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Your Organizational Culture Determines How You Innovate on Mature Products/Markets

Posted on July 13, 2012 by Ferhan Bulca, Ph.D., P.Eng.

Everybody can visualize the organizational culture of a start-up company. A small group of dedicated, motivated people working shoulder-to-shoulder with visionary founder(s). Things are humming and dynamic. How about the organizational culture when the product matures and is adopted by a larger market segment? How does that culture contribute to further innovation?

Let me first frame the conversation using Geoffrey Moore’s four innovation zones, introduced in his book Dealing With Darwin. Moore maps these four zones to his famous market adoption curve.

Geoffrey Moore’s Four Innovation Zones

At the leading edge of the curve is Product Leadership, which corresponds to disruptive innovation. At the tail end, there is Category Renewal. In this post, I will focus on the middle section and discuss the role of organizational culture in the company’s ability to innovate in that area.

Geoffrey Moore identified two main innovation categories for mature products/services:

Customer Intimacy refers to improving the value of the product/service to customers,
Operational Excellence is about improving operational efficiency to gain cost advantage over competitors.

While many organizations claim or want to do both, typically their culture is geared towards one or the other, not both. Improving customer intimacy requires an outward looking culture whereas the attention is inside when it comes to operational excellence. In today’s bottom-line driven approach, operational excellence is where most organizations focus because:

One can readily quantify goals: Cost of materials, taking waste out of operations, automating processes are all quantifiable and easily understandable. Leaders can set goals (eg. “reduce warehouse floor usage by 50%”) and monitor progress.
Improvements are internal: Improvements are done in operations behind closed doors. They are under the control of leaders of the organization.
There is little risk of public failure: What happens in the company stays in the company. Naturally, operational changes may impact customer experience but, for the most part, the outside world has limited visibility to how operations are run.

Customer intimacy, on the other hand, requires a different culture, which emphasizes continuous effort to better understand customers and respond to their evolving needs. True customer insight comes through walking a mile in the customers’ shoes, understanding their pain points and improving the product/service to eliminate these pain points. This approach conflicts with operational excellence as it is outward looking, ambiguous, risky and potentially costly.

In summary, customer intimacy and operational excellence require two very different organizational cultures to do well. These cultures are inherently in conflict with each other and should be managed well to be successful. Otherwise, typically operational excellence camp wins at the expense of better customer experience.

I welcome your comments on my blog. If you have specific questions, please feel free to contact me at ferhan@ferhanbulca.com.

How To Gain Customer Insight?

Posted on July 4, 2012 by Ferhan Bulca, Ph.D., P.Eng.

Recently, I was working with a client when he told me that he was mandated to develop customer insight so that their products attract better adoption. Being in business for over 20 years, he had good ideas about what customers cared for. He also recognized that there was probably a lot more he could learn about his customers but he did not know where to start. So, we put our thinking hats on and started brainstorming.

First, we needed a framework to work on. Inspired by Using Customer Insight to Build Competitive Advantage (2003) by Carlson Marketing Group, we created this:

Customer Insight Cycle

Let me explain this framework a bit: We all have assumptions and convictions about what customers value in our offerings (products/services). We have an idea about the tough problems we solve for our customers. This knowledge is customer insight. We take actions based on our insight but, most of the time, we do not fully validate our understanding of the customer. Our actions are, most of the time, not purely based on our understanding of the customer, either. Many internal (organizational) factors contribute to the decisions we make and the actions we take. These multiple factors add complexity to the next two steps, Assessment and Data, making it difficult to make a direct cause and effect relationship.

Second, we discussed applying this framework to his problem to see if it fit. The first question was where to start. It is a cycle and it is hard to identify where one steps in. We decided that Insight box was the place to start. This may come across surprising because customer insight is our end-goal. If we knew it already, why would we need all this exercise? In fact, we knew that we did not know everything but we had theories. In fact, the person I was working with and his peers all had theories (my word, not theirs) about their customers. The problem is that those theories were not always consistent with each other. But, who was right? That is why we start with the “Customer Insight Theories” and validate them by going through the above cycle a few times.

Third, we developed a plan for my client to work with his peers using the framework. He left the conversation energized and motivated to take the steps that will give him the insight he is looking for. Equally importantly, now he has a framework to institutionalize how the company gains and retains customer insight.

I welcome your comments on my blog. If you have specific questions, please feel free to contact me at ferhan.bulca@intrascope.ca.

