Your Customer Doesn’t Know What He Wants

The sign in my usual coffee shop says, “The customer is always right!”  Business advisors tell us to match our product or service to what the customer wants. If Henry Ford had asked his customers what they wanted, a faster horse is what he would have heard. Steve Jobs built one of the world’s largest companies saying, “The customers never know what they want until we show them.”

Entrepreneurs, product developers, and CEOs live with these conflicting messages. Investors, your division’s GM, and your board want you to prove that there is a paying customer for the new product. “Will the dog eat the new dog food?”

But a generation of entrepreneurs have been inspired by Steve Jobs’ view that creating a New Product Category based on emerging technologies can be a path to profitable products for which there is not a present customer demand.

What Steve Jobs Got Right

Two lessons are often drawn from Jobs. The first is that Jobs succeeded by ignoring shortsighted customer preferences. Instead, new ventures should pursue their technology and customers will ultimately find the new product. The second is that Jobs was such a unique individual that there is nothing to learn from his example. If anything, according to this view, he is a bad example for virtually every innovator and entrepreneur.

Both of these conclusions are wrong. Steve Jobs was a rare example of someone who spanned both technological innovation and market/customer acceptance innovation. Jobs’ insight was to recognize the potential for a New Product Category utilizing newly available technologies in a personalized computer that individuals could use for business and non-business applications independent of centralized mainframe computers. Apple as a company was launched.

The real lesson from Jobs’ success is that both technology innovation and a keen understanding of customer acceptance are required for major New Product Category success.

New Product Categories  — Concept and Examples

Here are other examples of companies that created successful New Product Categories building on underlying technology developments.

SpaceX  — Since the beginning of space exploration, building and launching rockets to put satellites into orbit has been the exclusive job of NASA and other government agencies. Elon Musk recognized that the underlying technology had developed to the point where a commercial company could build its own rockets and offer a new product concept – the service of launching hardware and people into space independent of governments and at a lower cost.

Uber  — Taxi services predated automobiles. Travis Kalanick and Garrett Camp believed a New Product Category was possible if cell phones could instantly connect customers with a locally available car service. Connecting mostly non-regulated independent car owners who are available as a car service via a software platform to individual customers who otherwise would use a taxi or their own cars is the Uber product category.

Airbnb  — Hotels, motels and apartments are widely available. The Airbnb founders, Brian Chesky, Joe Gebbia, and Nathan Blecharczyk, recognized that owners of many homes and apartments are willing to offer short term rentals of their bedrooms or the whole apartment. The widespread acceptance of software platforms for individual-to-individual transactions created the opportunity for Airbnb to build a successful business as the intermediary between homeowners and the traveler.

23andMe  — Decoding the human genome is an historic scientific achievement. The U.S.  spent $3 Billion for the first human genome sequence (1991 dollars). Plans for $100 sequencing are now proposed. Anne Wojcicki, Linda Avey, and Paul Cusenza recognized that the underlying DNA sequencing technology could allow inexpensive genotyping and profiling each individual’s family history. They founded 23andMe believing that individuals throughout the world would pay $200 to know more about their family history.

Commercial Jet Engines As a Service  — The jet engine we see out the window of our plane is expensive and exacting to maintain. The technology now available to measure engine performance while in flight and communicate performance data to the ground created the opportunity for a New Product Category. Malaysian Air did not buy its jet engines from Rolls Royce. The airline bought a service contract from Rolls Royce under which RR guaranteed to provide operating engines on each of their planes. RR created a “power by the hour” product. The Malaysian Airline lost over the Indian Ocean was tracked for a longer distance by the engine maintenance communication than by land radar.

Technology Revolution Today  — New Product Categories Tomorrow

Incremental product change with established customers will remain the lowest risk and far more common form of product innovation. But the wave of technology innovation now underway will create many opportunities for New Product Categories. Here are examples of large scale technology developments where these opportunities will emerge.

    *    Moving data into the cloud

    *    Rapidly decreasing data storage costs

    *    Access to many categories of “big data”

    *    Growing power of artificial intelligence (AI)

    *    Almost universal availability of cell phones and their computational power

    *    Introduction of 5G wireless-technology with much faster data transmission

    *    Understanding human health and disease at the molecular level

    *    Solar and other renewable energy sources becoming competitive with oil

    *    Close to worldwide real-time communication

    *    Movement from text communication to visual and image communication

These and other technology advances will be incorporated into incremental new products. But they also create opportunities for New Product Categories and new business models. Here are examples of product categories emerging from current technology developments.

Personalized Precision Medicine  —  Medical technology, drug treatments and the delivery of healthcare are rapidly changing as the underlying science is understood for the first time at the molecular level.

Service As The Product  —  The concept of switching from selling a physical product to selling the service that product provides to the customer has potential in many markets. Uber is competing with taxis. But Uber is also selling individual transportation as a substitute for owning a car.

At a Distance Specialized Professional Services — Cheap data storage, ultra fast 5G data transmission, artificial intelligence and the combination of both more powerful analytics and widely distributed computational power is creating new product category opportunities in many business sectors. At a distance surgery and high risk inspections and maintenance are examples.

Non-Bank Financial Intermediaries, Blockchain, and Bitcoin  ––  Will national currencies will be replaced by cryptocurrencies? Will banks disappear as intermediaries between companies transacting business? Or is this just a fad? Are there opportunities in your world where you could create a product concept that benefits customers by taking the transaction outside the conventional banking and transaction system?

Experience as a Product — Virtual Reality, and Augmented Reality  —  Watching the Red Sox at home on high quality TV and Thursday night at Fenway are competing experiences. Consider the combination of high resolution visual displays (TV-like devices and headset individual displays) and communication by visual images rather than text. Virtual reality will change the competitive balance for how individuals look for entertainment, news, information about their community, and connection with their friends in hard to predict ways.

Creating a New Product Category Can Be a Value Accelerator for Your Company

Creating a New Product Category following the path of Steve Jobs’ creation of Apple I and the iPhone may seem impossible. In fact, that process is very much alive today and will create the world we experience tomorrow.

Creating a New Product Category and introducing it to the market is a high risk venture. But success can be more rewarding than incremental product improvements. Here are steps you can take to develop new product concepts and improve your chances for successfully introducing them to the market.

1. In the world you know well, look at the underlying technologies, relationships, methods of communication, product concepts, business models, etc. Can you use emerging technologies or business models in an innovative way to empower or engage customers in new ways, and can the product find wide customer acceptance?
2. Engage both technology and market perspectives from the start. Your core competency  must include technology and a deep understanding of client requirements. Both perspectives are required to carry the project through to an excited paying customer.
3. Demonstrate quickly that there is a paying customer for whom this new product or service satisfies a MUST HAVE requirement and not just a NICE TO HAVE requirement.
4. Fundamentally new products require a passionate champion and a committed team. This is the strength of a focused startup or early growth company and the vulnerability of a large company bureaucracy. Leadership of a larger company with a department or team engaged in a fundamentally new product concept needs to ask whether the right team and right leadership is engaged to be successful.
5. A final point.  Don’t pretend to be Steve Jobs – you don’t have to be. In truth, the right small, committed team with complementary skills can bring the same capabilities to the table and create, launch, market, and sell genuinely innovative products.

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