Innovation: Product Innovation Charter (PIC) contents

Earlier posts discussed  Do you have a Product Innovation Charter (PIC)?,From Product Innovation Charter to the Product Protocol,Innovation: Product Innovation Charter (PIC) helps prevent scope creep in technology and market. This post is about what the PIC contains.Research suggests that there are three broad topics that the PIC must address viz. Focus, Objectives and Guidelines.Keep in mind that the PIC is a document put together by the top management after which the innovation team or NPD (New Product Development) team is left free to think outside the box and come up with innovative solutions. The PIC should contain the Focus, Objectives and Guidelines:

  • The Focus of the organization should be on what it has competitive advantage in, If your company has great skill in, let us say, doing great electrical design it’s a good idea to mention clearly that you want to focus on electrical design. Why? Those who are not in your industry can argue that it’s easy to hire electrical engineers or for that matter any other engineers and quickly build expertise. Not so, because not only do experienced engineers come up with designs but also are able to anticipate any manufacturability problems that might come up. In fact, institutional knowledge like which supplier can we depend on to come up with a quick prototype, can be enormously benefit.
  • Objectives are after you have defined the focus that is based on your organization’s core competence  as above. Objectives could be the famous GE dictum of trying to be no. 1 or 2 in any market at the time of Jack Welch. Apparently, managers started defining markets very narrowly and thus got the illusory feeling that their efforts were really successful. Thus if you are in ther burger market you can define the market by single cheese burger a  double cheese burger. If your single cheese burger is no. 1, it’s great to say “We are no. 1 in single cheese burgers.” However, if you want to assess your position among all burgers, your position might not be no. 1, allowing for more progress to be made.
  • Guidelines again leave the NPD team with a stronger sense of purpose. The guidelines are no longer about the core competence that sort of look at the SWOT of the team. Now guidelines include overall directions about profit margins (e’g.  no projects below 10% return) , The guidelines might also include early action on filing patents or include specific instruction to pursue patentable ideas.

For leaders,just spending less than an hour with the NPD team can answer many of  their concerns and questions about the PIC. Doing so early and frequently allows a huge amount of  feedback and clarity on the final PIC document that can be used by multiple NPD teams.

About StratoServe.

Company website deals don’t seem to reach distributor salespeople

Just as  gas gets cheaper and Auto sales rev up for the July 4th holiday it is surprising that salespeople at auto dealers don't seem to assume that a customer is very likely to have checked on the website offers of the manufacturer. This disconnect between company website and distributor salespeople  is amazing because today many folks go to stores like Best Buy for electronics  and check prices at Amazon.com. Many younger mobile phone users actually order on Amazon right from the Best Buy store. Sounds unfair to Best Buy and any other brick storefront but this change in consumer search and compare behavior just seems to be accelerating.

So why does a car salesperson not make the default assumption that the prospect would have seen the website deals? Here are some thoughts:

  • Marketing and Sales divide is a common problem where the sales organization does not seem to be in sync with the marketing folks. Common complaints before the Internet used to be that marketing people do not seem to have the right brochures available. Today with corporate marketing having the immediate ability to put out deals on websites direct to prospects the distributors and sales people get further out of synch.
  • Tradition of ignoring marketing is something the Arthur Miller's Willy Loman type of salesman is really proud of. Just that the Internet and the mobile web changes everything for the shopper and traditional sales folks don't seem to "get' this.
  • Salesforce compensation is a factor and one of the drivers here is that salespeople feel the need to be individually and personally  responsible for the sale. Obviously the "sales" type personality finds great personal satisfaction operating as  the "lone wolf, " and sees the Internet as a crutch.
  • Sales force automation changes things in terms of team work but here too an explicit acknowledgement of the online research in today's consumers does seem to be missing.

Sales forces must treat the Internet as an explicit ally. For example, negative comments about the product online should be not only known to the salespeople but preferably addressed as part of the pitch. Similarly, starting with the offers that the manufacturer puts out on the brand website is helpful to the sales processs. And above all, the sales profession is in no danger of extinction, it's just that integrating the Internet to the sales effort will make salespeople far more effective as consumers change. Contact StratoServe.

