1038 Before jumping

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

Sherlock Holmes

Enlisting Sherlock Holmes for new product success in mature markets

In mature B2B markets, it’s vitally important that new product developers answer the following question. Will this new product idea add to our distinctive value-creating skills?

Sherlock Holmes was a master at discovering what was in fact going on

He was a practitioner of the scientific method of thought. By close observation he discovered key information others had missed. He knew the craft of elicitation inside and out. He employed it when interviewing people to uncover knowledge they had but whose significance they had not previously understood or revealed.

Elicitation helps build a compelling value proposition to strengthen development of a new product idea

A value proposition is a strategic planning tool for success that does not guarantee success but ensures fewer lackluster ideas are developed. It helps development decision-makers steer clear of conclusions based on untested assumptions and unquestioned beliefs about prospective customers.

Using elicitation interviews with prospective customers can discover key information such as:

Customers’ latent needs

Emerging competitive products

Early adopters

Mistaken beliefs

When data from the interviews are analyzed, previously unrecognized patterns and regularities emerge. This cutting-edge information, when built into a value proposition, equips the product idea with an engine powered by a firm’s distinctive value-creating skills.

Forty elicitation interviews produce statistically noticeable information

In most B2B markets the number of people with distinctive market or technology knowledge is less than 300. The Central Limit Theorem of statistics provides a method of gathering significant insights from elicitation interviews with only 40 of these people. The theorem combines two statistical tools: probability and a simple random sample.

To apply the theorem as Sherlock Holmes would, first identify 300 people in the target market who might have market or technology knowledge. Then contact people in the sample, qualify them as having distinctive knowledge, and draw out their comments about characteristics of the new product idea and its preconceived market. Analyze the data gathered from 40 elicitation interviews. Be alert for previously unrecognized patterns  in how prospective customers view the product idea.

Thinking like Sherlock Holmes prevents “omission neglect”

Sherlock Holmes’ method of inquiry brings out previously silent information. This new information provides insight on important issues such as: latent needs, early adopters, competitive moves, and customers’ mistaken beliefs.

There are many ways to gather this information in the front end of product development. I prefer, for its speed and global reach, to gather the information through phone interviews.

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

Contact me at 203/323-4075 or george@georgecastellion.com. I will take the time to explore with you how I can help your team build a compelling value proposition.

Endnotes

(2002) Castellion, George Telephoning Your Way to a Compelling Value Proposition The PDMA Toolbook For New Product Development p63-86, John Wiley & Sons, NY, NY

(2013) Konnikova, Maria Mastermind: How To Think Like Sherlock Holmes Penguin Group, NY, NY

(2013) Wheelan, Charles Naked Statistics: Stripping The Dread From The Data W. W. Norton & Company, NY, NY

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

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