The Collaborative Design Lab
Engaging Customers in Successful Product and Service Innovation
Frank Capek Tom Nickles Gary Shaw
The Collaborative Design Lab © 2012 Customer Innovations. All Rights Reserved Page 2
Companies must transform the way they innovate if they want to create breakthrough
products and services while overcoming common challenges that lead to failure
We all know that differentiated and compelling products, services and customer experiences are the key to profitable growth. However, numerous studies show that between a third and a half of all new product or service launches fail. Three quarters of all customer-‐focused development efforts never make it to market. In total, nearly half of the total financial and human resources dedicated to new product or service development is spent on failed projects. Obvious failures aside, we’ve seen the great majority of the customer-‐focused investments deliver little more than “better sameness.”1
To avoid the pitfalls that lead to these failures, companies must transform the way they innovate. Today’s more knowledgeable and networked customers are ready to play a more active role in how companies conceive, develop, and deliver value. As a result, the old “plan and push” approaches are out; effectively engaging customers as collaborative design partners is in. Customers, not surprisingly, hold the key to success in rapidly changing competitive markets.
Over the past two decades, Customer Innovations has evolved a “Collaborative Design Lab” approach that productively engages customers in a way that significantly raises the chances of market success and avoids many of the predictable sources of failure. This approach has been followed in successful innovation efforts with a diverse range of leading organizations across industries, including Nationwide, Entergy, and Kaiser Permanente.
The Challenge: Why Customer-‐Facing Investments Fail?
Most customer-‐facing investments fail due to a combination of very common challenges. Let’s take a closer look at what we’re up against.
Challenge: Over Reliance on “Voice of the Customer”
The idea of asking customers about their needs and preferences is not new. However, it’s never been an ideal tool for innovation. As Henry Ford observed, if I’d asked people what they wanted, all we’d have is faster horses.
Most structured “voice of the customer” research is not only ineffective for influential design, but it regularly undermines innovation by directing investment at the wrong things. Traditional voice of the customer research makes an underlying assumption that people have a stable, conscious, explicit, and generally consistent set of desires or preferences. It also makes the assumption that what customers tell you will reflect what they actually do in real life. In practice, these assumptions are far from true. Individuals typically don’t know what they want until they see it; they construct their preferences and work through decisions as they perceive their alternatives in the actual purchase or decision environment.
1 Stevens, G.A. and Burley, J “3,000 Raw Ideas = 1 Commercial Success,” (May / June 1997); Crawford, C. Merle (1987) “New Product Failure Rates: A Reprise” Research Management 30 4, p. 20–24; Product Development & Management Association 2004 Best Practices Study. Customer Innovations Whitepaper: Customer Experience – Beyond Better Sameness
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Challenge: Managerial Wishful Thinking
Problems with these superficial insights become amplified when they run into managerial wishful thinking. Executives naturally want new products and service developments to succeed. The very nature of this "wanting" partially explains high failure rates. Decision research consistently shows how selective perception, ego-‐involvement, and ungrounded optimism can bias thinking in support of desired outcomes. If it’s a pet project at stake, or a project that defines the new role a manager has taken on or aspires to, the chances of clear decision-‐making dwindle quickly.
Managerial wishful thinking has been an element in a long list of memorable product failures: from Microsoft’s Zune, to the DeLorean DMC, Ford’s Edsel, Pepsi AM, the US $2 bill, Colgate dinner entrees, and BIC disposable underwear. It’s also present in the steady stream of questionable investments made every day in organizations across industries.
Challenge: Design-‐By-‐Committee Approaches
The worst possible question to ask a group of executive stakeholders or customers is “What do you think of this design?”
Trying to incorporate diverse input often becomes highly politicized and creates, at best, disappointing and, at worst, mind-‐bogglingly bad compromises. When everybody involved in the process—executive stakeholders and customers alike—has a slightly different vision of the final product, the design is tweaked repeatedly to ensure that everybody’s concerns are addressed. Without a clear unifying vision, what results is a mish-‐mash of features in which nearly everyone gets something. The outcome is inevitably a design that doesn’t offend anybody, but excites nobody.
