In the front end of new product development (NPD), techies and marketers disagree. Techies say their new technology will sweep the market. Marketers say, wait a minute, let’s find out what customers want.
What both engineers and marketers should know, is that in the front end of NPD uncertainty reigns. You can’t change luck. So, in most client projects, I search for hidden information that reduces the odds of a product concept’s failure.
Doug Hubbard is author of How to Measure Anything: Finding the value of intangibles in business. His approach is that of a bookie. He points out that a new feature in a product concept could increase sales by >12%. But the increase could be a lot less. Bookies invest in finding hidden information that reduces the odds of losing a bet.
Hubbard’s approach resembles that of Annie Duke, a scientist turned poker player. A description of Annie’s decision-making method is in a previous post.
Alvin’s dilemma … accept the techies’ push or learn what customers want
Alvin is Dir., Specialty Products Marketing for the firm’s paint thickeners. Techies in the R&D division developed a new thickener. They are pushing Alvin to test it in his market. Alvin does not want to do this. He hired me to find out what paint manufacturers want in a new thickener. He needs to know the odds of failure if he doesn’t follow the techie’s approach.
In my project for Alvin I entered into elicitation conversations with 30 knowledgeable individuals in the paint industry. At the start of a >15 min. conversation, each individual assumed the role of Professor. During the conversation I remained in the role of the Intelligent Pupil.
The project was a blind study; the client remained unknown. Selection of individuals for the conversation was random. They were chosen from a pool of >200 well-informed individuals. Under these conditions, using the Central Limit theorem results in a valuable mix of both qualitative and quantitative information.
There was no interest in the techies’ paint thickener concept. Why? “Cost to us to qualify a new thickener— assuming it’s completely compatible with our formulations — is at least $150,000. It’s a poor investment for us.” The Sherwin-Williams Co.
Strong interest in a little-known need. “George if your client could tweak thickeners so that we could lower the pigment grind step in our paint production, that would remove an energy intensive and time-consuming step.” Benjamin Moore
Alvin and the techies exploited this new knowledge.
Tweaked thickeners so that 1. There is no pigment grind step, 2. Tweaks are completely compatible with customers’ formulations.
Four years after introducing the tweaked product, Alvin had:
- Raised the product group margin to 85%.
- Become #1 in share of the thickener market.