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- Successful
market-based technology is driven
by keener market insights, understanding
the customer experience and leveraging
core skills.
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- Successful
companies seem to spend more time
trying to understand the customer
experience.
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- CEO’s
of innovative companies put more time
into making new ideas successful.
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- Successful
companies understand where the money
is made in the value chain, along
with where it will be made in the
future.
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- The most
common reason for product or technology
failure is not meeting the customers
needs.
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Today’s successful companies understand that it is
not only innovative technology that drives sustainable advantage;
it’s also the links between the technology, the products
and the customer.
Great products, developed with new and novel technologies,
offer customers unique benefits and provide better price/performance
characteristics than those products offered by their competitors.
Early market support for new technology is critical. This
can be achieved by targeting the “innovators and early
adopters” rather than the “majority” market,
and collecting valuable customer feedback.
By establishing proof of concept and customer usability,
the final technologies or products can be fine-tuned to
meet the customer’s needs. This approach needs to
be repeated for each new segment or each new market, as
there are sometimes significant differences between customer
segments or markets (particularly overseas).
Meeting customers’ needs may not be an easy task
since they are continually changing. Customers, due to their
access to more and more product information, are becoming
far more sophisticated and more discriminating.
Product or technology benefits need to be easily explained,
since success can be inversely correlated with the level
of product/use information required. Products or technologies
need to be easy for the customer to understand and use.
So, how does a company identify winning products or technologies
to offer to its customers?
Research suggests that a number of factors are important,
and these relate to culture, leadership, and strong business
processes. This article concentrates more on the processes
that companies use to source, screen and select the winning
ideas that are transformed into successful products.
Research also suggests that winning products arise due
to the “fit” with the company’s vision, its existing skills,
and the dynamics of the industry. Aligning new products
or technologies with the company’s vision, and having a
detailed understanding of the value chain, separates successful
companies from the less successful ones. Understanding the
value chain highlights where the money is being made, but
more importantly, where the money is likely to be made in
the future.
How do successful companies source new ideas?
Sourcing Ideas
Successful companies tap into ideas from a range of sources.
Ideas come from sales and marketing, competitors, leading
edge customers, or from detailed customer and market research.
To capture these ideas and turn them into winning technologies
or products, systems need to be established. The process
of capturing new ideas is very important and needs to bring
in ideas from unrelated fields.
Technological developments in one industry may substantially
reshape another. With the markets becoming more and more
fiercely competitive, technology and product life cycles
are shortening.
It is therefore important to develop an "ideas portfolio"
to sustain profitable growth and meet the changing needs
of customers.
Selecting Winning
Ideas
The main reasons for technology or product failure are:
- Not satisfying customer needs,
- Distribution and marketing problems,
- Poor project management, and
- Technology/product outside core skills.
The first reason is fairly obvious, but it is responsible
for the majority of technology or product failures.
The solution is to better understand what the customer
needs, and how the customer will use the technology or product.
Successful companies seem to spend more time trying to
understand the “customer experience”. It is
not unusual to find their product engineers following customers
around to find out what they do.
For example, one leading Australian technology supplier
to the retail banking sector had its staff observing tellers
to understand how and why they do things.
This gives the company developing new products or technologies
a clear idea of how it will be used as well as the potential
benefits for establishing product differentiation.
It's all about developing keener insights into the customer
experience.
Successful companies seem to involve their “innovator
and early adopter” customers in the whole design and
development process. Companies may also involve their suppliers,
manufacturers or distributors.
One thing is clear; a marketing person is always there
from start to finish, from creation to launch.
The other areas related to product or technology failure
arise due to internal considerations, such as poor project
management, lack of key skills, or marketing and distribution
problems.
Leveraging core skills and understanding where the money
is made, or to be made in the value chain, will determine
whether the company is to be a long term survivor.
If the core skills are not readily available, the company
needs to ask “why should we pursue this idea?”
or “who do we outsource or venture with to access
these skills?” Where the money goes in the value chain
is very important. Is it the developer, or the manufacturer
or the distributor that captures the most profit?
Driving Success
Research suggests that the CEO’s of innovative companies
put more time into making new ideas successful. Their involvement
seems to be at critical stages rather than all the way through
the process.
The critical stages relate to the generation and screening
of new ideas, initial testing and launch implementation.
Although apprised of ongoing developments, CEO's seem to
have less involvement in the detailed feasibility studies
or the product/process development stages.
Success will be influenced by how long a company takes
to go from concept to market.
Research suggests that US companies generally take half
the time that Australian companies take. This may be driven
by the scale of the US economy and the number of potential
customers.
Speed to market will also be influenced by the company's
ability to shift resources and to run overlapping development
phases. Greater strategic flexibility is achieved if the
development time is shortened.
At the end of the day, successful market-based technology
is driven by keener market insights, understanding the customer
experience and leveraging core skills.
However, success may be elusive if the industry dynamics
and value chain are not carefully understood. Success is
also less likely if there are dominant players or players
strategically placed within the value chain.
Unfortunately, it is not always the world-beating technology
that succeeds.
Peter T Gow is the Managing Director of Creative
Capital Pty Limited. He founded Creative Capital to accelerate
the learning skills of entrepreneurial CEO's and develop
their expertise in capital management, business and strategic
planning, cash flow management and market research and analysis.
Peter has over 12 years of experience in working with growth
companies and has been involved in the completion of over
30 financings in the software, manufacturing and medical
areas. His expertise covers company evaluation, strategy
and market analysis, capital raising, transaction structuring,
documentation and completion. Peter has also set up several
venture capital funds for a major financial institution
and appraised a range of venture capital managers.
Creative Capital Pty Limited
Peter T Gow
61 412 235 455
petergow@creativecapital.com.au
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