Products and Services: Introduction

Some people seem to have a magic about them when it comes to giving gifts. They give with insight. My son gave me a ski rope float recently. We are water-skiers in our family. Have been for a long time. We buy good equipment. Our ski rope cost $80 last season. Despite this cost, the handle of the rope sinks in the water! Yes, indeed, it is a minor inconvenience. But, the handles don't sink on $25 ropes. Still, I like the feel of the handle and keep buying the same rope every year despite the inconvenient sinking phenomenon. My son fixed the problem by giving me a float for the handle. No more sinking. Very few people would have given me a rope float. Yet, I will find my skiing experience less frustrating because of it. My son's gift was a great success because he knew exactly how to solve one of my life's tiny problems.

My son's gift was a success because he solved a problem that required very detailed knowledge of my life and activities. Product innovation is a lot like gift giving. To do it well, you must understand your customer's life as it relates to your product. How does he buy it? Where does he use it? What does he do to maintain it? Done well, it is a true gift to your customers.

You begin your diagnosis of current products and services by understanding how customers reach the decisions on how they buy your products and services. The objective of this analysis is to make sure the Company can compete well in today's market, before it enters the competition for tomorrow's market.

In order to compete for the customer of tomorrow, you evaluate opportunities to reduce customer costs. The objective of most product and service innovations is to reduce part of the cost a customer incurs in the system of activities he undertakes to buy, use and dispose of the product.

A product innovation has little value unless it remains unique for some period of time. Unique benefits are critical because customers cannot make a choice between one supplier and another as long as both competitors offer the same benefits. Once competitors copy a benefit, that benefit loses its ability to create more profits or sales for you.

These challenges notwithstanding, you are likely to end this process with more innovation opportunities than you have the capability and resources to undertake. The final step in this diagnosis is to evaluate each innovation alternative for its economic value and then to create a program for innovations based both on the economic value of the innovations and on your capacity to undertake them successfully during your planning horizon.

Summary Points

Next: Part 1: Customer Decisions on Benefits