Most companies build products they think the customer wants, then sit around nervously hoping customers will come. To survive today, however, companies must make sure they are producing products people want, and in a shorter time frame.
For the rest of the November 2002 issue of CRM magazine please click here
Most companies take a kind of Field of Dreams approach to product development. They build products they think the customer wants, then sit nervously around like Ray Kinsella hoping customers will come and save the farm. However, products today are more complex and the number of SKUs offered is growing rather than shrinking. To survive, companies must make sure they are producing products people want and in a shorter time frame.
Instead of conducting limited market research before a concept is even developed or during prelaunch trial, companies need to incorporate customer feedback and requirements throughout the entire product development process and life cycle. A customer-needs-management (CNM) strategy involves the deployment of applications that manage the collection, flow, and analysis of product designs, marketing materials, and customer requirements and feedback. The applications also need to be collaborative in nature to allow separate departments and organizations to work together in a real-time environment.
Whether developing new products or determining enhancements to current ones, companies rely too little on what their customers actually want. A CNM system will allow companies to better understand their customer needs and incorporate feedback throughout the entire product lifecycle. This will allow companies to be more confident in the success of new products, bring them to market faster, and predict demand more accurately by forecasting units, not market share.
A CNM strategy incorporates information from customer relationship management (CRM), product lifecycle management (PLM), and enterprise resource management (ERP) systems. By bringing this product and customer information together companies will realize three key benefits that will help them become more demand driven: 1) move from a linear to a closed loop product development process; 2) increase the hit rate of new products and eliminate losers faster; and 3) increase collaboration and information flow between all those involved in product development. Product development needs to shift from linear product focused process to one that is more cyclical customer focused.
In the past, when it came to developing and releasing new products, companies were very focused on the product. Releases went through a gauntlet of internal testing and business analysis. From planning to release, each step was quite dependent on the preceding step being fully completed.
This structure was put into place to try to keep projects on schedule and on budget; however, it didn't allow marketing and engineering to communicate throughout the development process. Marketing would present ideas and business cases then let the engineering teams try to figure out which were the most important features based more on costs than market needs. Instead of facilitating a smooth workflow, the lack of communication during this phase of development is the chief cause of product delays and cost overruns.
While some customer opinions are used in the preliminary stages of requirements planning the majority of customer feedback usually comes during pre- and post-launch testing. By this point it is typically too late to change core aspects of the product, and poor test scores result in another product on the scrap heap. In fact, AMR Research estimates that close to half of the money spent on product development is financing products that are doomed to fail. Value is found not only in increasing the hit rate, but eliminating the misses faster.
AMR Research estimates that the number of products developed that never make it to market can be as high as 40 percent. Companies are stuck in a catch-22, they want to consolidate their product lines, but also continue to be seen as an innovator. By eliminating ill-fated products earlier, CNM will help companies to roll out a stronger and more consolidated product line. This can help improve forecasting by reducing the number of SKUs, tightening production lines, and solidifying a corporate brand image.
In many industries companies produce samples and distribute them to field reps only to find weak reaction in the market. By incorporating customer feedback earlier in the development process, product teams would have a better understanding of market needs during the ideation and innovation stages. This would help eliminate unneeded samples and the costs involved in design, production, and shipment can all be eliminated. There are also hidden costs in having to cancel and replace orders for the few that wrote orders for the ill-fated product.
When evaluating CNM applications collaboration should be a key criteria. Except among engineer-to-order (ETO) manufacturing and tier-one suppliers of custom parts, it is uncommon to find representatives from engineering and marketing, as well as customers, working together on product specifications or CAD designs.
The term collaboration is not synonymous with the ability to attach product design materials to an email. This one way flow of information is in part responsible for the latency in product development activities today. Instead, features like online workspaces and chat should be provided to allow teams that are usually spread out geographically to work with one another as if they were in the same room.
Digital mockup or DMU is another example of a tool companies can use to help collaborate with customers. While customers can't actually test the products they are working on, it does provide a simulator they can use to get a better idea of whether the complex products will match their needs. This goes a long way in ensuring the products order will meet a customers specifications and expectations.
There are three strategies companies can use to encourage collaboration among product development, marketing, and customers. The first is to move from a linear development process to a closed loop. The traditional product development processes were set to try to keep projects on time and under control. However, advances in collaboration, data collection, and analysis technologies allow companies to work together across teams and locations. Organizations that share customer information and analysis throughout a product's lifecycle will be more effective in developing success products.
The second strategy is to introduce your customers to your product development team. Too often the people developing the products are relying on data from marketing. This data is second hand and based on the marketers interpretation of want the customer meant. If you are outsourcing focus groups or product testing than that is another layer in between the people developing the products and they people using them. With a CNM system information can be collected from the customer and viewed or analyzed first hand by the development team.
Third, let the software manage the data so you can do the analysis. The reason outsourcing has been so pervasive in product testing is it is a very mundane and labor-intensive process. Many of the CNM applications help reduce the time spent on these processes. Vendors and service providers are offering to manage tasks like finding test participants and hosting chat rooms or the Contact Us section of a Web site.