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How to Waste Millions of Dollars

OK… the title of this blog is a bit misleading. Most companies don’t need to learn how to waste millions of dollars. They already know how. In fact they are already doing it. The average Fortune 500 company squanders at least half of the tens-to-hundreds of millions of dollars that they pour into new product research and development. (Studies show that 50-75% of R&D expenditures are invested in products that flop when launched.)

They just don’t know which half they are wasting. Well, actually they do… but not until it is too late and the product has been launched. Can you think of any other function within a corporation where this level of waste is tolerated? What if half of your production was out of specification, or half of your financial statements were wrong? Would your company accept this and happily tolerate this failure rate year after year?

So why does this happen? Is it because the product development teams at these companies have too many incompetent engineers, scientists and designers? That doesn’t seem right: these ranks are often filled with our schools’ best and brightest. How about this: Maybe it’s not that these experts can’t find the right answers… perhaps they are being asked the wrong questions.

Here’s one way a company falls into this trap: One of their sales reps visits a customer who is having an obvious, near-term problem. The sales person latches onto this problem like a drowning man grabbing a life-preserver… failing to fully understand the implications of the problem or uncover more important but less obvious needs. Other suppliers are "invited" to solve the same obvious problem… leading to a solution that either a) fails to address the root customer needs or b) is quickly commoditized by multiple suppliers.

Sometimes it’s even uglier than that. In many cases, suppliers gather their employees around conference room tables and decide what they think their customers would like them to work on. These same companies seem quite surprised when their customers don’t eagerly embrace their new products when launched.

So how does a company avoid spending millions of dollars answering questions that the customer never asked? For B2B suppliers, the answer lies in tapping into the enormous knowledge their business customers already have. This comes from the discipline to begin with customers’ desired outcomes… and not the supplier’s desired solutions. And it comes from developing new listening, probing and interviewing skills to uncover the critical—but often non-obvious—needs that those customers have.