Product development in a perfect world
Editor’s note: Eileen Moran is a principal at Applied Marketing Science, Inc., a Waltham, Mass., research firm.
When Tom Gavin (a pseudonym) was called into the division president’s office at Global Diagnostics (company name changed) and was told to start work on developing a major new product from scratch, he was incredulous. It was a really busy time - the company had several successful products on the market and was about to launch another one. Now the president was giving Gavin an assignment that seemed almost too good to be true. “It was like product development in a perfect world - I had a clean slate to work from and sufficient time to do things right.”
However, a few weeks into the assignment, Gavin was struggling with where to begin. Representatives from all of the functional areas insisted that they knew what customers wanted and which features needed to be implemented in the next-generation product. The problem was, none of those functional areas, let alone any two individuals, had the same vision for the product. Gavin knew that people’s perception of what customers want was based on anecdotal data, heard either second-hand or from one or two conversations with customers. It was definitely not data collected in a systematic way. Gavin also knew he didn’t want to base his next-generation product on this type of information and he definitely didn’t want to incite any turf battles about who was right. He wondered, “Where do you begin when you’re developing a product from a clean slate?”
Global Diagnostics is a world leader in the hospital-based diagnostics market. It designs and manufactures high-tech diagnostics systems used primarily in hospital settings. To take a long-term view of product development, the company began investigating its next generation of products two to three years before it anticipated actual market entry. It sought to open the door to innovation by taking a very broad, customer-focused approach to product development. The company made no assumptions about the areas that were most important to customers. Instead, it wanted to examine the business as a whole, letting customers identify the areas with the greatest need for improvement. This meant focusing not just on the diagnostic equipment itself but also on the whole relationship between the customer and Global Diagnostics (including the sales process, technical support, customer service, etc.). It contacted my company, Applied Marketing Science, Inc., a research and consulting firm, for assistance.
Global Diagnostics clearly sought to make customers the focal point for inspiration in this next generation of products. However, the customer was a moving target. In some cases, the customer was the director of the laboratory; in other cases, it was a nursing manager or a physician on an individual unit. This dynamic meant that it was important not only to ferret out the wants and needs of each customer group but also to understand how purchase decisions are made under various hospital models.
Selecting the techniques
We settled on a multi-step approach to move Global Diagnostics from the formative stages to concrete new product concepts (see flow chart). The first step would be to gain a thorough understanding of customer wants and needs (i.e. the voice of the customer via the VOCALYST process). The second would be to use quality function deployment (the “house of quality”) to translate those wants and needs into internal performance measures (or metrics) and ultimately into potential features or solutions that tie directly back to the voice of the customer (VOC). The last step would be to go back to customers and test the top features and solutions to determine which concepts were most attractive to them.
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Note: I will elaborate more on the quality function deployment (QFD) process later in this article. But for a more exhaustive explanation of the technique, please refer to a paper co-authored by one of our company’s co-founders, Professor John Hauser at the MIT Sloan School of Management. It is called “The House of Quality” (Harvard Business Review, May-June 1988) and reprints can be ordered from http://www.ams-inc.com/readings/ publications.htm.
Step 1: Collecting and organizing customer wants and needs.
The first step was to determine the various groups that could be defined as customers or influencers of the purchase decision. For the type of equipment Global Diagnostics makes, the purchase decision is a complicated one. We decided to talk to a combination of both purchasers and users that included: laboratory directors, nurse managers, point-of-care coordinators, and in some cases, physicians and hospital administrators. Global Diagnostics relies on international markets for a large percentage of its total sales, so it made sense to make this research initiative a global one.
Once we had defined who the customer was, we recruited a respondent group, stratifying those various groups, to be interviewed one-on-one. Six key markets were chosen for interviewing. U.S. markets were chosen to reflect differing levels of managed care penetration. International interview locations represented key growth markets for Global Diagnostics. All interviewers were experienced in conducting in-depth, probing interviews. In other words, we placed great emphasis on unearthing the broad array of customer needs represented by the entire customer population. Respondents were constantly asked not just what they wanted, but why they wanted certain capabilities or why certain product features were important to them. This methodology meant that we were able to get beyond customer-generated solutions and engineering characteristics to the underlying needs that those solutions address - a key requirement for voice of the customer research.
