Build it and it will fail…unless

December 21, 2015

By Sunny Ahn, Partner, Endeavour Partners

talking customersGreat products are built every day – some worth billions of dollars. The problem is that for every great success, there are thousands of failures. So why do so many companies fail at launching successful products? Most organizations have a fundamental ‘blind spot’ in their elusive pursuit for product fame and fortune – they create products or technologies that have no market.

Startups and large organizations alike often have an underlying belief that technology drives success. In fact, the great Steve Jobs stated, “It’s really hard to design products by focus groups. A lot of times, people don’t know what they want until you show it to them.” Given the success of the iPod and other Apple products, the path to drive products first makes sense.

Technology is indeed a key ingredient for any (technology-based) product success, but it is usually only a means to an end. Companies can get seduced with the potential of their technological invention, particularly when their confidence in it is reinforced by positive feedback from colleagues and even the media itself. The power and virality of today’s social media can often wildly inflate the market value of a new product without any valid evidence.

University labs, startup incubators, and early startups often fall into this trap. Professors or entrepreneurs with expertise in a particular technology believe that a market will inevitably and automatically appear once they produce their technologically superior product. This behavior is not isolated to start-ups; it is also often exhibited by large organizations. These organizations believe that technological supremacy in creating a new product will automatically lead to market differentiation and ultimately result in revenue growth.

These organizations mistakenly adhere to the “If you build it, they will come” belief brandished in W.P. Kinsella’s “Field of Dreams.” While this belief may work in books and movies, real life wins are often less about the product or technology than about the customer needs it aims to address. Organizations that build products without properly listening to their customers first will have more difficulty in creating marketable products that customers are willing to pay for. Conversely, a product that directly addresses a significant customer need, even one that doesn’t take advantage of innovative technology, is much more likely to see customers opening up their wallets.

If your product does not clearly address a customer pain (solving a customer problem) or create a customer gain (creating a customer delight), you will be wasting your money, and, more importantly, your time in its pursuit.

Based on my experience with corporate clients, as well as work with the National Science Foundation’s I-Corp Program, derived in large part from Steve Blank’s teachings[1], companies should adhere to a few key customer discovery principles. 

Customer discovery is required, not optional

Many product developers in companies large and small often fall into the trap of thinking, “the value of this technology is so obvious.” These product developers subscribe to the belief that their new technology is so drastically different from anything else in the market that it is destined to be a success based on this differentiation alone. They forgo any customer discovery due to their ‘only technology matters’ blind spot. Some recognize that customer discovery would help, but many, particularly those within large organizations, are under such intense pressure from shareholders and management to develop the next cutting-edge technology that they take shortcuts during product development.

However, fast-forward in time and these very people often complain that customers just don’t get our technology or our sales team doesn’t know how to sell it orwe’ve run out of money.” I would venture to say that the root cause for many of these responses is that there is no market for the products being created. It is this same reason why 90% of startups fail, according to Forbes[2], and a similar failure rate is seen for new product launches by any organization (for example, 85% of new fast-moving consumer goods products fail in the market, according to Nielsen[3]).

In fact, customer discovery is much more important to the success of a product than any technology. Organizations wishing to create successful products must first acknowledge the importance of customer discovery, and then do it, rather than find excuses as to why they do not have the time or resources to invest in it. If you are investing resources into building a product, you have resources to invest in customer discovery. Even with an exciting or powerful technology, product investment should not be made unless it clearly addresses a customer problem or need that is well understood and can be articulated to others. In fact, I would hazard that organizations must know more about their customers or potential customers than about the technology or product they are developing.

technology versus customer discovery

Unless, of course, you are the next Steve Jobs. (Odds are that you aren’t, unfortunately.)

Not all customer discovery is created equal

Even for those acknowledging the value of doing customer discovery, eliciting the voice of the customer is rather difficult. The challenge is that not all customer discovery techniques are the same. Proper customer discovery requires time, patience, and discipline – it is actually quite hard to do discovery right. Customer discovery requires more than simply sending out a survey, bringing together a focus group, or picking up the phone. All techniques are fraught with bias. For example, questions in a consumer survey can — knowingly or unknowingly — be asked in such a way that companies get the results they want (leading bias); focus group participants are often influenced by one another (conformity bias); and phone conversations often only tell half the story (are they even listening?). It is important to understand the pros and cons with each type of customer discovery technique and how these techniques should be applied and executed to reduce different biases.

So what are a few key steps in doing proper customer discovery?

First, you must develop an understanding not only of who your customer is but also, and perhaps more importantly, of the customer’s associated persona. Identifying the “who” may be simple: for example, “females in their mid-thirties”. However, you might be misaligned in your initial assessment. Your actual customers may be different than your intended customers. The customer discovery process can help you validate whether your intended customers are ultimately the right target audience for your products. You may find, through the discovery process, that you need to re-evaluate and pivot from your original hypothesis to focus on whom the right customers really are.

