Commercial initiatives fail — We think we know what the customer wants

Commercial initiatives fail over and over again — 42% of startups die because they seek to tackle problems that are interesting rather than those that serve an existing market need. The shocking statistics aren’t limited to startups as 72% of product launches fail to meet their revenue target.

Is incompetence the explanation to this phenomenon? — The answer is NO.

There are lots of examples of businesses that have fundamentally good conditions for becoming successful; businesses with great technology, great data, a great team, great expertise, great advisors etc. This sounds like a bulletproof condition for success — like nothing can go wrong, right?

One of the main reasons these sorts of businesses fail is due to flawed innovation and entrepreneurial processes. They are too caught up in what they believe the customers want rather than what the customers actually need, in other words, their way of thinking is too product-centric based rather than customer-centric. Instead of testing “What does the customer want and need?” and conduct research based on desirability, many startups and corporations test feasibility such as “Can we develop it?”.

Established corporations are often optimized for execution and implementation and neglect the search for customer-centric value propositions. Work teams are asked by executives to make business plans, which are then funded, given the plan seems attractive. Even though the plan looks attractive it is likely to fail as there is no market need. Co-CEO of Simon-Kucher Georg Tacke, and Partner at the Silicon Valley Office of Simon-Kucher Madhavan Ramanujam both advocate that marketing and monetizing concerns should be brought much further forward in the ‘research and development process’ to increase the chance of success substantially.

You don’t design customers — You understand them

Source: Strategyzer

The key realization corporations need to reach in order to successfully innovate, is that you don’t design the customers, you understand them. The value proposition is where you make choices: you point out which jobs, pains and gains you want to address and pair it with a solution. The best way to do so is to get out of the building to understand your customer, then shape your value proposition around them.

This might sound like common sense, but it’s definitely not common practice. For many businesses the innovation process is a hit-or-miss game where they rely on ‘luck’. They tend to focus on the product or service rather than the customer’s job. As visualized in the picture above, their initial focus is on ‘2’ where Job Theory advocates that you should start by focusing on ‘1’. In order to compete against luck, you must understand the customer first and then design value with product and service accordingly. It is vital that corporations avoid testing the solution before developing a good and evidence-based understanding of the customer’s problem first.

When you test the solution and the customer rejects it, you won’t know if the rejection is because the solution is not good enough or if the customer problem is irrelevant. This underlines the importance to generate evidence around what matters to the customers first. Furthermore, understanding the customers’ jobs, pains and gains is the cheapest and fastest research you can do.

We think we know what the customers want

There is a correlation between the smarter and more experienced we are and the likelihood of believing we are right. Sometimes, we become overconfident and feel so certain about what the customers want, that we think it isn’t necessary to test our ideas before we go to market with them. The risk of launching a product that will fail increases as we rely more on our opinion rather than hard facts. When we rely on opinions and feelings there is a risk that we might be hallucinating. The customer reality can only be disclosed through testing and customer discovery. The overlap between the ideas of the corporation and the customers actual needs increases proportionally the more you test and perform customer discovery. The overlap might be bigger and it might be smaller than assumed, but without testing, we cannot be sure.

The Biggest Error in Customer Interviews: Mistaking Opinions For Facts

The single biggest error when interviewing a customer is to ask for opinions or assumptions rather than facts. If you are not trained to conduct good customer discovery, you will most likely immediately ask subjects like “Do you like this idea?”, “Do you prefer this solution?” and “Would you acquire this?”. These questions will solicit opinions. Opinions aren’t always reliable as experience shows that people rarely do what they say. Investigating facts mitigate the risk connected with new ideas — relying on people’s opinions don’t. Even though your service or product does something new, it is preferable to pursue evidence from the past. Your job is to match new behavior with evidence form the past as this strongly indicates future behavior.

Questions should probe for tangible facts. You shouldn’t ask, “What is the challenge in your opinion?”, instead you should ask, “When was was the last time you met this challenge?”, “Can you describe what happened the last time you faced this challenge?” or “When is the last time you searched for a solution for this particular challenge?”. The customer discovery process is not about selling, therefore you shouldn’t lead with the solution during customer interviews — at least not until you have strong evidence of what the customers jobs, pains and gains are. The interview is framed around what you are interested in and not what the customer is interested in when you commit this mistake. You should always remember that your task is to identify and validate relevant customer jobs, pains and gains.

Another common mistake in customer interviews, besides asking the wrong questions, is to be satisfied with superficial evidence when asking for facts. It is important to dig deep and truly understand the customer. If the customer has revealed a challenge, then you should ask “Why is this such a challenge?”, “How do you distinguish between a success or failure regarding this challenge?”. When the interviewee claims “I need a bigger machine”, then you should instantly ask “How much bigger?” and “What is the minimum of improvement that still qualifies as satisfying?”. Bear in mind that you can’t assess if your solution creates value for the customer if you can’t quantify how the customer measure success and failure.

Customer interviews are a great technique to quickly and cheaply get early customer insights. 5 guiding rules when conducting an in-depth interview are listed below.

In-depth interviews
The in-depth interview is a so-called ‘open-ended’ interview, that solely focus on understanding the customer. To accomplish this, you should follow these five rules:

o Rule 1: Adopt a beginner’s mind. Listen with a ‘fresh pair of ears’ and stay curious to explore unexpected learnings about the customer.
o Rule 2: Listen more than you talk. Your goal is to listen and learn; not to inform, impress or convince the customer of anything.
o Rule 3: Ask ‘why’ to get real motivations. Follow-up interviewee answers with new why questions. For example: “why is it important to receive a personal handover of your car following a maintenance visit?”
o Rule 4: The goal is about learning, not selling. Don’t ask: “Would you buy our solution?” Instead ask: “What are your decision criteria when you consider changing supplier?”
o Rule 5: Don’t mention solution. Don’t explain: “Our solution does…” Rather ask: ”What are the most important things you struggle with?

Are gains the opposite of pains?

Gains are often mistakenly perceived as the opposite of pains. Where pains are something that irritates the customer or even makes him dread, gains are, on the other hand, something that exceeds the customers’ expectations. For instance, when you get into your car and turn the key it’s a pain if it doesn’t start, but if it starts that is expected and therefore not a gain.

3 simple hacks can help you to go beyond thinking of pains and gains as just polar opposites:
o Define the expectations bar, if the expectation isn’t met that will be a clear pain for the customer.
o Consider continuums that pains and gains could live on.
o Clarify the boundaries of the continuums.

Keeping these three simple hacks in mind can help you in the process of mapping the customer profile. You have to get out of the building and test your presumptions on jobs, pains and gains with actual customers as this will lead you to much better outcomes. In the value proposition designing process, testing presumptions on customers is a crucial step — that is where you go beyond what could still be a biased and partial understanding of customers’ pains and gains.


Disclaimer

This article is inspired by Strategyzer’s framework