Real innovation requires real customers

I get to work with a lot of new companies and corporate ventures and, you know what, they frequently have no clue about what a real customer wants. Cambridge (the UK one) is a great place for technology innovation but even the smartest people don't always understand about having a real market. They have the “Field of Dreams” view about customers - 'if I build it, they will come." However, this mistake isn't limited to startups - I worked with a European electronics multinational and I couldn’t believe their approach to innovation.

The division I worked with produced equipment for automating factories - essentially like computers with input and output connections to make machines work. Here were two classic conversations with them.

"Good news Richard - we have done a deal with M****** (identity masked to protect the innocent) and will be distributing their single board computer series. Our arrangement means we will have the same market price as them."

"Okay. What do you mean by market price?"

"Our list price is identical to their’s."

"Hang on," say I, "our normal customer gets a discount of 10% whereas M****** give a discount of 30% as standard. Our real market price to users or distributors is going to be significantly higher than their’s.  In what way do you think that is market pricing?"

....silence....

The problem was that they supplied a big internal market of factories that could not go anywhere else for equipment. There was a very resentful trapped market that this division could ship any crud to and no-one could do a darned thing about it.

Here's the second conversation.

"This is our new programmable controller. We are going to sell it and gain market share against Siemens, Allen Bradley etc. Customers think it is really good."

Me - "Which customers?"

"Our factories."

Me - "So have you spoken to any customers using the equipment you want to compete against and get conquest sales over?"

"Erm.....no."

"So you have had a decent reaction from people that have to buy this stuff but not actually talked to any 'real' customers who buy the best solution for themselves."

At this point I recognised a fairly common look which was a mix of hoping the ground would open up and swallow them up or wishing it would swallow me.

Shortly after this, the internal factories were released from their orders to buy automation equipment from their own company.  After this I can summarise the sales for new equipment to the factories - zero.  Annoyance at poor products and being forced to buy from their internal division led to a disaster for this division. They didn't have any real customers so they didn't create any real products.

Technology push is very challenging and works only rarely. For every Walkman or I-pod there are thousands of dead companies that thought they had the best idea ever and found that they weren't solving a real problem for real customers.

If the pain of changing to a new product is greater than carrying on doing what they are doing then customers won't buy. If they don't see a need they won't buy. If you don't find real customers with real needs then you won't have a business.

Copyright Richard Jones 2006

This article above is made available under the "Attribution-NonCommercial-NoDerivs" Creative Commons License 2.5 available from http://creativecommons.org/licenses/by-nc-nd/2.5/.

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Never work with idiots and.....people you don't get on with and respect

Ten years ago, I had a discussion with a friend who was a serious rower. He's not Sir Steve Redgrave but understands what it takes to win. His assertion was that teams don't have to like each other to perform. In fact they can downright hate each other and still do the job. It was alleged that Eric Cantona would never pass to striker Andy Cole at Manchester United for example.

At the time I wasn't convinced that the sporting metaphor could translate to business. I'm certain now - he was wrong.In sports, the interaction is for a given period and you are focussed on defeating the opposition. Even a team that hate's each other's guts know that by passing to one another or tackling the opposition in particular ways, they can win the game. Even the rowers just have to stare at the back of their bete noir for a limited period each day.

During training you can steer cleer of them (I don't think swimmers have too much difficulty being in their own world) and football players can stay at opposite ends of the gym, get treatment at different times etc.

The problem with business is the amount of time you have to spend together without the rules you have in sports. You have to sit down eyeball to eyeball with the object of your loathing for hours on end in meetings and pass them at the coffee machine. I'd take this a stage further. The worst place to have a team that doesn't get on is in a startup.

One venture I saw recently has some interesting technology to allow people to increase their broadband speed. The chairman and technical guru were not exactly on the same page. I quite enjoyed the knockabout relationship but the guy I was with was appalled and didn't think they could be put in front of potential investors without serious changes. That was nothing, I was with the very intelligent leadership team of a Cambridge company who basically would have an argument every time I saw them (I'm pretty sure it wasn't me causing these problems). I'm talking real needle in the exchanges and serious bickering.

So why is this a problem for startups?Well, a startup is not like the insulated environment of a large company where roles are clear and responsibilities laid out. The senior team are going to have to have very flexible roles that may cover several disciplines. With the team all daydreaming about driving away in an Aston Martin DB9S (mmmmm me too) then the personal stake they have invested and their perception of the future value of the company will drive the pressure up even harder. Startups don't have the same clear route in front of them that say a division of General Electric, General Motors or Virgin might have.

Which direction should the company take? Should the company stick or twist, grow or die, diversify or focus?

Under this pressure, my view is that you need to start from a base of getting on with, and respecting, each other. It's not the army so discipline and shouting won't stop a dysfunctional team from getting at each other but, like the army, you certainly will end up 'in the trenches' together from time to time.

My experience makes this very clear now. I won't work with anyone that I don't think I can share a trench with. I'm lucky that I can make that choice but being in a new venture, helping a startup or creating a new business for corporates is tough enough without having a madman on board. My friend might be right for sports teams but I am convinced he is wrong about business. Never work with people you can't get on with and respect.

Copyright Richard Jones 2006

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