Stopping J.C. Penney Coupons was a bit like introducing New Coke

The troubles at JC Penney that started with stopping coupons in February sort of reminds one of the New Coke fiasco. In both cases company leaders misjudged what their brand really means to their customer. Here is what happened:

JCPenney marketing folks figured that their customers hated all those coupons and keeping track of the coupons. Counter folks at JCPenney also reported that there were always some customers who missed the date and wanted the discount and appeared displeased if they could not get the discount. 

So in February J.C. Penney(JCP) rolled out the program of no coupons and discounts and an "everyday low price." In the Ad alongside the problem is framed  as the J.C. Penney marketers saw it. Yes the ladies were annoyed at times with the coupons and missing coupon dates but they loved the process of tracking coupons and grabbing that great deal and actually making a trip to the mall just to use the JCP coupon. If you have observed JCPenney customers before February you would have seen customers that were totally passionate about not missing a coupon deal! The  JCP counter staff also had developed their routines of how to deal with customers who had missed coupon dates and also inadertently alarming customers by asking " Do you have a$10 off coupon or a $20 off coupon" which would immediately start a discussion between the shopper and the counter person as to who gets the better coupon with a lot of speculation thrown in.  The JCPenney coupons were a real social event much more powerful,engaging and at times frustrating to the customer and retail staff. But all this was the joy of shopping at J.C. Penney..So how did otherwise great marketers make such a huge mistake?

One possibility is that managing the coupons and their redemption was a problem and proving costly. So the marketing camp that misjudged customer and store staff complaints about coupons got some support from the finance folks.

What is perplexing is that consumers who saw the above ad actually have written numerous comments on the YouTube ads clearly stating that they don't like the idea of JCPenney getting rid of coupons. So why did no one in marketing reverse the decision? It's not clear yet. While the President Michael Francis who was the CMO and Merchandising head has resigned,CEO Ron Johnson of Apple store fame, will probably have to make some quick decisions. JCPenney might want to do what New Coke did….. it went back to classic coke. JCPenney customers complain about coupons they miss, but complaining is also a great form of customer engagement…. or so it seems for JCPenney.Contact StratoServe.

Credit Cards: What do people complain about ?

The US Consumer Financial Protection Bureau (CFPB) has put out the complaints that it has received about credit card companies since June 1. Banks are naturally unhappy. But they should not be because instead of a "buzz" in forums, Facebook here are  actual complaints that give huge insight as to what annoys folks the most. The types of complaints  are available as a neat pie chart and table at the CFPB website.  At the time of writing here are the 28 categories of  complaints totalling 133 complaints from June 1 to June 19.  All credit card companies might want to use the CFPB pie chart  table as some great actionable insight. Here are the top two complaints, about 39 % of complaints as of today, and what credit card companies might do to address them:

  1. Billing disputes top the list with 33 out of 133 complaints or about a quarter of complaints. Here is how this dispute plays out at the consumer end: you call the card company to complain about the bill. It's not clear whether this is for charge disputes (that need to go to the merchant) or charges that the bank imposes. Either way if you are charged for something wrongly, you would be angry. Add to this an operator who is not empathetic, or a process that does not resolve the issue quickly but just bounces the customer around. What should banks do?  Treat all billing disputes as potential big deals. Think of these complaints a bit like the happier sales conversion process when a consumer actually signs up for a new credit card. Now going backward, the consumer is getting progressively  so annoyed as to file a complain with CFPB, mention on Facebook and Twitter and any other "? sucks.com" website. The ? being the bank in question. If 25% complaints can be sorted out by this one issue, its both worth studying deeply and handling on a fast track.
  2. APR or Interest Rate: This one had over 14% contribution to the complaints. When credit cards keep talking about interest in the teens and twenties as penalties when everyone else is giving almost free credit ( OK I mean the 0.99 and 1.99 % interest you see advertised for autos), it does seem unfair. This one is a policy issue and Bank CEO's/CFO's need to listen to the marketing folks who are bringing back the feedback that it's not a good idea to write threatening letters to all customers about high interest rates and actually charging many of them for the slightest infraction.

