Tuned In: Uncover the extraordinary opportunities that lead to business breakthroughs.

Does 'what you do' really matter?

One of the statistics I share with audiences when talking about Tuned In is really starting to get them to sit up in the chairs. Turns out, more than 95% of small businesses fail within five years and more than 91% of new products are withdrawn from the market within 18 months. Nice batting average huh? 

In baseball parlance, this is significantly below what has become known as the 'Mendoza Line'. Mario Mendozoa was a professional player for the Pirates in the 70's who famously lasted about 10 years in the big leagues with a career batting average around .200 and actually hit .198 in 1979. It pops up on ESPN every now and then to bring a little laughter into the conversation about someone who is in a slump ... 'Chris Young is in a deep slump and is getting dangerously close to the Mendoza Line'.  Not something you want to hear your name associated with. 

So how does it feel to live in a world where our averages are below 1 in 10?  And that's just for survival because there's another similar small percentage that acutally go on from there to achieve some amount of success or maybe even become hits. Yet, the fundamental reason why this occurs is so basic that it's downright shocking that most of us miss it. Before you even start, did you ever ask the question:

Does anyone care about what it is we do and do we do it better than anyone else? 

Seth Godin recently posted on the misperceptions most of us have when we are developing and launching products to market. He says we aim for the 'hit' thinking there is always a fallback to build a successful niche solution if that doesn't work or maybe even drop our offering in with an aggregator who is making money in Chris Anderson 'Long Tail'.  We found this in spades in our research. People want to hit home runs by guessing and coming up with something that noone else has ever thought of. Then they introduce it and when noone cares, they start spending more money pushing it into a variety of niches to see if it will stick. Then when noone cares, they try to sell it or abandon the opportunity completely. 

How sad really. It's all backwards and it's a lot of hard work to achieve nothing. Why not start with a problem that people care about solving and build a product or service that completely solves it. Here's the really interesting thing we found when we talked to leaders who created breakout successes ... they weren't even trying to hit a home run!  Instead, they just focused all of their time and energy on a problem they found that needed to be solved and eventually came up with a solution so compelling that their business took off. It's the opposite of what most of us have been trained to think. 

If you want to avoid the pitfalls that 90% of us fall into, start with making sure what you do really matters to someone and that you really, really care about solving a problem for them. If you do, you'll be in the minority of people who enjoy what they do and make a lot of money doing it.      

Where will your hit product come from?

I got a lot of questions from the press this week on our tour about the new iPhone 3G. 1 million in sales in the first three days! People wondered how to companies create these 'hit' products, the things we were calling 'resonators'. My response was that they quite simply had created a perfect solution to a problem that a distinct group of buyers had ... in this case, the millenials desire to have a mobile social networking device that integrates their life with a mobile phone.

Some wanted to dig a little deeper. OK, so HOW do you do this?

One concept that drives these kinds of breakout successes is one we saw very few focus on ... creating a quantifiable reason for a buyer to switch from what they are doing today to a new product. We called this the 'incremental impact' which at it's simplest measure is the perceived difference between products. What you are trying to measure is how urgent and pervasive is the problem you are solving (or the new capabilities you are introducing) and how much are people willing to pay for it.

The 3G is hitting on all cylinders from this perspective.

Let's look at the specs. It's twice as fast, half the price and with new apps to improve photo sharing, GPS system and access to corporate e-mail through Exchange integration ... among others. The way companies like Apple figure these things out is identifying the things that are most relevant to improving the experience of existing buyers and attracting new buyers. Their initial launch had aleady hit a chord with 20-somethings (I can be a real-time social networker) much like the Blackberry did to corporate buyers (I can stay connected real-time to work from anywhere). Now the challenge moves to creating enough of an incremental impact to make existing buyers want to upgrade and new buyers (like maybe some corporate types) tip to giving this a chance. The answers of more speed, more apps and corporate links are the kinds of urgent & pervasive problems that buyers in both categories are willing to pay for. 

If you want to create hit products, pay attention to the little things that maximize your switching cost benefits. The iPhone is a good model for doing this right. 

         

Have you considered your product's positive incremental impact?

A critical aspect of getting tuned in is for the vendor to quantify the impact that the buyer receives when they buy and start using the product or service.  If we aren't tuned in to the unresolved problems that exist in our marketplace, we tend to build products that we think will make our buyer's life better.  Often, we substitute our needs for the client's needs and declare that rolling this product out will make their life "better."

By tuning in, we understand, from the buyer's view, what the impact will be.  There is an important refinement to this process that we often miss.  It isn't just "impact" that we are looking for, it is positive incremental impact.  We need to measure how their life will get incrementally better over their current way of solving the problem.  And when we measure positive incremental impact, it must be balanced by the negative impact that inevitably goes with it.

