Developing for Markets, 28.10.2017
1) Introduction
“Innovation is the process by which an idea or invention is translated into a good or service
for which people will pay, or something that results from this process.”
Process of innovation often requires development of new competences or new combination of existing ones.
Innovation = invention + commercialization
- Innovation is not the same as R&D…: Most of the top companies ranked by peers as “innovative” weren’t
among the top spenders for R&D! (e.g. Appel – most innovative but only 70 place in R&D)
The Stage-Gate Model
Innovation can be managed: The model depicts the ideal innovation process and guides way to success
• Series of activities
• Go/no go decisions
• In practice, not always this linear
“Using the analogy of North American football, Stage-Gate is the playbook that the team uses to drive the ball
down the field to a touchdown; the stages are the plays, and the gates are the huddles.” - Robert Cooper (2009)
NPD (New Product Visions) funnel Booz, Allen & Hamilton (‘82): Stevens & Burley (1997):
62 ideas for one success 3,000 raw ideas = 1 commercial success
“The integration of customers into the early and the later phases of NPD has a positive effect on success. … In the
successful NPD project, all process steps are aligned with the market requirements.” - Holger Ernst (2002)
Champions and serial innovators
Product champions play critical role in innovation projects: they keep the organization interested in the project
e.g. during setbacks. They go “the extra mile” to make it work, adopt the project and become its advocate.
Serial innovators: individuals who conceive ideas, develop those ideas into breakthrough innovations, and guide
them through the organization’s commercialization process and into the market. They need not only technical
expertise and problem-solving tenacity but also tireless desire and the interpersonal and political skills to be able
to navigate unproven projects through many layers of an organization.
Success factor #1: The product offers the customer a significant relative advantage.
But: Just being different is not enough…
What makes your product unique? Is your customer willing to pay for that?
Products looking for customers
Internet of Things: wide range of products connected to Internet (e.g 24eight diaper that text parents when wet)
Do managers really understand their customers?
• Know what job their customers try to do?
• Understand their customers’ key success factors?
• Know how their product or service creates value for them?
,- Or are they more focused on their own well-being and not really interested in their customers (inside-out)?
McKinsey conducted interviews with CEOs worldwide:
• 85% has innovation at the top of their agenda
• 80% are concerned that their business model is at risk
• 6% are pleased with their firm’s innovation performance... ↔The other 94% have no idea what problem is!
That’s why Developing for Markets: It is not about how to become more creative but about the
systematic process that is needed to create superior value for customers.
2) Understanding customers (Lecture 2)
Foundations of Innovations
Important issues for Outside-In
- What (new) needs do customers have?
- How and why are customers changing?
- What can we do to solve their problems?
- How to help them to develop themselves?
- What new offerings are competitors offering?
- Any new competitors?
Outside-In: Is it so obvious? Designing Outside-In Strategy
Reasons for Inside-Out Myopia:
- Positive reinforcement: small steps
- Competing priorities: Many stakeholders and customers farther away
- Contemporary Strategy Theories: e.g., resource-based view, core competences
- ‘Darwin in the Enterprise’: Employees resist creative destruction
- Going with the flow: impact of social norming
Customer value thinking
“Customers don’t need quarter-inch drills,
they need quarter-inch holes.”
Theodore Levitt
Benefits: The Elements of Value Pyramid Acquiring Customer Understanding
(Almquist et al., HBR 2016)
Customer Insights Firms Need How to Get Customer Insights?
- Which needs do customers have? - Hire customers as employees
- How important are needs? - Organize work to optimize customer contacts (not efficiency)
- How many/which customers have them? - Job rotation: temporary or permanently:
- Which product (features) can satisfy needs? R&D sales / Sales maintenance / Manager call center
- How customers value competitive products? - Use internal databases
- Will product outperform competition? - If everything else fails: do research!
, Feedback Sofia Quintero (31 Aug 2016)
1. All feedback should be considered, no matter how small.
2. Consider every customer touchpoint as an opportunity
to gather constructive feedback.
3. Build hypotheses to drive your requests for feedback.
4. Use existing feedback to decide what questions to ask.
5. Make it a priority to talk with your customers.
6. Keep your biases and emotions in check.
7. Analyze feedback context: who, when, what, how often?
8. Both quantitative and qualitative feedback are needed.
9. Before collecting: decide who is responsible for using customer feedback.
10. Customer feedback is critical to your bottom line.
New Ideas for more Customer Value Test: Professionals vs Users Poetz and Schreier (2012)
Getting Customer Insight: From whom?
1. The ‘average’ customer: How: representative sample. What: needs averaged
2. Customer who currently has future needs: Lead users in the industry
3. Lead user who is employee: Embedded lead users
4. User who currently has future solutions: Lead users outside industry
Towards Powerful Innovative Ideas
Methods discussed until now: To identify customer needs
→ Next step is to explore: How many customers share these needs? How important are these needs? How well
do new features satisfy needs? Are customers willing to pay for new features? Can existing features be left out?…
Customer Preference Methods
- Source of preference data: Stated preferences (study); revealed preferences ((quasi) real-world behavior)
- Freedom of attribute choice: Free (customer select relevant attributes); Predetermined (researcher decides)
- Attribute or alternative based evaluation:
o Compositional: evaluate separate attributes, then combined into products
o Decompositional: evaluate alternatives, statistics to determine contribution attributes (levels)
Often used methods
Structured methods:
• Self-Explicated method: compositional Evaluate separate attributes and attribute levels (e.g., Casemap)
• Conjoint Analysis: decompositional Evaluate product (descriptions) by rating, ranking or choosing
• (+): holistic, realistic (trade-offs), limited set needed
1) Introduction
“Innovation is the process by which an idea or invention is translated into a good or service
for which people will pay, or something that results from this process.”
