Warren Buffet said it well: "Only when the tide goes out do you discover who’s been swimming naked." But even well-managed companies may feel a little "exposed" in this economic downturn. What are your choices? For too many, short-term interests will be pitted against longer-term interests… and we all know which will win, right?
In this and the next couple of blogs, let’s explore some actions companies can take to survive during a miserable economy—that will actually improve their long-term prospects. The first tip is to cut waste. I’m not talking about reusing paper clips. I’m talking about reinventing the one function in most companies that is more wasteful than any other function: new product development.
In the average company, about half of R&D and related resources are wasted on developing new products that are destined to flop. Can you think of any other function with this level of waste? Accounting? Human Resources? Manufacturing? And yet many large companies waste tens or even hundreds of millions of dollars here. They just try harder next time when they really need to reinvent their approach.
None of these companies has "extra" R&D people standing around. There are always more projects than people to work on them. What if these companies could hire scores or hundreds of new workers who understood the company’s technology, processes, culture and customers… and could start working tomorrow? Well, they can. They just have to kill the dumb projects they are now working on that are destined to be duds.
But, you say, we don’t know which projects to kill. Exactly! You don’t know… but your customers do. You just have to figure out how to ask them. Without going into all the detail here (visit www.newproductblueprinting.com for more), you need to uncover all the most important outcomes that the customer would like. Then ask them two questions about these outcomes: 1) How important is this outcome on a scale of 1-10, and 2) How satisfied are you with what you’re getting in this outcome today on a scale of 1-10?
When you multiply the importance times the dissatisfaction (or 10 minus satisfaction), you get the Market Satisfaction Gap. A high Gap (over 30%) indicates the customer really wants you to work on delivering this outcome with your new product.
Now here’s the scary part: We’ve worked with clients in hundreds of markets and they are usually surprised by what customers tell them with this approach. Put another way, they had been planning on developing a new product that wouldn’t do what customers really cared about. Put yet another way, they had been planning on wasting their R&D resources.