In past research, we’ve found that, with the exception of a minority of “lead users,” most customers are not particularly well-equipped to design or “spec” new products. When asked to do so, they will very often simply play back current features or solutions that are available already (e.g., “I want a system that can handle 10 samples at a time.”). That type of information was of little use to our client, who was already aware of the current state of the art. Global Diagnostics was interested in the underlying customer needs that would help them innovate far beyond current solutions (e.g., “I want a system that’s easy to use so people working on the intensive care unit can easily operate and maintain it.”). Customers are very adept at articulating these types of needs, if given the opportunity in the appropriate interview setting. In short, it makes sense to collect wants and needs from customers, not solutions. After all, solving product problems is not the responsibility of customers; it’s the obligation of companies interested in selling to those customers.
Once the broad base of customer needs is collected, it typically results in 80-120 detailed individual customer needs that are elicited from verbatim transcripts of customer interviews. In this case, customers articulated 104 unique needs. An example of a customer need would be: “I can perform multiple tests on one blood sample.” This level of need is far too detailed for product development teams to work with. Therefore, it’s important to get a sense (again, from customers) of how those needs should be grouped and prioritized. We accomplished that aggregation by recruiting a larger sample of customers (again including all customer groups: nurses, lab directors, physicians, etc.). They were asked to complete a card sorting procedure, with each card having one customer need printed on it.
The card sorting process consists of having customers group cards into piles that go together for whatever reason. Respondents were instructed to create as many or as few piles as they’d like. They were then asked to assign importance ratings to each pile of ideas, as well as performance ratings for how well the needs in each pile are being satisfied by current solutions. We created an aggregate card sort by performing cluster analysis to show the hierarchy of needs that best represented the typical card sort created by customers. This hierarchy shows customer needs at three levels: the detailed- or tertiary-level needs (the original 80-120 needs on the cards), the secondary-level needs (the 20-25 aggregated customer needs that are the optimal level for product development teams to work with), and the primary-level needs (extremely high-level needs, good for strategic-level communications messages).
The output of the voice of the customer research was an affinitized list of customer needs, aggregated into three levels. Customers also assigned importance ratings and performance grades to the secondary-level needs. This meant that the product development team assembled by Tom Gavin was able to determine the areas that were most important to customers and with which they were most dissatisfied. This ensured that Global Diagnostics put its limited product development resources to the best use possible. For example, does it make sense to put resources into making slight improvements in the accuracy of test results or should those resources instead be aimed at improving the level of technical customer support? Additionally, the voice of the customer process provided valuable qualitative data on how purchase decisions are made within hospitals, as well as enhancement ideas for the current generation of products.
Step 2: Translating needs into performance measures (first house of quality).
This next step (see “First House of Quality” figure) helped Global Diagnostics take the organized and prioritized voice of the customer and translate it into internal performance measures or metrics that directly address key customer needs. This process was an internal one, carried out by a cross-functional team led by facilitators who were keenly familiar with the voice of the customer as well as the QFD process. The cross-functional team consisted of members from R&D, information systems, sales, marketing, manufacturing, technical support, and industrial design. Though not an actual team member, Tom Gavin remained in touch with the team’s progress, while still allowing them the freedom to make the decisions they felt were best.
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First, team members generated a list of internal performance measures, which, when moved in the appropriate direction, would positively impact customer satisfaction on the customer wants and needs resulting from the VOC process. This process of brainstorming internal metrics took the team a long way toward their goal: thinking about how to measure these items internally was the first step toward creating the actual product features or solutions that would ultimately increase customer interest in and satisfaction with the product. This was a creative, “blue sky” approach that helped the team move away from their traditional way of thinking.
