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/.
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/.
posted by Richard A D Jones at 2:37:00 PM
0 Comments:
Post a Comment
<< Home