The rest of the 26 issues are 6.5% or less of all complaints and probably become part of the long tail of complaints.

The CFPB putting out the formal complaint data will just add one more Internet source for the consumer who is anyway not listening to traditional marketing messages. An interesting challenge for the credit card organizations. Contact StratoServe.

Steps in Engineering Outsourcing : What goes out – must come back

Given the interest in an earlier post on engineering outsourcing its timely to think about the steps of engineering outsourcing and keep in mind that what goes out must come back! Here are the most basic steps of the engineering outsourcing process:

  1. Core competence: As discussed in several articles innovation and intellectual property is best managed if the organization has a clear sense of how the outsourced work fits into its core competence. Simply speaking – core competence is what you can do better than other competitors in terms of cost,quality and customer satisfaction. Whether it is engineering design or drawings – outsource only those parts that are not too close to what what makes you special.
  2. Selecting vendors: capable and responsive vendors make all the difference and finding them,developing them,encouraging them is a complex but satisfying process. Be aware that whatever vendors you choose you might just get stuck with them as it becomes difficult to "fire" an existing vendor in the engineering services space. So choose carefully but commit completely after the contract.
  3. Manage transition: As pointed out in an innovation and outsourcing article, transition is the phase that is absolutely critical. This is when a transition team from the vendor's organization is trying to understand the task at the outsourcing organization's office. What exactly is to be done? Who will assign the work? Who will receive the work and integrate it to the re-configured value chain of the outsourcing firm.
  4. People issues: If some people have to be re-assigned or let go, an active constructive HR process must work. If not, you can hardly expect the existing team to help with a good transition. And after your remaining organization is re-configured … the entire tacit knowledge of your team will be lost. The vendors' performance will be compromised from the start.
  5. What goes out – must come back: Its much harder to specify an engineering service compared to a physical product. You cannot really do a quick quality check of a bunch of engineering drawings. And if you have to check and re-do any parts of the drawings – what was the point of outsourcing in the first place? In other words, recognize that anything that is outsourced has to come back and fit in with the rest of your value/supply chain that is facing your market. The more effort you put in the previous steps- the better will be the outcomes in the last step.

Engineering outsoucing is a great opportunity to speed up innovation. If you can do one drawing in a day in house – you can get 10 drawings done at the same cost and time overseas. The catch is that your existing engineering draftsperson/manager must be able and willing to move up the value chain and co-ordinate the vendor. Doing so can lead to higher paying jobs in America by speeding up innovation – while leveraging worldwide engineering skills now accessible through the Internet. Contact StratoServe.

From Strategy to Execution via Website: the Power of Web Analytics

As Web Analytics evolves (see earlier post) the possibility of organizations to map website—>organizational structure—> strategy —-> to execution via website analytics is an enormous opportunity. And this applies to the mission of the organization, its functions including Marketing, Investor Relations, Supplier Relations to Employee Relations. Here is how:

  1. Websites are becoming better with more efforts on digital marketing and even non-marketing functions like Human Resources and Supply Chain realizing that it's highly effective for their constituents as well.
  2. Organizational Structure includes the Organization Chart and the informal organization. Structures and Charts seem to constantly evolve with all kinds of re-structuring including those that arise due to mergers and acquisitions. The internal organization is supposed to deliver on a strategy goal. The mapping of this goal to a web page is just getting started.Consider the safety department involved with worker safety… while elaborate processes and documentation exists within organizations, some of it is also finding its way to the website so that employees,suppliers,visitors are aware of the safety efforts and processes of the organization.
  3. Strategy including the goals and mission is clear to the CEO of the time but gets progressively unclear lower in the organization. Listed companies CEO's spend considerable time and effort explaining the short term goals and performance to analysts. The investor section of the website seems to have some of this information. Organizations are just getting started in trying to map out the analyst projections of say sales and marketing to corresponding  special offers that are available on the marketing parts of the website.
  4. Execution of strategy for each function can be helped if the public face of the the website has pages relating to the strategy and its execution. For example, if an old model is being replaced with a new model the website might  have some special incentives for dealers or direct orders and this where the amazing power of web analytics comes in.
  5. Website Analytics is the enormous opportunity exists for every function in the organization. Starting with free tools like Google Analytics the manager can receive very detailed reports of actual behavior on websites in real time. For example HR doing a recruitment campaign via search advertising will know exactly which types of advertising sent candidates. Which social media helped? How many filled in the job application and what parts of the application form was too overwhelming and probably needs simplification. Similarly every function can benefit from web analytics that provides insights to the actual behavior of folks they want to serve or engage with. 

