Paradigms of product development have shifted significantly in the last decade. We have started integrating the agile and lean methodology (popularized by the IT industry) into our waterfall methodology (popularized by the manufacturing industry). The key tenet of agile and lean development is to quickly and iteratively build – test – learn. Based on this shift, our rules of customer engagement have also changed significantly over the last decade.
To reduce cost and time associated with the product development cycle, we have to start engaging with our customers early. Ongoing customer input is very important to build products that will be successful in the market. The build-test-learn model demands customer engagement be a part of our innovation strategy.
In this post, I will be discussing the three tools that I use regularly to enhance customer engagement and innovate strategically.
As Ash Maurya discusses in the Lean Canvas, there are three stages of innovation
- The Problem Solution fit
- The Product Market Fit
- Scaling
The Problem Solution Fit
In this stage, we are trying to understand and identify the “Job” the customer is trying to do. This will help us understand the problem that our customer faces, so that we can build solutions that will solve the problem. The Design Thinking Methodology of Empathy – Define – Ideate – Prototype – Test is ideal for this stage of innovation to learn about our customer’s problems and build solutions that can help solve their problem.
A successful innovation strategy involves engaging with our customers even before we have a solution. Early in the innovation process, we focus on problem identification, ideation and quick prototyping. We test our early prototypes with customers to learn what works and what does not work. We go through the Design Thinking methodology iteratively, until we identify a solution that we are confident will help solve our customer’s problem.
It is important to focus on learning in this stage. We have to be open to suggestions, feedback and input. Adopting empathy to really listen to and understand our customer’s needs at this stage will be vital to a successful innovation strategy.
The Product Market Fit
Now that we have identified the problem and a potential solution, we have to define if we can build a for-profit enterprise. It is time for us to start building our business model. At this stage of the process, I like to use Ash Maurya’s Lean Canvas. In order to build a model that will help us make the right decisions, we have to do a deep dive to understand our customer segments, channels to market and revenue streams. We also have to define our business’ unique value proposition, key success metrics and cost structure. Based on these we can build a concrete plan on how we will build a successful enterprise within a well-defined period.
Customer Segments
We Identify all the customer segments that will benefit from our solution. At this stage, we must have a clear idea of who our first and second adopters will be when we go to market.
Unique Value Proposition
We focus on being able to clearly articulate
- How will our solution provide value to our customers
- What differentiates us from the competition and
- Why should the customer buy our product
Key Metrics
These must include how we define our success. Based on our product and market, these could include
- number of units installed in X years
- revenue in X years
- go-to market in X years (for products with long developmental timelines)
Our early adopters and the size of market will help us realistically define our key metrics for success. Key success metrics are unique to each business. We try to make them tangible by assigning a number value that we can measure against.
Channels
How will we reach our customers? Channels can include social media, advertising, events, word-of-mouth. We like to be be strategic and think about all the channels that we will use, not just for our early adopters but also for our early majority.
Revenue Stream
This will define whether the business will make money. In order to define this we must know not only our customer segments and channels but also our pricing strategy.
Cost structure
How much will it cost us to build the product and the business?
Our financial model will be a detailed output of our cost structure and revenue streams.
As we are building our business model, we will be continuously interfacing with our customers to define the following
- Customer segments and early adopters
- Unique value proposition
- Pricing model to build our revenue structure
- The best channels to reach our customers
In the product – market fit stage we are also pro-actively thinking about crossing the chasm. In this phase, we have to develop a plan not just to reach our early adopters but also our early majority that will effectively set us on the pathway to scale.
Scaling
In this phase of the business, our focus is on growth. Our company is not only revenue positive but also profitable. We want to capture as much of the early majority and late majority market as we can. A large part of our customer interaction at this stage is devoted to customer satisfaction.
As a forward-thinking company that likes to stay ahead of the curve this is the time that we will start planning for our next innovation cycle. It is time for us to start our empathy interviews to identify our next problem – solution fit.