The simplest example is the net effect of paying for the product.  Yes, it improves my life, but that is balanced against the cost of acquiring the product.  If the price is higher than the perceived improvement, the market doesn't buy.  The negatives don't stop with price.  Add to that the "costs" of implementing, training, and downtime and now the positive incremental impact may become a net-negative.  Microsoft's Vista currently exists in this territory for many buyers.

If you think about your last "competitive replacement product" you may have experienced this.  Tuned out thinking leads to internal proclamations about the superiority of our product and how it will kill the competition.  Sure, your product is "better" but if you net that against the cost of your replacement plus their current investment in the competitive product, plus the disruption associated with implementation, training, and acclimation to your offering, the buyer may be in net-negative territory.  This explains why so many competitive replacements falter even though the replacement actually is substantially "better."

Finally, you need to remember that the positive incremental impact is segmented by persona.  For some buyers, the impact substantially outweighs the negatives while others really don't receive the same net-positive results.  Attempting to overcome this with any amount of marketing is simply an exercise in futility.

Impact versus value

Let’s be realistic. Not all potential product ideas are going to come from the outside. As much as we want to be Tuned In, there are times when an idea comes from our founder, the CEO, product development, a customer, or even a competitor. We feel an insurmountable pressure (or mandate) to proceed with the idea against all common sense telling us otherwise.

The Tuned In solution to this is called an acid test. When we are being pressured to build a product from the inside-out, we should first put the idea to a market test and let the market decide. Acid testing doesn’t take long and need not be expensive.

First you need a prototype that you can show. It doesn’t need to be a complete product or service. You could simply prepare a presentation, much like a salesperson would give, and show what you plan to offer. Call the prospective user and ask for 30 minutes and stick to your schedule. If you can’t define your product and solicit input in 30 minutes, you aren’t ready to test it. Reassure your contact that you are not selling anything because you haven't even started to build this product.

When you present the product or service, stick to the facts. Don’t tell them the benefits, just show them what it does and ask them what problems does it solve and what impact would it have on them, their family, or their company.

I like to use the term “impact to the customer” instead of the word “value". Value is one of those terms that means different things to different people, much like “quality” or “marketing.” Asking for the impact clearly asks “How is life going to get better for you by owning or using this product?”

There are lots of things that I own that have “value”, but there is a distinct subset of those items that truly had a positive impact on me, my job, my company or my relationships. Those are the tuned in products that resonate for me. Those are the ones that I would pay dearly to acquire, and yet, some of them were free of charge. It is indicative of marketing people who don’t understand the “impact to me, their customer.”

Top two reasons why new products and services fail

Why do most new products fail?

1. Organizations base new products on what their current customers request rather than an understanding of the unresolved problems that people will pay money to solve.

2. Organizations try to create a need in the market through expensive advertising or relying on an army of salespeople instead of building products that the market wants to buy. 

The most successful organizations tune in to their markets.

In this blog and in our upcoming book, we’ll introduce you to dozens of tuned in organizations that develop products and services that resonate with buyers and help them to achieve success.

People who run tuned in companies largely ignore the competition. Instead they focus their energies on the problems that buyers are willing to spend money to solve. By first understanding market problems, then building the products people want to buy, and communicating to buyers that we solve their problems, everything else falls into place.

Sounds easy.

Actually, it is...

…if you’re tuned in.

ROI: Enemy or Friend?

I’ve been hearing a lot of pushback recently around how useful ROI is as a measurement. As someone who has sat on both ends of the table, I think understand the reasons why it’s a lightening rod issue. It seems ludicrous when you are being asked to measure the un-measurable but at the same time, I remember being incredulous as a CEO when folks asked me to approve large expenditures without any accountability for how they would help the business.

It’s time to face facts on this. ROI matters because it’s the core of decision making and its glue that holds everything together. 

We’ve worked with thousands of companies over the past ten years to understand the value and justification behind our efforts to standardize the product management process. Most recently, we sat down for one-on-one discussions with 33 CEOs to get to the bottom of the ROI question. By far the biggest eye-opener was the way in which these CEOs dug into the questions and delivered a pragmatic assessment of how their company measures their value.

What was enlightening is that they ask four very simple questions around almost any major investment decision:

• How much faster can you bring a new product to market and how much money can be saved by eliminating development mistakes?
• How can we ramp sales faster and lower the overall costs of sales and marketing by spending our dollars and resources more wisely?
• What impact will this have on the fundamental measurement that we value the business by—improving customer satisfaction, retention and referrals?
• Will any of these practices create better margins by improving productivity or retention rates?

Pretty simple questions that any business cases should be able to measure. What’s so tough about that?  Tuned In companies seem to relish this process.   Tuned Out companies run from it.   Which one are you?