You've heard the phrases, "fail first" and "fail fast," haven't you? The NextStage CRO explores the relationships among failure, innovation and expanding your market.
Readers who are familiar with NextStage's Principles or who have heard me speak on the topic know I put a lot of trust in failure. Salespeople show me case studies of their product or service helping others and my response is "Give me the names of three to five companies or people who've used your product or service and failed. I am much more interested in knowing why and how they failed."
It's not that I enjoy failure. I don't. I do enjoy knowing if my situation is similar to the situations of others who've failed. I don't think less of the product or service, I simply know it's not for me and I've saved lots of time, money and frustration by asking some unpopular questions.
I apply this methodology when I'm working with clients, as well. I'll ask lots of questions during the discovery phase of the engagement and lots of the questions are around what didn't work and why. I encourage people to share their failures because we can only safeguard against future failure by acknowledging and understanding failures in the past.
What I'm going to share here is a cautionary and true tale. I won't mention the company involved although I'm sure the story is a familiar one.
"Help us create a new product"
A company called us in based on some excellent word-of-mouth regarding our ability to predict if something will or won’t increase marketshare. We've often helped companies recognize new opportunities in existing markets or ways to expand their markets, so this was a fairly common request.
Our methodology in these situations goes something like this:
- Is this based on client demand or
- Are you losing marketshare or
- Are you wanting to remain competitive or
- Do you believe there's a hole in the market you can fill or
- ...something else
The discovery process around this can be fairly extensive. It can also be fairly quick.
Example: The company says, "Our clients are asking for this." Then we ask, "How many of your clients? How much revenue do you currently derive from these clients?" When the answers are small numbers our advice is not to expend the product development costs unless there's some other truly compelling reason to do so, such as filling a market hole that you know will be a major marketplace down the road. Cell phones and personal computers fit this category.
This time out, the client company had some resources available that it had never had before, and it wished to develop those resources into a product with which to enter a new market.
This, at first blush, is good thinking. It's not a process NextStage often sees, and it is one we're familiar and comfortable with, so go ahead with it.
The sociology of new products and new markets
Review: a company with a known product in a known marketplace wants to create a new product and enter a new market.
Socioanthropologists and cultural historians are nodding at this point. This is a colonization model at its best and a pioneering model at its worst. History shows that these models work best when one of two things occurs:
- You bring your current marketplace with you
- You design your product specifically for the new marketplace
There is also a third option that is initially suboptimal but often insures long term gains: - Create a bridge product that will draw your current marketplace after you while creating an inroad into the new marketplace
NextStage's method for determining which strategy to use involves studying the existing market, the new market, determining how the new product or service will fare in a target audience conceptual matrix and performing a gap analysis. The target audience conceptual matrix involves the following:
- Can members of the target audience imagine themselves using the product or service?
- Would these people really use the product or service or would it just "collect dust"?
- Can the product, service, whatever be successfully worked into their current lifestyle or would getting whatever require a change in their lifestyle? (Note that this may or may not be a positive experience based on other factors)
- Have they had any experience with this or a similar product or service?
- Are they using this or a similar product or service?
- Have, do or will they have a need for this or a similar product or service?
- Do they believe they will have or have they had pleasure due to the product, service, whatever?
- Do they believe they will have or have they had pain due to the product, service, whatever?
It's important to note what the above comes from. It's based on the forces that come together in a society or culture right before innovations occur. Phrased a little differently it determines why tools appear when they do, and if you substitute "product or service" for "tool" it's a handy guide for whether something will be useful or not within a given target audience or market segment. NextStage's CEO was shocked when I first showed him the above. Like most people, he had no idea how much of social- and neuro-science were applicable to business.
An example of the above matrix being derived from website interactions is shown in the following figure. This graph shows what's stopping conversions from taking place. This doesn't mean conversions aren't taking place, only that not all of them are doing so.
The distance between the red mark and the stacked bars in each category is an indication of how many conversions are being lost due to each factor, and there are many more factors involved than what's shown here. If all factors were included we'd be doing quantum entanglement, encryption algorithms, cold fusion on the kitchen table and we don't want the government to know we're capable of that just yet. The ideal is to have the red marks near the tops of the stacked bars. The stacked bars themselves indicate how much of the necessary factor's information is provided by the web page itself (yellow) and how much is provided by the visitor (blue) him or herself.
Your customers are saying this...
This time out the task was far simpler than could be imagined. The client's end-customers had come forward in significant numbers and asked for a specific product. They'd even described functionality, usage characteristics, purpose... and it was purpose that caught our eye.
End customers were describing a purpose that indicated they were moving into a marketplace new to the client but well-established in the world. There was even supporting research from other groups indicating the same user migration, the same shift in the market.
Personally, I like it when things are this simple. The customer is asking for A, therefore give them A. If you can't give them A then partner with folks who can. There's a sign in an old, New England restaurant that reads "If the customer wants vanilla, give them vanilla." This is excellent advice in my book. Unless you've satisfied the customer's request, you can't upsell them anything.
Designing a new product
NextStage looked at what end customers were asking for, what resources the client had available and outlined the product requirements. The product would satisfy conditions B and C above, a definite win-win for everyone involved.
We gave our results to the client. The response was "No, that won't work for our audience. Our audience would want this other thing instead...."
We brought in charts, graphs, interviews and related research. None of it mattered because the client knew their audience better than we did and they told us so. They looked at our suggestions, tossed out probably 85 percent of them, modified the remaining 15 percent to something they believed would work with their existing audience in their existing marketplace, filled in the rest with what they already had and (wait for it)...
…failed miserably. The new product had (when last I checked) a 0.4 percent adoption rate in the old and new markets combined. It does an excellent job of addressing needs that don't exist and which the client decided their audience had despite evidence otherwise. Both old and new audiences are confused because they know, even if the client doesn't, that the new product doesn't serve the purpose intended.
I remember working at Compaq and telling a marketing manager that a product wasn’t ready. The response was "You don’t understand. It will ship and it will be a success." The product did ship and two months later was pulled from the market.
Lessons learned
I started this column offering that I trust failure because failure is an excellent teacher. Very often what I learn via failure is that there was some other question, some other bit of information that I took for granted during the discovery process. I long ago learned to ask things like, "Who's the decision maker?" "Is there budget for this?" "Who has signing authority?" "Who are the stakeholders?" or "What's the timeline?"
Now I'm going to add something like ... well, I'm not really sure.
But don't worry. I'll think of something.
Joseph Carrabis is CRO and founder of NextStage Evolution and NextStage Global and founder of KnowledgeNH and NH Business Development Network. He was recently selected as a senior research fellow and board advisor for the Society for New Communications Research. Read full bio.
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