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  

 

 The  Collaborative  Design  Lab                                                            ©  2012  Customer  Innovations.  All  Rights  Reserved       Page  3  

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  

 The  Collaborative  Design  Lab                                                            ©  2012  Customer  Innovations.  All  Rights  Reserved       Page  4  

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:    info@customerinnovations.com  

                                                                                                               3    Jason  Gilbert,  “Qwikster  Goes  Qwikly:    A  Look  Back  at  a  Netflix  Mistake,”    Huffington  Post,  October  10,  2011.