Filed under: business, Consulting, leadership, management, market, NPD, product, product development, strategy, Validation, Voice of Customer | Tagged: business, marketing | Leave a comment »

Eliminate Your Innovation Pains, Part 2

Posted on June 28, 2012 by Ferhan Bulca, Ph.D., P.Eng.

My previous post was about a couple of tools to address the top three pain points in the management of product portfolio according to the Third Product Portfolio Management Benchmark Study by Planview (http://www.planview.com/m1/pd/3rd-product-portfolio-management-benchmark-study-hph).

Too many projects for available resources,
Not being able to drive innovation fast enough,
Decisions that go back and forth, get made late or ineffectively.

In this post, I will address the second pain: Not being able to drive innovation fast enough.

Eric Ries introduces two concepts in The Lean Startup (http://theleanstartup.com):

Minimum Viable Product (MVP) – a product that is aimed to test fundamental business hypotheses and learn from. It is not (necessarily) a prototype or a beta version of the product.
Pivoting – making changes to product concept based on results from success or failures of MVPs.

Most organizations go through a linear development cycle, which goes something like:

Define business model, business goals, requirements, target market, product/service to be offered and its value proposition
De-risk technology, develop conceptual design, gather market intelligence
Develop product/service
Prototype/beta testing
Transfer to production, crank-up marketing engine, operationalize
Focus on sales

The problem with this approach is two-fold:

The product/service is market-ready only after a lengthy cycle. Depending on the complexity of the product/service, the cycle may take anywhere from a few months to a few years.
There are few opportunities to experiment with market acceptance and change direction (if necessary)

The importance of multiple cycles to reach the final product is not a new concept. Before Ries, many others made the same argument and gained considerable traction (eg. W. Edwards Deming). However, this appears to be a difficult concept to put into practice. We tend to get lost in the race to the finish line and forget that sometimes a detour is the smarter path to the end-result.

My experience, which is learned the hard way, shows that these MVP-pivot cycles need to be explicitly introduced into development process. Each cycle needs to include a decision point where the hypothesis of the MVP is tested, results analysed and one of the following decisions are made:

Go – all is well, hypothesis is validated.
Pivot – hypothesis is not validated but lessons-learned indicate new opportunities.
No-Go – hypothesis is not validated and we don’t know what else to do.

I welcome your comments on my blog. If you have specific questions, please feel free to contact me at ferhan.bulca@intrascope.ca.

Filed under: business, Consulting, effective, Innovation, leadership, management, market, NPD, product, product development, strategy, Validation | Tagged: business | Leave a comment »

Lack of Ethics in a Financial Product

Posted on April 16, 2010 by Ferhan Bulca, Ph.D., P.Eng.

The other day, I received a letter from Royal Bank of Canada, promoting a “0% interest” campaign. It states that any cash advances I would make on my credit card would be interest-free for a period of six months. Being a businessman, free money always gets my attention. Being analytical-minded, I read the fine print. And, there I find the details, which led me to write this about the ethics of product positioning and product definition.

Here is what made me think that the offer was unethical: The fine print states that any payments I would make would be applied to various components of the bill, in the following order:

Interest, fees, penalties – this makes sense
Balance with LOWER interest rate – this made me curious!
Balance with HIGHER interest rate!

Do you see what I see? They leave the higher interest balance to the end. In other words, the so-called 0% promotion is nothing but! It is a method to take advantage of the trust of most people or, worse, pull those who need the cash most even further into debt.

Now, if one considers the objective of a bank, which is simply to make more money, the product is quite cleverly designed and promoted. The bank gives you a carrot and makes you pay the cheaper debt first, leaving your more expensive debt open for a longer period of time and collecting their fees, interest and whatever else along the way.

This situation exemplifies the importance of alignment between an organization’s objectives and those of their clients. Royal Bank, at least in this case, chose a “we win-you lose” strategy, which is costing them at least one client (yours truly). The challenge for the organization is to find “win-win” scenarios where the clients are happy with to buy the products of an organization where they see value and the organization makes money.

Many brick and mortar companies learned this a while ago and took specific steps to ensure ethical compliance (at least relatively speaking) in the way they source and sell their products. Take, for example, Wall-Mart’s “roll-back prices” tag line. They found a way to align their bottom line objectives with those of their customers. It appears like financial organizations have a few things to learn from Wall-Mart, Costco, and many other goods re-sellers.

Filed under: business, ethics, financial product, product, product development, Voice of Customer | Leave a comment »

Is Your Product Development Strategy Increasing Your Time-to-Market?

