Around 60 people attended the September 7, 2011 meeting of the Silicon Valley Product Management Association meeting held at Tech Mart in Santa Clara. Ron Brown presented “The Marketing Side of Agile: 10 Secrets for Success.”
Ron Brown is a patent holder, corporate spokesperson, and author of the book, Anticipate, The Architecture of Small Team Innovation and Product Success, on promoting creativity and innovation at the team level. Brown is currently the CEO of United Keys, Inc.
Ron’s career spans three industries. One third of his career was in the packaged goods advertising industry where he learned principles of professional creative problem solving. The second third he spent in high-tech hardware and software companies, where he learned about supply chains and distribution channels. One third has been within Silicon Valley internet startups. His career includes experience at Nestle, international ad agencies J. Walter Thompson and BBDO. At JWT, Brown managed the HP computers and printers businesses. As VP Corporate Marketing at Wyse Technology, he gained global channels, distribution, and corporate marketing experience. As president at eFax.com, he built one of the fastest growing consumer internet sites.
Brown said that the failure rate for new product entries has been increasing. Whereas 50 years ago, most new products were successful, twenty years ago the failure rate was 50%, while it is 70% in today’s business environment. He set out to discover what knowledge leading companies have about new product innovation that distinguishes them from their industry peers. He started by digging through 60 years of industry research about product success, then he interviewed developers and managers from a wide range of companies.
Brown defines “leading companies” as those that generate over twice as much revenue from new products compared to their industry peers. Specifically, the successful companies generate 49% of sales from new products compared to 22% of sales from new products in other companies. They must always have a fresh flow of “new” products in new categories at any given time. In contrast, most companies lose a tremendous amount of time and money on internal costs that result in poor moral and failed products while their competitors get stronger.
The successful companies spend much more time figuring out how to be more innovative than the unsuccessful ones, because they recognize that innovation is key to winning in the market. Small development teams must have freedom and resources to be effective. Brown discovered that engineers operating from the Agile manifesto talk to customers regularly, although they may not recognize that customers are fickle and that product management skills are necessary to determine how to convert customer input into features, explicit product descriptions and strategic positioning.
Brown isolated 10 core strategies of leading companies that are not readily apparent, including the ability to anticipate what customers want and deliver new products by thinking like customers and understanding human behavior and motivation.
1. Leading companies make entrepreneurial teams the focal point of their strategy.
A major obstacle to innovation is the entrenchment of linear development processes such as Waterfall that result in late stage rework with associated risks. The benefits of Agile are reduced risk, increased product/market fit, decreased time to market.
Brown defines Agile teams as
- small cross-functional teams
- that are self-regulating and
- self-governing, and are
- empowered to make strategic decisions
2. Leading companies push decision making to the edges of the organization close to customers.
The higher up in the organizational chart of the manager charged with decision making power, the less awareness they have of the day to day issues, patterns of problems, and understanding of the end users’ needs, wants and pains.
3. Leading companies employ development techniques tailored for the “fuzzy” front end.
Early stages of a development cycle are referred to as the “fuzzy” front end. This is the phase when the company is first conceiving and considering an opportunity before determining if it is worth developing. The creative development process takes an idea and works it into a tangible product. However, manufacturing control processes don’t apply to creative thinking. Total Quality Management (TQM) or statistically based manufacturing techniques developed by W.Edwards Deming are not conducive to pre-revenue activities. Even Six Sigma, although flexible, doesn’t translate well when attempting to formulate an idea properly. Development and manufacturing don’t occur on the same continuum, although they are often depicted visually as if they have the same characteristics and implementation strategy. Development formulates an idea and implements, while manufacturing replicates and scales – each requires unique skill sets, orientations and management technique.
4. Leading companies commit to customer immersion and problem detection techniques.
Seven out of ten product failures result from poor customer input procedures. Customers are not rational and buyers may not know why they buy. Brown cited a 2008 Microsoft commercial featuring Bill Gates and Jerry Seinfeld going to live with “average” people in their homes. When Gates asked Jerry why they were doing it, Seinfeld suggested that they needed to understand what it was like to be a regular person, since they were too removed. This is a literal example of customer immersion, which came from social anthropology and ethnography. Living with customers provides insights into the customer moment to moment experience in their own environment. Direct observation provides insights into customer motivation, pain and behavior. Once you start thinking like a customer, you can anticipate what they want which provides a strong competitive advantage. VCs ask whether startups are an aspirin or a vitamin. An aspirin kills pain while a vitamin prevents pain. Leading companies solve important problems exclusively by finding the screaming baby and urgently solving the problem.
