The third in a series of four articles on key factors in business growth.
We often take a direct approach and ask business teams, “Why can’t you grow?” Their answers tend to fall into three categories: Leadership Mindset, Organizational Skillset, and Operational Toolset. We have already defined and described each of these sets and addressed Leadership Mindset. Now, we will explore the Organizational Skillset.
We were asked by a client to evaluate approximately 30 growth initiatives across several businesses. They had recently used Six Sigma to upgrade their growth process.
Skill levels varied among the teams. Black belts were still monitoring process adherence despite the work and deliverables of their upgraded process being consistent with best-in-class approaches. Although not originally central to our discovery diagnostic, we found improvement opportunities in three major areas:
- Quality of market learnings generated
- Ability to transform market leanings into a value proposition
- Robustness of their business case
Below is a more in-depth description of these three areas, how they impact quality, and potential remedies to strengthen weak performance in each.
Quality Market Learning
The objective of market learning is to discover enough about a number of markets to make an informed decision about which to pursue. It requires identifying the market knowledge critical to decisions, then knowing how to collect and generate symmetrical knowledge on each market being considered.
Once prioritization criteria have been established, validating the nature of demand is the next step. Focus data gathering on what is critical to both the business decisions and analytics and that will deliver the necessary market knowledge or intelligence. The discovery of insights fuels fact-based decisions for differentiated positionings and innovative offerings. This is how market learning drives innovation.
Market-driven innovation differs from the traditional product-driven approach in that a clear and analytic knowledge of the market drives the innovation process. In the latter, development is focused on making the product better to justify sales success. In the former, development is focused on translating what can deliver the outcomes targeted customers want to experience.
Quality market learning requires three critical skills:
1. Develop a robust interview guide that engages specifiers and influencers of a potential offering. A properly constructed interview guide is a powerful tool to address innovation issues. It ensures you have included all relevant information required for effective learning. Interview guides should begin with general or more strategic questions and drill down into the specifics. They can be modified to be more relevant to different types of audiences, including downstream specifiers and external influencers. They should be upgraded throughout the learning process.
2. Interview key players (specifiers and influencers) in the market. Planning and conducting interviews requires skill. Some of the people we have worked with were so unsure of themselves that they either hired external interviewers to do everything or used focus groups. These approaches detract from organizations building internal capability and fostering deeper individual customer understanding. Building confidence comes from practice. And role-playing is excellent practice. Another performance builder is to find someone in the market space that you know and feel comfortable around. Try your interviewing skills out on them, and be sure to ask for and accept honest feedback. This is also where experienced coaches can help by
- Prepping team members for the interview
- Participating in early interviews as a resource
- Providing interview critique
It often takes no more than a couple of interviews to reach your stride.
If the opportunity is available, significant learning can also be obtained by observing how customers interface with your product and/or service in direct use and across multiple touch points. This observational research can take place in person or by utilization of Web-enabled tools.
3. Use market structures and value-adding chain dynamics to scope concepts to be evaluated. The market drivers define a specifier’s
- Unmet needs
- Desired outcomes
- Benefits to be delivered
Understanding the market structure also provides guidance into whom to interview and key strategic questions to be asked.
We often find teams spend most of their energy on the easier to engage direct users (especially those who already are customers) and, as such, learn only a small portion of what they need to know.
Transforming Learnings into a Value Proposition
Many consultants suggest that the only purpose of qualitative interviews is to learn what the customer has to say. Not so! It is critical that you begin the task of testing your concept statement early in your learning phase. Concepts are the seeds of value propositions that flourish. The transformation of the concept into a value proposition results from both the early qualitative interviews and the later more extensive quantitative validation.
We recently reviewed over 20 innovation project charters. You may be as surprised as we were to learn that many of the charters did not have a well-defined concept statement and description. Discussions with other innovation coaches supported our findings. Although teams could describe what they were working on and why, they were not able to translate those thoughts into a form that could be communicated and tested with users and influencers. Defining the starting point—the concept around which market learnings must center—is essential to reaching the endpoint that delivers results.
We will start with our definition of a concept statement. A concept statement has three key elements:
- Needs you propose to satisfy when you bring the concept to market
- The form the concept must take to be usable by the market
- Technology/Capability that provides the basis to assure the concept is meaningful and unique
At the end of every interview, once you have exhausted your learning questions, put your concept in front of the interviewee to find out their reaction. Ask about
- Their overall impression of the concept
- The part of the concept they value most and why
- The part of the concept they do not value and why
- How they would upgrade the concept to meet their needs
Concepts should evolve as you learn and test them throughout your interview process. Remember: interviews are exploratories and not to be confused with more structured quantitative validation – the stage that comes later.
Once you have a concept tested and refined qualitatively, you can determine the value for the concept quantitatively. A well-constructed quantitative survey provides the development team the necessary customer specifications for those who will actually build the offering. The primary unknowns following qualitative exploratories are
- The cost of developing and delivering the value proposition
- What group has what value for your concept and how many of them there are
In quantitative inquiries, we use concept-testing approaches that include Van Westendorp analysis to generate the value that customers have for the concept. Concept testing should be entrenched in your operational toolkit, which we will cover in our next blog post. No project should proceed to development unless it passes the concept test!
Building a Robust Business Case
The business case answers the following questions:
- Can we make money on this concept?
- Why do we want to pursue developing our concept/value proposition into a commercial venture?
- Is this the best use of our resources?
It serves as the proof of effort to justify the investment of resources by leadership. To build a robust business case, you need to answer four questions:
- How much value does the market have for our value proposition? Determines the unit value
- Who in the market has this value? Defines the demand by segments
- What do we need to create this value? Defines the development task
- What must we do to bring this value proposition to market? Projects the marketing expense
The most common pushback from project teams is “How can we estimate market value and size, let alone what the cost of our product will be, based on the value proposition?” This issue alone can cause friction between leadership and project teams.
A well-constructed quantitative survey (which we will discuss in our next blog post) provides all the information needed to build the business case.
Additional benefits from generating business cases include
- Understanding of the cause-and-effect relationship between the market learnings from the early qualitative work and the validated learnings that are inputs into the business case
- An objective mechanism to evaluate and compare alternative projects, using the same criteria. With limited resources, only the few potential winners should compete for resources.
- Increased alignment that comes from communicating across the organization the value of commercializing the prioritized offerings
- Clarity about the source of profitable business growth
So far, we have discussed Leadership Mindset and Organizational Skillset. They are interdependent sets. Effective Leadership Mindset uncovers weaknesses in Organizational Skillset by
- Staying engaged
- Asking all the right questions
- Measuring the gap between what’s necessary to acquire and leverage market learnings in the business and the bench strength of the current organization.
Leadership should establish performance standards that define quality market learnings, value propositions, and business cases before allowing the project team to enter into the development phase of the innovation process. Too often, leaders make judgments on less-than-robust knowledge—conclusions based on inconsistent data and/or inappropriate analytics—which results in wasted development time and inefficient use of scarce technical resources.
On the other hand, project teams who apply quality market learning, value proposition development, and business case generation processes can influence and even change leadership behavior. They can make it difficult for leaders to say no. It is easier to sell a project with well-founded market learnings than with gut feelings or hopes.
In our final installment in this series, we will discuss the importance of an Operational Toolset to bring well-defined market based learnings to reality.