One of the highest profile products of design by committee rolled off the assembly line in 2000: the Pontiac Aztek. Multiple rounds of stakeholder input led to a combination of unusual features and produced the vehicle’s bizarre, pushed up back end. "The Aztek represented all that is wrong with GM's design process,” summarized one GM official. "By the time it was done, it came out as this horrible, least-‐common-‐denominator vehicle where everyone said, 'How could you put that on the road?’” A listener on National Public Radio's Car Talk quipped, “It looks the way Montezuma's revenge feels.” The Street, an investor's advisory journal, placed the car at the top of the list of the "10 Worst Cars of All Time" not only because of its appearance, but also because it had "a singular distinction… it destroyed an 84-‐year-‐old automaker."2
Challenge: Great Ideas but Poor Execution
Larry Bossidy, former AlliedSignal CEO, and co-‐author of the best-‐selling book Execution: The Discipline of Getting Things Done, declared, “Strategies most often fail because they aren’t well executed.” In the end, execution is everything. The landscape of failed efforts is littered with poorly executed great ideas. Design teams spend considerable time and money on service concepts that cannot be effectively implemented and deployed. Scopes are either too large to get funded or too small to generate momentum. Teams attempt to go from an initial idea straight into deployment without any meaningful customer validation to ensure, “if we build it, they will come.”
In any design effort, you occasionally get the intended consequences but you ALWAYS get the unintended consequences. For example, Netflix’s poorly executed change in service structure in the fall of 2011. The change forced consumers who had previously received DVDs by mail along with digital streaming to choose one or pay more for both. Without any customer-‐centric transition in place, the move generated waves of criticism and many unhappy customers who threatened to cancel their subscriptions. CEO Reed Hastings publicly apologized for his company's handling of these changes. He then one-‐up’d the original mistake by introducing Qwikster, a complete separation of DVD delivery from online streaming which would have forced as many as 12 million customers to create two separate accounts. In the end, Qwikster was cancelled weeks after launching. Reporter
2 The Street, “The 10 Worst Cars of All Time” February 2, 2012. Washington Post, “Biggest Automaker Needs Big Changes” June 11, 2005. www.codinghorror.com, “Coding Horror: The Pontiac Aztek and the Perils of Design by Committee” June 16, 2005
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Jason Gilbert summarized, “It should certainly be a first ballot entrant into the Bad Decision Hall of Fame.”3 Of course, hindsight is 20-‐20. The trick is adopting an approach to turn hindsight into foresight.
Overview: The Collaborative Design Lab
The Collaborative Design Lab allows a core design team to engage customers and executive stakeholders in a structured process that incorporates critical insight into design specifications, while avoiding managerial wishful thinking and design-‐by-‐committee outcomes. It emphasizes an iterative design approach that ensures the design can be implemented and that customers will respond positively. It also helps build a business case required to generate and sustain executive commitment and funding.
The process is geared to engage customers in fundamentally different conversations—conversations that get beneath the surface of stated preferences and allow the design team to understand the deeper issues driving customer behavior. Because customers and company executives are engaged as early as possible in the development cycle, long before the heaviest design costs are usually incurred, accelerating customer and stakeholder input minimizes both bias and risk.
The process involves five steps, each carefully structured to meet specific design needs and circumstances:
• Identify Latent Needs. Surface customers’ desired rational and emotional states, as well as the latent or underserved needs that arise across the end-‐to-‐end pathways they follow to accomplish their goals.
• Generate Ideas. Identify potential solution elements or interventions that address the highest priority desired states and latent needs. This step includes ideas generated by both the company and by customers.
• Combine and Prioritize Concepts. Test customer reactions to storyboarded combinations of ideas. Create coherent bundles of design elements customers find compelling and that reinforce the desired design story. Identify and assess operating model implications.
• Refine and Prep Offering. Iteratively refine storyboards and prototypes with customers. Develop detailed design descriptions for the offering along with the operational and technology changes required for delivery.
• Validate Response. Test and ensure customers’ positive reactions to offerings. Depending on risk, this can include concept testing, pilot, or beta release. Make course corrections, as appropriate, given customers’ reactions as well as operational or technology issues.
Besides avoiding the pitfalls common to innovating products and services, the Collaborative Design Lab provides a structure to manage the downstream solutions delivery process more effectively. Innovative designs can be large, costly, and unwieldy to implement. Such ideas frequently run into organizational complications: a scope too large to be funded, indefinite deferments, or lack of executive sponsorship to shepherd the design through the stage gates prior to launch.
We’d be happy to provide more information about this approach or discuss how it could be used to transform your product and service innovation efforts. This approach has been an integral part of helping leading organizations in virtually every industry realize bottom line improvements of 10-‐25% while proactively addressing the market and organizational challenges that introduce risk. Contact us at: [email protected]
3 Jason Gilbert, “Qwikster Goes Qwikly: A Look Back at a Netflix Mistake,” Huffington Post, October 10, 2011.