5. Leading companies develop creative problem solving skills at all levels.
Brown cited a study that showed that projects were nine times more productive and quicker to market if managers had proven high levels of creativity as measured by the Myers-Briggs Type Indicator creativity index. Everyone, regardless of inherent tendencies, can be trained in creative thinking skills which improve with practice.
6. Leading companies generate meaningful ideas from the entire value chain.
A supply chain includes the network of vendors required to bring the product to market. Each component in the supply chain has an associated cost which must be kept as low as possible for financial accountability. In order to differentiate, marketing recognizes that each component can be positioned as a source of value to the customer. Porter defined this perspective as the value chain. Leading companies reinforce brand trust at every opportunity in the value chain even bringing suppliers into the action as early as possible to identify potential for innovation. Proctor and Gamble has a program called “Connect and Develop” which looks outside the company to discover at least 50% of new product concepts. McDonalds added menu items such as the BigMac and Egg McMuffin from franchisee suggestions.
7. Leading companies emphasize superior implementation throughout the organization.
Taking a concept from an idea into a finished project requires an ability to implement well in an elegant way. Innovation is a process, not a chance endeavor, which requires structure. The structure of innovation is comprised of identifying the idea, developing the strategic direction that the idea should be taken in, and executing on that strategy. Strategy turns an idea into an invention, providing it with form and function. Execution turns the invention into a product that customers can purchase and utilize. Implementation equals strategy plus execution.
8. Leading companies utilize business models for strategic planning.
Brown referenced management writer Joan Magretta, as the guru of business models. She defined a business model as “the story that explains how an enterprise works.” Peter Drucker described the business model as the answer to the questions: Who is your customer, what does the customer value, and how do you deliver value at an appropriate cost?
Making money occurs one transaction at a time. A business model for a new product is a strategic document focused on transaction level value creation. A transaction is an exchange of value between the company and the customer. A product is a vehicle for a transaction. The dynamics of the business transaction between the company and the customer must be understood and analyzed in order to be enhanced and refined. This focus on transactions is referred to as “unit economics” since it is concerned with value creation rather than production costs. Business models are also designed to generate stories, since stories are what customers buy and fuel word of mouth communications. Business models fail when the narrative isn’t believable and when the numbers don’t add up.
9. Leading companies recognize the importance of precise messaging.
Differentiation is the tip of the arrow and the value proposition seals the deal. The positioning presentation has to be razor sharp and repeated often. The USP is the unique selling proposition which describes the qualities unique to the product in a tangible way that differentiates it from the competition and motivates a large audience to take action. It must be tangible so the audience can experience the benefit through their senses to measure its performance. Products that demonstrate their value are easier to communicate and sell. The USP = Benefit + Differentiation + Motivation.
The strategic positioning statement defines the target audience, describes character or personality of the brand, and provides the reason why. The reason why is important because it establishes the credibility and the believability for the benefit claim. Brand character projects an attitude and reinforces the main claim with a feeling. Drama, storytelling and emotional component are effective aspects of the statement. Strategic Positioning Statement = Target + USP + Brand + Why
10. Leading companies measure and track key decisions.
Brown described a simple Audit on a slide with 4 boxes within a square, each box pointing to the next box in counter-clockwise direction. Starting with the Idea in the top left box, pointing down to Critical Success Factors, which points to Audit in bottom right, pointing up to Track in top right, which continues to point to the Idea. Critical Success Factors focus on the most important areas to get to the very heart of both what is to be achieved and how it will be achieved. Feedback mechanisms measure and track progress, provide insights for continual improvement and correction, simplify and speed up decision making, enhance communication and collaboration, consistently include team members disparately located. Identifying rules, best practices, critical success factors, appropriate metrics and feedback mechanisms contribute to design thinking for constantly iterating business models in leading companies.
In short order, Brown identified the keys to successful leading companies as those that show their teams how to collect and process customer input more effectively, develop creative problem solving skills, use business models to stay on course, and measure and track progress.