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Newport Board Group, an Advisory Firm Serving Middle Market Companies, Issues 5 Points to New Product Innovation

The sign in the coffee shop around the corner says, “The customer is always right!” How many courses and seminars have told us how to design a product or service to what the customer wants? Yet Steve Jobs built one of the world’s largest companies on the opposite principal saying, “The customers never know what they want until we show them.” If Henry Ford had asked his customers what they wanted, he would have been told to design a faster horse.

Entrepreneurs, product developers, CEOs live with these conflicting messages. Investors and boards want a CEO to prove that there is a paying customer for the new product.”Will the dog eat the new dog food?” Incremental improvements to well established products are the lowest risk new product. But a generation of entrepreneurs have been inspired by Steve Jobs’ view that new product categories can be created by innovative product concepts.

History shows that companies chasing customer preferences and fads can fail; the cyclical pattern of airlines chasing demanding business flyers only to be undercut by low cost competitors providing simple location to location transportation and IBM and DEC chased power computer users only to be undercut by the PC.

Technology companies in the U.S. such as med tech firms have developed products to satisfy U.S. and European healthcare systems. But these companies have limited success selling products in developing countries. Healthcare buyers in developing countries have smaller budgets and are looking for simpler products that meet a lower threshold of patient care which will likely result in similar low technology/low cost competition as US healthcare providers come under more cost reduction pressures.

This pattern is described as the introduction of disruptive technology by Harvard Business School Prof. Clay Christianson in his book “The Innovator’s Dilemma.”

Far too often, the passionate entrepreneur or R&D director presents a new product idea which is a wonderful display of technological innovation. Significant work by talented people has produced creative uses of their technology. But has this effort created a product or service that a customer will buy to solve their problem or satisfy their desire?

The underlying drug for Viagra, sildenafil citrate, was created to treat hypertension. During human trials, the curious side effect of enhanced male erection was noticed. That became the core business application for the drug. The Post-it Notes adhesive technology is a famous product development failure at 3M. The 3M scientists were attempting to develop a new strong adhesive. The resulting product had poor adhesion properties. A 3M scientist, Spencer Silver, then asked if there were any products that would benefit from low adhesion glues. Post-it Notes were born.

Steve Jobs was a rare example of someone who spanned both technological innovation and market/customer acceptance innovation. He had a profound understanding of where the computer and communication technology could go, but also how customers could and would use the capabilities of the technology.

Two lessons are often drawn from Jobs. The first is that Jobs succeeded by ignoring shortsighted customer preferences. Instead, new ventures should pursue their technology and customers will ultimately find the new product. The second is that Jobs was such a unique individual that there is nothing to learn from his example. If anything, according to this view, he is a bad example for virtually every innovator and entrepreneur.

Both of these conclusions are wrong. The real lesson from Jobs’ success is that both technology innovation and market/customer acceptance innovation are required for major new product and new business model success.

CEO’s of innovative companies, leaders of technology driven start-ups and high growth companies, investors in these companies, product development leaders and board of director/advisory board members of these companies will benefit from the following approaches:

1. Engage both the technology and market perspectives from the start. Get the right team involved that can carry the project and product through to an excited paying customer.

2. In most cases, asking the new product team to demonstrate that there is a paying customer for whom this new product or service satisfies a MUST HAVE requirement and not just a NICE TO HAVE requirement is the right approach.

3. Ask what customers and what potential customers will most benefit from the properties of the new technology or product. These may not be the customers you are currently serving or you were planning to serve. Reaching beyond your existing clientele or your initial conception of the customer is difficult. Engaging outside perspectives is essential.

4. Fundamentally new products and product concepts require a passionate champion and committed team. This is the strength of a focused start up or early growth company. And the vulnerability of a large company bureaucracy. Investors, the board, the CEO of a larger company need to ask whether the right team and right leadership is engaged to create a successful company.

5. A final point. Don’t pretend to be Steve Jobs. In truth, the right small, committed team with complementary skills can bring the same capabilities to the table and successfully create, launch, market, and sell genuinely innovative products.
Rick Williams is a partner in the New England office of the Newport Board Group. this article first appeared in several city Business Journals across the United States.

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