4.5 Deep Customer Insight

When it comes to R&D success, deep insight into customers' needs is more important than size of R&D budget, quality of engineers, technology deployed, or market research intensity.1 DeWalt's president, John Schiech, for example, described DeWalt's secret: "It's engineers and marketing product managers spending hours and hours on job sites talking to the guys who are trying to make their living with these tools."2

You must, however, do more than keep the customer in focus during idea generation. You need to pay close attention to customers in every phase of the innovation process, from idea generation to development to launch. For example, Fred Palensky, 3M's chief technology officer, explains: "Our goal is to include the voice of the customer at the basic research level and throughout the product development cycle, to enable our technical people to actually see how their technologies work in various market conditions." 3 Let's take a look at some of the tools companies use to get into the lives of their customers and understand their needs (see Table 4.2).

Traditional Market Research

Marketing engages customers to find out what they are thinking.

• What are their expectations?

• How satisfied were they with the experience?

• What new products would they like to see?

Classic market research tools include customer surveys, focus groups, expert panels, and in-depth interviews. You'll find these approaches very cost effective for discovery where needs can be easily articulated; that is, for product extensions or incremental improvements.

Direct Customer Observation

Desi DeSimone, former CEO of 3M reminded us that, "The most interesting products are the ones that people need but can't articulate that they need." Although DeSimone's statement is a little counterintuitive, you've probably experienced this phenomenon. You've been in a situation where you felt/knew that something was inconvenient or a hassle. Simply put, you knew a pain point existed! But, somehow, you had learned to live with it. You no longer really considered what alternatives or solutions might exist. You simply accepted the inconvenience as "just the way it is." As a result, if asked, you wouldn't (or maybe couldn't) articulate a need. When someone else finally brings the product (solution) to the market, you say, "Why didn't I come up with that?" One way to identify these "hidden" needs and translate them into a product is through direct observation.

Such was the case with Kimberly Clark's Pull-Ups. By adopting families—visiting homes and observing parents of two-year olds—researchers discovered that parents were looking for a way to graduate their children from diapers to "big-kid" pants. Parents, however, were frustrated with the transition process. They didn't want to deal with the mess and emotional stress that comes from soiled training pants. And they didn't want to talk about it.

Michael Barry, consultant to Kimberly Clark related, "The stress in toilet training came from parents' feelings of failure, and you'd never get people to admit that in a focus group. The worst thing for a parent is to have someone gape in horror and then ask, 'Oh, is your child still in diapers?'"4 Direct observation and storytelling validated the Pull-Ups concept. Pull-Ups met parents' ego needs and promoted children's emotional development. By helping "babies become big kids," Pull-Ups became one of Kimberly Clark's greatest success stories. By the time rivals caught up, Kimberly Clark's annual sales of Pull-Ups were $400 million per year.5

Sales and Customer Support Feedback

Every touch point between your firm and a customer generates a data point. When the data points are combined, they tell a story. Many of these touches occur between customers and your firm's sales and customer support teams. You need to talk with these team members on a frequent basis—both formally and informally—to make sure you don't miss opportunities to remove customers' pain points.

Digital Tools

Technology is providing new insight into customer behavior. Customer profiling has become one of today’s hot new tools. By tracking customer preferences, companies can see what you’re interested in, searching for, and ultimately buying (or not buying). Companies track your behavior by getting you to use a preferred customer card or by placing cookies on your web browser.

• Kroger, for example, used such insight to introduce three-quarter-gallon milk cartons, which fit the needs of today’s smaller families better than traditional half or whole gallon options.6

• Tesco, Britain’s largest grocer, developed its highly popular “Tesco Finest” line when it discovered what customers weren’t buying at Tesco: wine, cheese, and fruit.7

Closely related, companies are using big data tools to search social media content. The goal: Identify word threads that provide insight into customer pain points—and the products that might solve them.8

Crowdsourcing doesn’t dig into existing data; rather, it lets you invite “the crowd” to share ideas with you. Procter & Gamble, one of today’s best R&D companies, established its “Connect + Develop” open innovation strategy to help it look everywhere for product ideas. A.G. Lafley, CEO and instigator of Connect + Develop noted: “I’m a big believer that we sometimes need help in solving problems. So I have set a goal to get half of our innovation from outside.” By 2009, Connect + Develop helped P&G obtain 42% of its new product ideas externally (up from 10% in 2000).9

Customer Immersion Labs

Customer immersion labs provide early customer reactions to new product designs by engaging actual customers in digital, simulated experiences. Gwenne Henricks, CTO at Caterpillar, notes that Cat,

Finding out what works early in the design process is a big deal. In fact, companies spend as little as 5% of the total, cumulative product cost on design. However, design locks in 70-80% of a product’s total cost.

You may wonder, "Is all the effort to gain deep customer insight worth it?" When you see the ROI, the answer is clear: Yes! Companies that understand how their products solve customers' problems achieve double the shareholder returns of their less-in-touch rivals.10