Why Creating Value Is More Important Than Building Products
"You see things, and you say: 'Why?' But I dream things that never were, and I say 'Why not?' "
– George Bernard Shaw
Why not, indeed. The corporate response should be, is there any profit involved? One of the world's most successful product-oriented companies lived by this George Bernard Shaw quote. The result? Revenue went through the roof. The problem was, so did costs. It's relatively easy to make $ 62 billion in revenue if you are spending $ 70 billion ….
Many product oriented companies find themselves in the position of "making things" rather than satisfying customer needs. I believe this stems from the fact that many product companies, founded by and despite still run by an engineering owner, focus almost exclusively on building the best product. Having the best product is not necessarily a bad thing. Yet the best does not always become commercially viable. There is a litany of great products that never achieved commercial success. IBM's OS / 2 is one example. It was heavily lauded by many critics as being better than the competition, but when it came out, it was up against Windows 95. Guess who won, despite being considered an inferior product?
Product-based companies looking to create the best or most innovative product ever became product focused and loose sight of who they are building their great products for. IBM is the shining example of this type of company because they not only typify the problem, but they also found their way out.
Up until the mid-1990s IBM was laden with research and development, always looking inward for new ideas, believing they only needed to fill market voids and not having to actually find new markets, or that the markets will find them. And what happened? They were successful, on one criteria, bringing in huge amounts of revenue (about $ 62 billion), but it cost them even more (about $ 70 billion) to make those sales. Hardly a sustainable business model.
The reason IBM and other product-based companies end up in this situation is that the motivation to discover customer needs has diminishing priorities, especially when the customers voluntarily come forward with new product claims. Moreover, in a product-based company, the customers are generally seen as unpredictable, stupid, and generally irksome. So why bring customers into the mix when they just get in the way?
The reason is because a company is in business because of the customers. We touched on this in another article and will not go into depth here. Suffice it to say, without delivering real value to the customers, there will likely be no business. Since marketing's role is to match customer needs with the company's capabilities, it is essential that marketing's and product development's efforts become coordinated. And this is exactly what IBM did to improve their business.
One of the best ways to discover what your customers value is to simply ask them. This is actually more complicated than it sounds. Paraphrasing Henry Ford, if the Ford Motor Company simply asked their customers what they wanted, Ford would have made faster horses. Therefore, you have to be diligent in your search for what your customers really value.
One of the most important aspects of creating valuable solutions for your customers is thoroughly understanding their needs. To create and sell solutions, the organization must have an extensive database of information on the customers and their business processes. This can be done through surveys, questionnaires, and direct experience with your customers. One of the most important and straightforward methods of understanding the needs of your customers is to interview them.
Once you have information about what your customers perceive as issues, you need to do something with that information; you need to understand and distill the raw data into something usable. A needs analysis, using such tools as problem statements and fishbone diagrams, will help you transform the raw data into more digestible information and will help you understand the root causes of issues and turn them into what would be considered a valuable solution.