Innovating Past the Customer: The Limits of Innovation?

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In our line of work, we often see companies which innovate past the point that customers need or will pay for. 

We have seen this phenomenon in almost every B2B product group.

The cause?  A mistaken belief or assumption that companies can compete only through continuous innovation which is translated as continuous product differentiation.  At a certain point this leads to product over-engineering - too many features, product bloat, unnecessary complexity, and product extensions which customers dislike.  Technology replaces common sense.

We must have empathy for the company stuck in this mindset. They view themselves as product innovators and they always move their product forward in an effort to stay ahead of the competition. Furthermore, two powerful groups within the company - product development and sales - both push for continued expansion of features and functions. The product development group is always clamoring for more money to keep ahead of the Joneses, and sales must account for tougher market conditions. Thus, we hear a refrain: "the customer wants x and y and z!"

One example from the world of consumer electronics comes to mind. Although not a B2B example,  it fits this category and we can all relate to it: the heralded release of 3D TVs!   Just think how tough it is for TV companies to get us all to replace our cool flat screen TVs with the next big thing! perfect If they don't get us all to continue buying - we all know what that will mean!

In the B2B world, we see the same dilemma in medical devices where the technology is only needed in rare cases and is sold for much higher prices than current technology in use (which works for 99% of the cases).

We also see it in office machines - where the optimistic projections of an optimistic sales force hopes that the new color options will drastically improve the sales rate of a product under considerable pressure.

Sound familiar?

We see it all the time.  The relentless pressure to outdo the competition (if only for a few months) with products that just aren't needed.

So, what can you do?

First and foremost we must accept that innovation of current products has a limited life cycle and at some point drastically diminishing return on investment opportunities. Challenge the mindset, the assumptions, the myth of endless innovation.

Second, we must decide what portion of our markets/segments we must win to continue growth and profitability. Then we must look at those markets critically and determine where we are in the product innovation curve and admit that we might need a more dramatic impact than a product that no one really needs and won't pay a premium for.

Third, examine what alternatives truly exist:

•    Eliminate competitors through acquisition - consolidate the market
•    Expand our product lines - hopefully to a new innovation curve.
•    Bundle our products into larger deals where we can provide greater price flexibility and still remain profitable, and/or
•    Add the Customer Intimacy Engine business model to those areas that you must protect, or acquire from competitors, or improve product margins.

By adding the Customer Intimacy Engine to your strategy options (yes, it is a different business model with its own challenges) you have a viable alternative to the "innovate at all costs" mindset. Re-directing R&D money to a portfolio of True Solutions™ (ones that your customers executive truly need and want) you can add years of life to your product lines and focus on delivering what the customer truly needs and will pay for.  Sometimes it's not a bad idea to become a fast follower of proven new features instead of the company that has to get there first.

I've been amazed at the ability of companies to maintain the useful life of a product or products by owning the executive suite of their key customers and driving intellectual thought-leadership in their marketspace.
 
Granted it is not easy to begin to solve your customer's true problems or help them take advantage of big opportunities. It requires a new kind of offer set to be added to your product portfolio, different market and customer messaging and different account management techniques and often different talent and talent development efforts.

But, compared to spending millions - sometimes hundreds of millions - on product that will inevitably fail, it is a bargain and well worth the effort of learning a new business model.

P.S. - We may be wrong about the 3D TVs but I would not want to be betting my career or significant $$$ on products that are well past the sweet spot of a market.

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This page contains a single entry by Dean McMann published on June 9, 2010 10:07 PM.

Is IBM's Smarter Planet a True Solution™? was the previous entry in this blog.

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