Even when you can identify the right customer segment, you must not stop there. You must also be able to articulate the persona of the target customer segment — their needs, daily activities, spending behavior, etc. Identifying a customer segment of, for example, “females in their mid thirties” is insufficient. The customer discovery process must go on to answer questions like: what is her working status? What is her marital status? Is she a mother? What keeps her up at night? How does she spend her day, and how does she spend her money? If you can’t articulate the persona of your target customer, you will likely struggle to identify the value proposition that your customer could derive from your product.

Second, once you have defined your customer segment(s) and associated persona(s), you can then, and only then, look to uncover any problem or need this customer segment has. What is the customer’s current method for dealing with a particular problem? What is the job they are trying to accomplish? What is the customer pain or customer gain as mentioned before? Once articulated, you can then start exploring what product or market offering might properly address it.

Third, I would argue that true customer insights are only uncovered through empathetic observation – listening to and observing your customer. This can be done together or separately. To really and truly understand your customers and their needs, you must “get out of the building”, as Steve Blank would say[4], and listen to your customers. Face-to-face conversations with customers are usually the best technique for this; if you are to perform this in the customer’s natural habitat, then even better. Valuable insights are generally elicited by posing open-ended questions that allow individuals to explain why they feel a certain way. These conversations allow customers to describe their journey and thereby give a response rich with context.

Other customer discovery techniques, such as a customer survey, simply aren’t as effective with open-ended questions. They can be useful at posing closed-ended, quantitative research questions that provide yes or no responses. “Have you purchased a smartphone in the past 3 months?” Surveys can be a helpful technique in understanding a customer’s action that was performed in the past, but are often limited in understanding actual future behavior. Of course, face-to-face conversations are not without their own challenges, as customers may not always do what they say, but they are generally the most effective way at eliciting a customer’s feelings and emotions about future behavior.

On customer observation, if at all possible, observing customers in their own habitat can be insightful in understanding how customers actually act and behave in specific situations. Witnessing how customers perform specific jobs and when they make purchasing decisions can be very powerful. Again, challenges can exist with this technique if customers know they are being observed, as they may act differently than they otherwise might.

In fact, some well-known companies, such as Proctor & Gamble, have taken this to the next level. Through its Living It and Working It Programs[5], P&G is able to witness firsthand what consumers do. Its Living It program allows P&G employees to actually live with consumers for a period of time. This allows them to understand the everyday jobs of consumers, determine the outcomes that consumers are looking for, and ultimately provide P&G with insights into future product ideas. With its Working IT program, P&G employees work ‘behind the counter’ with employees of different companies to understand why shoppers buy a product, determine how products are marketed, and provide insights on what value propositions work.

Customer discovery is continuous

customer discovery examplesThe process of customer discovery is not a single activity to be carried out in isolation, but rather a continuous dialog over time. We often hear from clients who understand the value of customer discovery, but rely on information that can be somewhat dated. “Oh, we did customer research on this topic a few years ago, so we have that covered.” Things change quickly in today’s world. Relying on customer discovery that was performed 5 years ago, for example, can be misleading. In fact, companies like Uber, Square, Pinterest, Stripe, Slack, Blue Apron, and Houzz — which today are household names to many — weren’t even around 5-6 years ago.

In addition to being timely, customer discovery must also be repeated. Organizations must repeatedly connect with their customers and observe their needs as their behaviors can change and markets can evolve over time.

And for each product definition, organizations must have many of these customer conversations. While product success is never a guarantee, evidence-based customer discovery increases the probability of developing a product that customers find useful and are willing to pay for.

Thus, companies, large and small, need to condition themselves to think differently: “Why would I ever spend a single cent on product development without validating it with customers first?” Without this mindset shift and new discipline, this old behavior is a guaranteed way to lose money, period.

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Sunny Ahn is a Partner at Endeavour Partners, a boutique technology consulting firm based in Cambridge, Massachusetts. Sunny has worked extensively with technology, media and telecommunication (TMT) service providers, device manufacturers, retailers and healthcare organizations in the US, Europe and Asia. If you have thoughts or want to generally discuss this piece, contact Sunny at sunny@endeavourpartners.net

 

[1] Blank, Steve and Dorf, Bob, “The Startup Owner’s Manual”

[2] Forbes, http://www.forbes.com/sites/neilpatel/2015/01/16/90-of-startups-will-fail-heres-what-you-need-to-know-about-the-10/

[3] Nielsen, http://www.nielsen.com/us/en/insights/news/2014/how-to-flip-85-misses-to85-hits-lessons-from-the-nielsen-breakthrough-innovation-project.html

[4] Blank, Steve and Dorf, Bob, “The Startup Owner’s Manual”

[5] Lafley, AG and Charan, Ram, “The Game-Changer”