Before web analytics the prospects of understanding a large segment (OK some do not use the Internet, but this population is getting smaller) of your target audience involved time consuming surveys,analysis,interpretation. And remedial actions would take months. Today, if acontact form is not working- alternate versions can be tested simultaneously and the better one deployed within days if not hours.

Organizations should therefore actively try to map their organization structure-mission to the website…… achieving missions will become easier and more transparent to all stakeholders.  Just because web analytics has got so much powerful and even free for Google Analytics, for example. Contact StratoServe.

Innovation: Product Use Testing is the most overlooked type of testing

Innovation and New Product Development (NPD) involves three types of testing viz. concept testing, product testing and market testing. Of these the product testing or product use testing is the most overlooked one with  avoidable  negative outcomes for market success. But first  are the three types of testing:

  • Concept Testing: occurs in the early part of the NPD process after the firm has figured out its competencies and identified a pretty narrow market opportunity that it can serve. The concept test tries to gather feedback from prospective customers about the functions,features and benefits that the customer cares for. Starting with qualitative  interviews and focus groups – researchers go to techniques like conjoint analysis to identify the relative weights of attributes that need to be built into the product.
  • Product Use Testing: once the concept test results are in and the product is developed, prototypes are made and pilot production might also take place. Product use testing can take several forms like alpha testing that is done by employees and beta testing that would be done by users commonly seen in the  software industry.Ideally the final market ready product should be used in a field setting, i.e. natural setting, by users.
  • Market Testing is done once corrections are made from the product use testing. Market testing  intends to test distribution,retail,merchandising and all those pieces that must be working even for a great new product.

So why is product use testing so important? Because from inside the organization you really cannot place yourself in the customers shoes, with absolute precision. Mere customer empathy is not enough. To understand this issue look at the example of  a refrigerator door that has handles on both sides. Depending on where the refrigerator is placed in a room you might misunderstand where the hinge is and avoid pulling off the door. The solution would have been to provide a cover for the recessed handle so that there would be less confusion among users. And it is not human factors alone but the ability of the innovation team to replicate all the alternative ways that a customer might actually use the product.

So why does the innovation team loose steam at the product use testing stage? Probably each member is so highly invested in the new product and so tired that they just want to get it done with. Thus project sponsors and top leaders must insist on good product use tests and modifications because these changes would be inexpensive and can make a huge impact on market success. This is also a stage where top leadership must encourage the innovation team to hang in there and sprint through this almost last mile of testing.About StratoServe.

Mayors Innovation Challenge for US cities from NYC Mayor Bloomberg

The Mayor's Challenge for US cities from New York City Mayor Michael Bloomberg is a great idea. The rationale for the Mayors Challenge is explained in the video alongside and  details of the competition are available at the Bloomberg Philanthropies website. Mayor Bloomberg is personally funding the effort and it is available to all cities with over 30,000 population and the first prize is $5 million with four second prizes of $1 Million each.

An example of a great idea is from Chicago where there are two phone numbers. 911 for emergencies and 311 for everything else. The 311 idea has spread to 70 other cities and has greatly enhanced the effectiveness and responsiveness of the city to resident services. Details of the Chicago example are worth reading. To summarize , in Chicago, before 311 if you had a charge complaint for a cab ride, you did not know who to call in the city. By getting feedback from public the 311 service has helped prevent flooding, deal with the West Nile virus and vastly improve emergency response times.

Mayors of US cities with over 30,000 population will get an invitation to participate. By just participating, cities will start focussing on areas they can make a difference including healthcare as in the Camden experiment mentioned in an earlier post.