Over the course of several days, team members completed a large matrix with customer wants and needs listed along the left-hand side of the matrix and internal performance measures (generated by the team) listed along the top of the matrix. This was a painstaking process in which the team had to determine how strong the relationship was between each customer need and each performance measure. The purpose of this exercise was to determine which performance measures are most critical in satisfying customer needs. Performance measures become “key” by being strongly related to multiple needs that customers considered very important (as measured in the VOC process).
Step 3: Translating performance measures into product features or solutions (second house of quality).
Many teams end the QFD process after completing the first house of quality (QFD matrix). But this team had lost some momentum after the first house of quality due to some internal organizational changes. A good jumpstart for getting the product development team refocused on their next-generation product turned out to be completing the second house of quality (see “Second House of Quality” figure). The team was reconvened. The second house of quality is very similar to the first, except that now the key performance measures or metrics are listed along the left side of the matrix and product features or solutions are listed along the top of the matrix. As before, the product features or solutions were generated by the team by looking at each of the key performance measures (again, those performance measures that had the greatest impact on the needs most important to customers). Team members were instructed to think about possible product features and solutions that would positively impact the key performance measures.
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Again, the most cumbersome, but most insightful part of the process was when team members completed the center of the matrix. This is when the strength of the relationship between each performance measure and each product feature or solution is evaluated by the team. Once again, the interaction between the cross-functional team members proved to be invaluable. For example, the marketing people became more aware of the manufacturing constraints involved in creating a system with a footprint as small as they’d like to see. The sales people made the biochemists aware of the impact that multiple required chemical solutions had on user-friendliness. The output from this process was a prioritized list of product features and solutions that were most strongly related to key performance measures. Again, the key performance measures had strong ties to the most important customer needs from the VOC process.
The QFD process yielded several benefits, the most important of which were:
- Product features that went beyond gut-feel and me-too solutions and which resulted from methodically examining the relationship between customer needs, internal performance measures, and finally product features and solutions. Many of these features were considered breakthrough for this category of products.
- A collective memory and audit trail of why key decisions were made, so teams do not need to constantly re-visit certain “great new product hunches” from senior managers.
- Buy-in and internal support of the new product that can only come from a collaborative cross-functional process that enlists the input of all functional areas
- A “translation” system for making market research usable and actionable for engineers and technical staff to help them make design decisions.
Step 4: Concept-testing the winning ideas.
The last step in this process was to complete the circle by going back to customers with the winning product features and solutions for one last reality check. The team-based QFD process yielded many exciting potential features, but it was clear that they could not all be incorporated into the next-generation product at a price customers would be willing to pay. Global Diagnostics needed customers to evaluate its ideas and help identify the concepts that would truly wow the market.
We chose a combination of qualitative and quantitative research to be performed in-person among purchasers and users (or influencers). Again, six key markets were chosen, including three international markets. Interviews were done in both one-on-one and mini-group settings. This process also provided customer input on how best to describe the benefits of each of the features in sales and marketing materials. Because most every feature tested (15 in total) was considered positive by customers, the quantitative data helped us to determine which ones were the most positive in the eyes of customers and would likely yield the greatest reaction from them.
The process in review
I’ve outlined some particular methods for how we chose to incorporate customer input in a very structured manner into the product development process. There are many other valid methods available for accomplishing the same objectives. The main point is that customers may see things very differently from the way you as a company do. It’s vital to get their input at every step of the process. Global Diagnostics’ resulting product would likely have looked much different, had customer input not been elicited throughout the process.
As you can see from the in-depth nature of the research described, this process clearly takes time. Our client began with the right mindset; it had the forethought and long-term commitment that this process requires. In the end, though, the payoff will likely be an extremely innovative product that truly addresses the key needs of customers. As the product is still “in process,” we’re not yet able to report how successful it’s been. We can, however, report that the voice of the customer and the output of the QFD process was the foundation of this whole endeavor. Gavin reports that every time the product development team is temporarily at a loss for how to proceed, they dig out the findings from the voice of the customer project and their QFD matrix and use them as guiding documents for how to move forward. This means little expensive re-work and it provides guidance from a definitive expert that no one can dispute - the customer.