Process of innovation often requires development of new competences or new combination of existing ones.
Innovation = invention + commercialization
- Innovation is not the same as R&D…: Most of the top companies ranked by peers as “innovative” weren’t
among the top spenders for R&D! (e.g. Appel – most innovative but only 70 place in R&D)
The Stage-Gate Model
Innovation can be managed: The model depicts the ideal innovation process and guides way to success
• Series of activities
• Go/no go decisions
• In practice, not always this linear
“Using the analogy of North American football, Stage-Gate is the playbook that the team uses to drive the ball
down the field to a touchdown; the stages are the plays, and the gates are the huddles.” - Robert Cooper (2009)
NPD (New Product Visions) funnel Booz, Allen & Hamilton (‘82): Stevens & Burley (1997):
62 ideas for one success 3,000 raw ideas = 1 commercial success
“The integration of customers into the early and the later phases of NPD has a positive effect on success. … In the
successful NPD project, all process steps are aligned with the market requirements.” - Holger Ernst (2002)
Champions and serial innovators
Product champions play critical role in innovation projects: they keep the organization interested in the project
e.g. during setbacks. They go “the extra mile” to make it work, adopt the project and become its advocate.
Serial innovators: individuals who conceive ideas, develop those ideas into breakthrough innovations, and guide
them through the organization’s commercialization process and into the market. They need not only technical
expertise and problem-solving tenacity but also tireless desire and the interpersonal and political skills to be able
to navigate unproven projects through many layers of an organization.
Success factor #1: The product offers the customer a significant relative advantage.
But: Just being different is not enough…
What makes your product unique? Is your customer willing to pay for that?
Products looking for customers
Internet of Things: wide range of products connected to Internet (e.g 24eight diaper that text parents when wet)
Do managers really understand their customers?
• Know what job their customers try to do?
• Understand their customers’ key success factors?
• Know how their product or service creates value for them?
,- Or are they more focused on their own well-being and not really interested in their customers (inside-out)?
McKinsey conducted interviews with CEOs worldwide:
• 85% has innovation at the top of their agenda
• 80% are concerned that their business model is at risk
• 6% are pleased with their firm’s innovation performance... ↔The other 94% have no idea what problem is!
That’s why Developing for Markets: It is not about how to become more creative but about the
systematic process that is needed to create superior value for customers.
2) Understanding customers (Lecture 2)
Foundations of Innovations
Important issues for Outside-In
- What (new) needs do customers have?
- How and why are customers changing?
- What can we do to solve their problems?
- How to help them to develop themselves?
- What new offerings are competitors offering?
- Any new competitors?
Outside-In: Is it so obvious? Designing Outside-In Strategy
Reasons for Inside-Out Myopia:
- Positive reinforcement: small steps
- Competing priorities: Many stakeholders and customers farther away
- Contemporary Strategy Theories: e.g., resource-based view, core competences
- ‘Darwin in the Enterprise’: Employees resist creative destruction
- Going with the flow: impact of social norming
Customer value thinking
“Customers don’t need quarter-inch drills,
they need quarter-inch holes.”
Theodore Levitt
Benefits: The Elements of Value Pyramid Acquiring Customer Understanding
(Almquist et al., HBR 2016)
Customer Insights Firms Need How to Get Customer Insights?
- Which needs do customers have? - Hire customers as employees
- How important are needs? - Organize work to optimize customer contacts (not efficiency)
- How many/which customers have them? - Job rotation: temporary or permanently:
- Which product (features) can satisfy needs? R&D sales / Sales maintenance / Manager call center
- How customers value competitive products? - Use internal databases
- Will product outperform competition? - If everything else fails: do research!
, Feedback Sofia Quintero (31 Aug 2016)
1. All feedback should be considered, no matter how small.
2. Consider every customer touchpoint as an opportunity
to gather constructive feedback.
3. Build hypotheses to drive your requests for feedback.
4. Use existing feedback to decide what questions to ask.
5. Make it a priority to talk with your customers.
6. Keep your biases and emotions in check.
7. Analyze feedback context: who, when, what, how often?
8. Both quantitative and qualitative feedback are needed.
9. Before collecting: decide who is responsible for using customer feedback.
10. Customer feedback is critical to your bottom line.
New Ideas for more Customer Value Test: Professionals vs Users Poetz and Schreier (2012)
Getting Customer Insight: From whom?
1. The ‘average’ customer: How: representative sample. What: needs averaged
2. Customer who currently has future needs: Lead users in the industry
3. Lead user who is employee: Embedded lead users
4. User who currently has future solutions: Lead users outside industry
Towards Powerful Innovative Ideas
Methods discussed until now: To identify customer needs
→ Next step is to explore: How many customers share these needs? How important are these needs? How well
do new features satisfy needs? Are customers willing to pay for new features? Can existing features be left out?…
Customer Preference Methods
- Source of preference data: Stated preferences (study); revealed preferences ((quasi) real-world behavior)
- Freedom of attribute choice: Free (customer select relevant attributes); Predetermined (researcher decides)
- Attribute or alternative based evaluation:
o Compositional: evaluate separate attributes, then combined into products
o Decompositional: evaluate alternatives, statistics to determine contribution attributes (levels)
Often used methods
Structured methods:
• Self-Explicated method: compositional Evaluate separate attributes and attribute levels (e.g., Casemap)
• Conjoint Analysis: decompositional Evaluate product (descriptions) by rating, ranking or choosing
• (+): holistic, realistic (trade-offs), limited set needed