The reason that the Mayors Innovation Challenge  is a great idea is because this will encourage on the ground local leaders to propose and highlight innovative solutions to some of the most pressing problems in America. This decentralized grassroots approach to innovation in the public sector will work because guess what:  if say a city submits an innovative science and math popularizing program for the High School the town will talk about it, have it be the lead story on the local TV News and newspaper and make long but enthusiastic speeches at the Board of Ed meetin.g And many city leaders will facilitate Tweets and Facebook pages. Whether or not the innovation idea wins overall, it will make a difference at the originating city and to those  who learn about it -worldwide.Let's hope that every city that is eligible will apply: confirmation of interest is July 14 and submissions are September 14. Contact StratoServe.

New Service Development involves experimentation

New Service Development involves experimentation unlike the development  stage approach of new product development. Recently a financial services industry executive mentioned that there was no real need for them to develop a prototype, do a product use test and then go into large scale manufacturing followed by market testing and product launch. Here was the scenario the financial services executive from banking  offered:

Let's say that we have the idea for a new type of deposit product. Perhaps it has a mix of insurance,annuity and growth features. All we do is to confirm the back end calculations, and legal compliance.Next we simply get into the launch and commercialization phase, put out the brochure at the branches and send an email to our branch based  investment advisers to talk about the new product to any  interested customers. We might even start an Internet campaign with PPC like Google AdWords. But all this is really launch and marketing… in case the product doesn't do well, we just stop promoting it. There is really no need for any service development.. our approach is experimental … if it works great !… if it does not , no problems because we had only spent very little money on the brochures.

Sure the above is a good rough and ready approach but it is not an experiment that can really fine tune the service product the bank is offering. It is possible, for example, to test different levels of insurance, annuity and growth among different segments of customers at a few selected bank branches. Doing so would have allowed a clearer idea of what the offering should be.

In other words, just because an organization has many branches does not mean that one more brochure appears at the brochure holder display near the cashier counter. The larger the organization, more the service offerings : after all they don't cost much to put out. But guess what ? The new  service  is never withdrawn because a few customers do sign up so the product is now in the financial reporting system as well as the CRM system. Like difficult product deletion decisions, no one really takes off a new service offering that just limps along. Unlike non-moving products that have inventory and associated raw materials, non-selling services do not appear in the balance sheet and therefore do not appear as an imminent threat. They just bring morale down for the sales and distribution folks. The "try if it succeeds" time window just gets smaller and chances of good service ideas becoming great successes, reduce.

Thus, it is a good idea for new service developers to go through the same early steps of the new product process but replace the development phase with well designed experiments that can give some clear guidance for new services that are market winners. Contact StratoServe.

From Product Innovation Charter to the Product Protocol

Given readers interest in a previous post on Product Innovation Charter (PIC), it ‘s useful to look at the Product Protocol. The Product Protocol is a team governance document that  helps the internal co-ordination and clarifies expectations between team members.  Here are some key points about the Product Protocol:

  • What is the Product Protocol ? The Product Protocol is a written document that the multi-disciplinary new product development team puts together to help team members from functions like R&D,Design,Marketing,Procurement, Production co-ordinate.
  • When is the Product Protocol  developed? Product Protocols become necessary at the development stage when the idea has been narrowed down, a concept has been developed and a concept test has been carried out with prospective customers to prioritize the attributes,functions and benefits  that customers consider most important
  • Attributes,functions or benefits? Focussing on developing the product or service around benefits is most desirable. A bit like staying focussed on value as perceived by the customer.  Also if the benefits to customer are put on center stage team members from Design,R&D and Production can really think freely about how to deliver that benefit within their own areas.
  • How Product Protocols help: Just as the PIC creates an overarching New Product Mission statement and guides the process throughout, the Product Protocol encourages the Development team to reach out to potential customers just as they are designing/developing the product. By doing so the NPD process gets an opportunity to be validated at this technical stage, saving a lot of potential re-work.

So even if you have a great development team and a great concept that has come through well in concept testing, consider developing a Product Protocol. Doing so will clarify goals to your development team and help them contribute better to the development process. In fact, the clarity will empower your development team to better execution. About StratoServe.