researchers. While the budget often resides in Marketing, Marketing-led VOC may be too late as most of the solution set may be baked before Marketing gets involved.

This is the first in a series of ten posts that explore my deep concerns about the effective application of Voice of Customer (VOC) research. The phrase “VOC” has been bandied about for a number of years now. VOC is considered essential as customer views change; it’s important to factor-in issues that customers face in areas we can provide solutions.  As leaders navigate in this “new normal” era of slow to weak growth, we’re learning that our B2B value propositions are resonating differently, from somewhat differently to drastically different. My use of “Train Wrecks” to describe how VOC is being applied isn’t tame language at all, and you might wonder why – it’s because we’ve observed a number of Worst Practices in this area, and a variety of companies seem to make the same mistakes over again. During the series I’ll make a number of key points about how VOC methods being routinely misapplied by so many companies today, and why these common sense approaches are so ineffective. Note that most of this thought applies to B2B; in B2C we’re seeing much better discipline and better practices., especially in getting direct VOC.

True VOC is the careful aggregation of objective information, without interviewer or survey bias ,that helps us better understand what groups of customers need. The techniques deployed can range from the simple and low cost to the very complex and costly. We will list and discuss these in a later post. The focus here is to briefly describe what many B2B companies are doing to hear the “Voice of the Customer” but why they are, in fact, not.

One of the root causes in VOC train wrecks is not taking the time and making the right investment in collecting VOC. I contend that many B2B companies see VOC as an expense and not an investment. In B2B there tends to be an over-reliance on the sales force and channels to drive the final mile of marketing – getting the value propositions and positioning right – when in fact the product and offering process should be well tested and developed before putting it into the hands of the channel. Effective VOC can help marketing fully bake an offering, so there are no surprises during initial channel engagement. Testing messaging, positioning, value propositions, and pricing as part of a pre-launch marketing program will reveal how the offerings will be received.

We do see this best practice in B2C. Leading consumer products companies like P&G know before launch whether the product is accepted and the messaging resonates. In the B2B world, Northpoint uses a simulated sales call process to help determine how the product or service will be received before it goes to market.

I know of companies that spent $20 million to develop and launch a product, and spent nothing on effective VOC. In several cases I know, the product had to be re-launched – still with no real VOC – so the value proposition is weak or the pricing is wrong or the positioning is off – and they sacrifice price / margins to get at least some sales. So, why, we ask, do leaders ignore effective VOC when there is such a high price to pay?

With this background, we’ll explore 10 VOC Train Wrecks over the coming weeks. Here’s the first:

VOC Train Wreck #1: Taking input from the sales force and channels. Having dialogs with your market access points, such as channels, is critical in order to support them. The channels are able to express what they see and need on a variety of points. They can tell you about what customers want, what competitors are doing , and other sales enablers and barriers.

Channel input provides a lot of spin -first from customers to your sales people, and then additional spin for each layer the message is relayed within the company. So you might get some kernels of value, but rarely will this happen when developing products and new programs. The ingredients that are missing are objectivity, projection to a broader base of customers (you get a disproportionate amount of input from highly vocal customers – “squeaky wheels”), and getting at unmet needs and unexpressed problems in the customer’s business.

So it’s wise to not over-value the VOC inputs from your channels, and to find ways to effectively apply various VOC tools to get a direct input from customers. As we know ,customers won’t necessarily help us design products, but there are ways to get at what’s holding them back.

This is only the first of ten VOC Train Wrecks I’ll explain in coming weeks. At the end of a series I’ll provide a scorecard of all of them, and I hope that it will be a helpful reminder of how to recognize and  avoid these pitfalls, and to assess your own VOC efforts.

It’s the holiday season, when our thoughts intensify on friends and family. Most of us have had a favorite aunt or uncle that we’ve gone to for sage advice. Maybe we prefer them to our parents because they seem more objective and confidential, they listen well, are positive and patient, they’re a safe harbor, or they know how to say the right thing at the right time. In my life these folks have been indispensible and have helped shape who I am. In business I can think of a few key people that have helped me in similar ways, and to no one’s surprise they wouldn’t be found on the organization charts.

As we leaders turn to our business family, we look for the same characteristics as with that trusted uncle or aunt. And just like our personal family, people in our immediate “work family” usually aren’t right for the role. What we often need – but don’t have – is someone that can understand our situation and provide some solid impartial advice.

Consultants and business advisors can fill this role once they gain a leader’s trust. Ram Charan is one of these people and has proven to be indispensible to the leaders of P&G, Verizon, and Honeywell, to name a few. We at Northpoint fill this role for our clients, and while we have the capability and experience to deploy game-changing techniques, it’s often our role as a trusted advisor that’s most valued.