Before jumping into technical development of your concept, test your assumptions

Two powerful tools for testing assumptions about your concept: Voice of the Customer and Value Proposition

Voice of the Customer was the prime front-end marketing research tool for testing assumptions in 453 firms1. It eclipsed both customer site visits and beta testing in use as determined by this 2012 peer-reviewed study by the PDMA Foundation.

Once you gather and analyze information on customers’ stated and latent needs by the Voice of the Customer process, the next front end task is to use these insights to build a strong value proposition. A colleague, who has translated ideas into three successful startups, tells MBA students that learning how to create a three-sentence value proposition to guide commercial development of a concept is priceless.

Building a concept’s Value Proposition is central to the National Science Foundation Innovation Corps’ new program2 for translating technologies into products.  Begun in 2011; the Corps has worked with 300 teams to accelerate commercialization of the $125 billion of research underwritten by the US government.

Voice of the Customer

I was introduced to Voice of the Customer in 1989 at a PDMA conference in New York City. Abbie Griffin, then a graduate student at MIT, presented her findings on customer marketing research for new product development. She published her work on Voice of the Customer, in collaboration with Professor John Hauser of MIT in 1993.3

Since 1989 I have used this tool in my marketing research practice and find it to be powerful. My experience is that 40 one-on-one elicitation interviews will test crucial assumptions about B2B concepts. By the final interview, the 5-10 top-level explicit and latent customer needs for the concept are identified and a deep understanding of the concept’s opportunities is gained.

Over the past twenty-four years I’ve watched Voice of the Customer emerge as a prime marketing research tool for testing assumptions in new product development. As it surfaced, Voice of the Customer like many other powerful marketing research tools, has collected some weak interpretations.

When I asked how many customer interviews his firm normally does to test assumptions, one practitioner with the title of Manager, Voice of the Customer said “ Oh we know what the customer wants. I look at some (multi-client) research reports and I represent the customer on our portfolio planning meetings.”

Perhaps the words of Thomas Edison are correct here.

“Opportunity is missed by most people because it is dressed in overalls and looks like work”

Value Proposition

A strong value proposition for a product concept must answer these three questions posed by desirable customers. What does your concept do? Uniquely well? For me?

In 1998, Michael Lanning4 stressed that a value proposition is an internal document, not for external distribution. It acts as a blueprint ensuring consistent messaging inside and outside the firm on the value delivered by the concept.

Product developers can use the value proposition to guide technical development of the concept. They may also use it creating marketing communications and sales proposals to early adopters. My experience is the Thomas Edison quote also applies to value proposition creation.

As mentioned at the start of this post, the NSF Innovation Corp initiative makes building a value proposition central to commercializing a technology. Steve Blank whose concept development process is the foundation of the initiative, is collaborating with Alexander Osterwalder to develop a Value Proposition Canvas tool5 as a Mac or iPad app. I await release of this app because my experiences with a value proposition canvas app produced by another developer6 have been disappointing.

Testing assumptions involves skill, experience, and objectivity

Since 1985 I have quickly, through telephone elicitation, gathered and analyzed fresh customer insights to test assumptions for B2B specialty products companies and private equity firms in North America and Europe.

Contact me a 203/323-4075 or george@georgecastellion.com to start a conversation about how we might work together.

1. (2013) Markham, S., Lee, H. Product Development and Management Association’s 2013 Comparative Performance Assessment Study Journal of Product Innovation Management 30(3) 408-409 (Full disclosure: I am a co-founder of the Product Development and Management Association Foundation a 501(c)3 non-profit.)

2. http://steveblank.com/2013/10/26/300-teams-in-two-years/

3. (1993) Griffin, A., Hauser, J. The Voice of the Customer Marketing Science 12(1) 1-27

4. (1998) Lanning, M. Delivering Profitable Value Perseus Publishing, Cambridge, MA

5. http://businessmodelalchemist.com/blog/2012/08/achieve-product-market-fit-with-our-brand-new-value-proposition-designer.html

6. Canvas Model Design iPad app

Building a compelling value proposition for a new product idea is like snorkeling

 

Above the water’s surface all may seem uncomplicated … a familiar beach lined with palm trees … fluffy white clouds in the sky. Put on a snorkel mask and look below the surface. Your view will be different. Brightly colored fish dart this way and that amid murky currents and craggy reefs with niches that may hold safety or danger.

It’s similar when a development team builds a compelling value proposition for a new product idea. Above a familiar market’s surface, all seems serene and certain. Looking below the surface, however, sometimes shows significant changes in customers’ needs.

 It’s easy to fooled by what customers say they want

All seems certain when one is sitting in an office chair and data-mining call reports on purchasing agents. However, the main facts about marketplace acceptance of a new product idea are outside the office, inside customers’ heads.

Customers’ purchasing agents are not the main decision-makers for adopting new product ideas. Key decision-makers may be engineers in a customer’s plant or members of their R&D department. Here is where skill in asking questions of people you don’t know will help elicit what is going on below the surface.

Going below a market’s surface can help discover hidden competitive moves

A dozen years ago, Theo, director-general of a European specialty materials company was concerned about a puzzling move a USA-based competitor had made. Looking at an USA import database, Theo noticed the competitor had bought a small amount of a possible precursor to one of the competitor’s specialty materials. This specialty material of the competitor and one of Theo’s products performed a similar function.

Theo’s sales representatives and R&D staff were indifferent to his concern “we know our USA customers for that product and they would have told us if anything was up”. He decided to employ a consultant to gather information that would reduce his uncertainty about the competitor’s move.

The consultant interviewed forty customers in the USA and Europe. By the twenty-seventh interview he found that both Theo’s and the competitor’s specialty materials had industry supporters. When the consultant asked about future needs the supporters responded with general versions of “faster, better, cheaper”.

On the twenty-eighth interview the consultant caught a glimpse of new information. This customer hinted he knew something special about “faster, better, cheaper”, but was reticent about the details. Next the consultant discovered and interviewed two engineers working inside this customer’s plants. Both said the company was working with the competitor to develop an on-site unit to produce the specialty material.

Going to on-site production would result in major cuts in the cost to the customer of either the competitor’s or Theo’s specialty material. An interview with the building approval officer in the county where the plant is located, gained a copy of the competitor’s on-site unit’s plans. Theo’s plant engineers quickly piloted and developed an on-site process for their specialty material. After introducing their lower cost specialty material, Theo’s company kept market share in the industry.

Reducing uncertainty in the front end of development

There are many ways to gather information for reducing uncertainty in development of a new idea and building a compelling value proposition. I prefer elicitation through phone interviews for its speed and global reach.

Since 1985, I’ve worked with development teams to help new B2B product ideas achieve the commercial success they deserve. My clients are manufacturing companies and private equity firms in North America and Europe.

Contact me at 203/323-4075 or George@georgecastellion.com. I’d like to explore with you how my experience and skills can help your team come to grips with substantive development problems.

Since 1985 … eliciting latent needs, lead users, and growth opportunities

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