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Vol 1. Issue 2:
NPD Dialogues: Innovation, disruption -- and VOC?!
Hi, welcome to NPD Dialogues
- highlights of interesting discussions that have taken place (or
are about to take place) at Management Roundtable events and
audio-cons. As in the previous issue, I’m going to keep this short,
sweet - and hopefully spicy.
Last time I wrote about
co-development and alliances, a topic which continues to
generate discussion, but we’re also hearing quite a bit about
innovation and disruption, and believe it or not,
good old-fashioned Voice of Customer.The surprising
thing is they’re all linked! To be innovative, you probably will
need external partners and you definitely will need customers.
What's more, you should pay very close attention to both.
1. Are co-development
partnerships worth it? How can you tell?
2. Innovation is different than invention
3. So, how do you get at these customer needs anyway?
4. My Two Cents
1. Are co-development
partnerships worth it? How can you tell?
Many companies outsource and partner to develop
new products, but few have established processes – let alone metrics
- to ensure mutual gain. Often it’s unclear whether a partnership is
even beneficial!
Here are a
few insights and metrics from our recent audio-conference with
Steve Steinhilber, VP Strategic Alliances, Cisco Systems.
Cisco is one company that ought to know something about
profitable partnerships; revenue from its strategic alliance
partnerships grew 12% last year, now accounting for more than 14% of
Cisco's total sales.
Q: What is the
typical success ratio for alliances? What is Cisco’s ratio?
A: The industry average is 30% Success, 70% Failure.
Cisco’s target is the inverse: 70% success, 30% failure. We’re
probably not quite there yet, more likely in the range of 60%-plus
success with 20% TBD because new or expanded relationships are
involved. We’d always like to do better, but we recognize you need
to place some bets to get the big payoffs. So if you aim for 100%
success rate, you’re probably not going to take the risks which come
with the major opportunities.
Q: What are the
criteria for success?
A: The criteria include:
1. Meeting or exceeding business goals within timeframe
established
2. Delivering on customer value proposition, including hitting or
exceeding sales targets
3. All key stakeholders on both sides remain committed to and
engaged in relationship
4. Alliance viewed positively by customers and industry influencers
Q: What metrics
does Cisco use?
A: Metrics that are most appropriate to
what the partnership is all about, and that varies somewhat with
each partnership. For example, on our dashboard we might track
Bookings, Customer Satisfaction, New Market Acceleration, New
Business/New Accounts, Practices Established, Vertical Solutions
Developed, Certifications, etc. . If it’s a multi-faceted, two-way
relationship, we will include Balance of Trade. If it’s a supplier
of Cisco we may have a supplier component. Some measures are
qualitative, some are obviously more quantitative.
Q: What advice
would you offer about alliance metrics?
A: Having metrics and not doing anything when
you’re missing them is an exercise that wastes everybody’s time. So
if you are beginning to see significant missing of metrics, you want
the team to dive in and take specific actions to figure out what’s
going on, what is the corrective action. Another caution: If you
don’t have clear metrics, you don’t really know what you’re
measuring and you’ve got nothing to take action on. Frankly, the
relationship will probably slow at that point anyway.
However, in some cases the
metrics may cause a problem. They may indicate you set the wrong
goal. Maybe you assumed things were going to move faster to market,
for example. You can adjust the goals for success - and I don’t mean
just keep changing the goal lines to make the alliance successful.
But up front when you set these goals, they're imperfect so you need
to be able to go back and review them. There are times when the
metrics will isolate a problem, but maybe the problem isn’t the
execution, maybe the problem is that the goal was wrong to begin
with. And you need to re-trigger the goal based on what’s realistic
-- this allows both teams to feel successful in a meaningful way.
- Full transcript, CD and
slides from this session are available for $295. Call 781-891-8080.