Posted on October 29, 2009 by Ferhan Bulca, Ph.D., P.Eng.

It is my experience that many companies have relatively relaxed product development strategies. Most declare lofty goals like “delight the customers” or “be the leader in performance” but these statements lack clarity for the development teams that are supposed to help the organizations meet their business goals.

Product development performance and effectiveness requires clarity in two areas:

New product development (NPD) strategy,
Product portfolio strategy.

Let me explain what these two concepts are and how they are different.

NPD Strategy is the way an organization introduces new products to its target markets. This is the “how,” and it should lay out, in clear detail, how the organization handles all the tasks and activities related to product development. Examples of NPD strategies are development through mergers and acquisitions, technology partnerships, or in-house research and development.

Product Portfolio Strategy is the “what,” which lays out what the company is offering to its target markets over time. It contains life-cycle of each product, from introduction to market till removal from use. Examples of product portfolio strategies are relevant product families, product platforms for different markets, legacy compatibility (or not), product and service packages.

There are two ways these strategies affect your time-to-market:

The content of the strategies: For example, if your product portfolio strategy involves inter-dependent products, development teams will have to ensure that a reasonable combination is tested before launch, significantly adding to the development time. Similarly, if your NPD strategy is based on in-house development, your teams may need to acquire new skills for a new product line.
The clarity of the strategies: Lack of clarity leads to interpretations and filling the blanks. As expected, none of these will resemble the intent of the organization and will differ even within the development teams. As a result, each team member or sub-group will work to a different objective, resulting in frustration, conflicts and significant delays in delivery.

In conclusion, organizations need to pay attention to articulating two product development strategies clearly and thoroughly. Further, these strategies need to be regularly communicated, reviewed and updated.

I hope you find this posting helpful. I invite comments and feedback on my posting. You may reach me by writing to ferhan.bulca@intrascope.ca.

Filed under: effective, leadership, management, market, NPD, product, product development, strategy | Leave a comment »

Product Cost Reduction and Architecture

Posted on June 26, 2008 by Ferhan Bulca, Ph.D., P.Eng.

With continuous cost pressures on products, companies are constantly looking for ways to cut costs out of their products. If you are in the same situation as many others, you probably are exploring your options in these two main areas:

Re-design all or parts of the product for lower cost,
Outsource all or parts of the product to a lower cost manufacturer.

In most cases, re-designing a product from scratch is prohibitively expensive, with questionable return on investment (ROI). Similarly, outsourcing the whole product is risky for your intellectual property, which you have heavily invested in.

When you need to cut costs quickly and with minimum risk, the obvious solution is to find the low-hanging fruits for cost reduction and tackle those areas first. But, how do you partition a product, identify and isolate the target assemblies, and ensure painless re-integration after taking out the costs? This is the main challenge that is derailing many cost-cutting initiatives.

The solution to the problem lies in the architecture of the product. Most products are not architected in the first place to allow partitioning and re-integration. This does not necessarily mean that one should give up. Instead, take the following steps to significantly improve the chances of your cost-reduction activity:

Create an architectural representation for the existing product. A good architecture should include, as a minimum, the following four components:
i) Functional architecture: what does the product and its sub-assemblies do?
ii) Design architecture: what sub-assemblies and components does the product have?
iii) A mapping of functions to sub-assemblies: what is the function of each sub-assembly and component?
iv) Interfaces: Identification of each interface between the sub-assemblies.
Identify acceptance criteria for each sub-assembly. How do you know that sub-assembly is doing what it is supposed to do?
Target one or more sub-assemblies for cost reduction. Control re-design or outsourcing through established acceptance criteria and interfaces.
Re-integrate lower cost sub-assemblies and enjoy higher profitability.
With the baseline you established in steps (1) and (2), repeat steps (3) and (4) as necessary.

Filed under: architecture, cost reduction, outsourcing, product, value engineering | Leave a comment »

Ferhan Bulca

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Your Organizational Culture Determines How You Innovate on Mature Products/Markets

How To Gain Customer Insight?

Eliminate Your Innovation Pains, Part 2

Lack of Ethics in a Financial Product

Is Your Product Development Strategy Increasing Your Time-to-Market?

Product Cost Reduction and Architecture

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Your Organizational Culture Determines How You Innovate on Mature Products/Markets

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Lack of Ethics in a Financial Product

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Is Your Product Development Strategy Increasing Your Time-to-Market?

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Product Cost Reduction and Architecture

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