Outcome-Driven Innovation: Know what customers want before developing the product

by Chad McAllister

Know What Customers WantAn old marketing adage is that half of a company’s advertising is effective, we just don’t know which half. A similar conundrum faces innovators and product developers, with the best companies finding success with about half of the products they create (and the odds are much worse for average companies). At this rate, most product developers realize the painful reality of building a product no one wanted. This was Tony Ulwick’s experience as a manufacturing engineer at IBM when he worked on the PCjr (PC Junior).  The PCjr was to be a game changer in the computer industry and was eagerly awaited by the press and consumers. Within a day of its release the unexpected happen with the Wall Street Journal declaring it a flop. A year later IBM had lost over $1B on the product that few people wanted. Tony was determined to learn from this experience. His work resulted in Outcome Driven Innovation (ODI), which has matured over the last three decades since its first formulation. Clayton Christensen said ODI “brings discipline and predictability to the often random process of innovation.” It is a quantitative tool to understand what customers want before the development of a product starts, i.e., before big money is spent, innovators can know that they have a product concept people want. I interviewed Tony to learn more about ODI.

See the link below to hear the interview.

What Makes ODI Work?

The key component is determining the metrics people use for getting the job done. We need to understand the measurements people use to describe a successful job – what they want to accomplish. Customers don’t describe metrics for a product but do discuss the job they want to accomplish in terms of metrics. An example is a product for teeth whitening, and the job customers want done is to have whiter teeth. Associated metrics include how much whiter their teeth can be, the convenience involved in getting whiter teeth, and the financial costs of the product or service. All the metrics are categorized into one of three areas – core/functional, consumption (convenience), and financial (costs).

How are Need Statements Captured?

A perfect need statement uses a specific syntax that describes the customer’s desired outcome. It is based on three characteristics of needs: (1) it has to be a measure of customer value, (2) it has to be measurable and controllable in the design of the product, and (3) it must be stable over time.  A specific syntax is used in the form of:

{Direction of improvement} {unit of measure} {outcome desired}.

An example is:

Minimize the time it takes to whiten teeth 5 shades whiter.

There are many approaches for capturing needs statements, such as ethnographic research and face-to-face interviews, but after numerous applications of ODI, Tony has found that phone-based interviews work well when performed by a skilled practitioner. Interviews focus on the job the customer is trying to get done and understanding the details of this job as well as why they are doing it. A job map is then created that lays out all of the jobs the customer is trying to get done.

How are Customer Needs Ranked?

A complete set of need statements (customers’ desired outcomes) is often over 100 items. The objective of ODI is to cast a wide net and capture all possible customer needs. Customers rank the needs by importance and satisfaction. This can also lead to identifying underserved customer segments – segments that cluster around specific unmet needs and who may be willing to pay a premium price to have their needs met. ODI calculates a composite satisfaction ranking for the chosen need statements to be implemented in a product. If the composite satisfaction is 20% or higher than existing products on the market, consumers are willing to make the switch and buy the new product.

An ODI Example

One example is a Bosch circular saw. ODI was used to examine unmet customer needs. Fourteen unmet needs were identified in a segment of the market, which reflected 25% of all customers. Bosch implemented solutions for the unmet needs, making it the best selling circular saw in the United States for the last 10 years. An example of an unmet need was when the electrical cord of the saw is accidentally cut. When this happens, which is not uncommon among contractors, the worker loses time repairing the cord. An associated need statement was:

Minimize the frequency with which the cord gets in the way of the cut path.

Bosch addressed this by removing the electrical cord entirely and allowing an extension cord to be connected directly to the device using their direct connect capability.

To learn more about knowing what customers want… Listen to the interview with Tony Ulwick on The Everyday Innovator Podcast. Tony is a pioneer of jobs-to-be-done theory, the inventor of the Outcome-Driven Innovation® process, and the founder of the strategy and innovation consulting firm Strategyn.

image credit: depositphotos.com


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Chad McAllister, PhD is a product innovation guide, innovation management educator, and recovering engineer. He leads Product Innovation Educators, which trains product managers to create products customers love. He also hosts The Everyday Innovator weekly podcast, sharing knowledge from innovation thought leaders and practitioners. Follow him on Twitter.

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