For more insights specifically on alliance metrics, we suggest a
new book by Larraine Segil Measuring the Value of
Partnerships. Larraine will also be leading an
audiosession on this specific topic on June 30 and keynoting
MRT's
9th Annual Conference on Product Development and R&D Metrics.
2. Innovation is different than invention
We are beginning to get a little weary (and wary)
of the “I” word which is so over-used it’s almost lost meaning.
Nonetheless companies are searching for ways to pull away from the
pack, whatever it takes. Many recognize that the only way they can
do this is to go beyond their own four walls – to actively scout for
new ideas and technologies. (Sometimes called "open innovation").
So we recently had a discussion with
Jay Paap, a leading technology
management expert who’s been doing open innovation for over 25 years
– long before it was trendy. Here’s his take on the Innovation and
Disruption phenomenon, including when to scout for external ideas
and when not to – and, guess what, it all boils down to customer
needs.
Innovation
means that we take a technology and are the first to apply it to a
problem or a need that our customers have. It’s different than
invention. It’s different than discovery. You do not have innovation
unless someone actually buys or uses your product. People do not use
something unless there is a need. So you may not know the need for
sure when you develop it.
If you’re trying
to figure out what’s going to disrupt you, you don’t look for
technology. You look for changes in needs. If needs remain constant,
and there’s a lot of maturity left in your technology, there’s
probably not going to be substitution. You don’t need scouting. If
the needs are constant, and your technology is running out of steam,
you need scouting to find the next replacement technology.
Listen to your
customers. Not what they ask for, but what they do. Look at how they
use your product. Look at the problems they have. Look at the
environment in which they are operating and try to anticipate what
the next generation of drivers are going to be when the current
generation of drivers are satisfied. Then go out and find analogues
in other industries that have addressed these problems and borrow
that technology, or adapt that technology in ways that will allow
you to go forward.
3. So, how do you get at these customer needs
anyway?
A natural segue from the conversation with Jay is
our conversation with
Gerry Katz of Applied Marketing Science, a VOC guru.
Since customer needs are so important, how do you get at needs and
uses for a totally new-to-the-world product? What if it’s a
completely undefined product category or a product for which there
simply aren’t any existing solutions or substitutes?
Here’s Gerry’s advice:
There are two things you can do. First of all, if there are other
products with which customers try to accomplish the same task right
now, you can always talk about those. If it’s totally undefined,
then sometimes you do have to either show or explain a few concepts
to simply open up the space. Let me give you an example:
Many years ago I worked on a product (based on
research being done at Harvard Medical School) that could shift
someone’s internal time clock to fight jet lag. It had to do with
the use of extremely bright light and its effect on circadian
rhythms. In this particular example, there was really nothing out
there. What we did was to interview frequent international
travelers, people who took at least three international trips across
more than five time zones per year. We asked them how they fought
jet lag. And we heard all kinds of things from taking pills, to
adjustments in diet, to toughing it out. Then we showed them some
devices that would deliver this bright light and got them to react
to that. It wasn’t perfect, but it was the best that could be done.
So, in a nutshell, you
can talk about analogues that deal with that problem now. But if all
else fails, you may have to tip your hand a bit and let people react
to some actual concepts.
Conversely, if it is
an existing market, don’t confuse Voice of The Customer with a
concept test. You should not be showing new prototypes or new
concepts in Voice of The Customer. You’re not supposed to develop
those until well after you do Voice of The Customer.
4.
My Two Cents
Listening to the experts talk about innovation
makes me wonder -- does VOC really inspire breakthrough products? I
have to admit - the advice seems practical, but conservative. What
about those crazy ideas that come out of R&D (or the shower) and
perhaps create a need that people didn't even know they had? Sure,
you need to run the idea by people before you mass-produce it, but
are customers always right?
I'd love to hear your thoughts….if you have an
opinion on these topics - or others, drop me a note
Jackie@roundtable.com.
Thanks - and hope to hear
from you!
Best regards,
Jackie Cooper
Executive Director
Management Roundtable
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