The High Land of Opportunity
Alex Gofman
Hundreds of years ago, the Earth was different, a huge mass of land known as Pangea. Then the continents separated, and began to move apart further and further to leave vast oceans between them. To follow the allegory, the modern distinct ‘continents’ of mass-produced products and luxury are moving apart as well – as ever more products become cheaper and more accessible to the public, while extreme luxury flies higher and higher into the stratosphere of unimaginable excess. Yet this trend differs radically from the geological example, for the modern process leaves between the ‘continents’, instead of water, a huge, fast growing ‘land’ of masstige – a term created from merging the words ‘mass’ and ‘prestige’. While there are many names for the trend (among them mass affluence, premium, and new luxury), I prefer to call it High End. Much like its analogous “the land between”, High End has many inhabitants, and plenty to keep them occupied.
People used to keep up in their consumption with their neighbors’, or with relatives generally at the same income category. Nowadays, many want to be Trumps or Mittals, or at least live some part of their luxurious lives, which was hardly even known or visible to outsiders a mere generation ago. The craze is to ‘differentiate’ oneself from the masses, to find things that bring with them a sense of pride, yet all within the constraints of their growing albeit limited means.
The initial successful companies of this High End trend were mostly from the USA – the country famous for democratizing virtually anything, in this case, the luxury. Great examples of such companies are Tommy Hilfiger, Abercrombie & Fitch, Banana Republic, Coach, Dooney & Bourke, Ralph Lauren, Tiffany, etc. Now this trend has swept Europe and is blossoming in Asia.
Some people believe that Japan represents “the” blueprint of contemporary luxury consumption in Asia. Japan consumers account for well over 10% of the world’s luxury goods and services. A stunning statistics shows that 95% of young Japanese females own a real Louis Vuitton. Is it a luxury (based on the price – it has to be), a mass-product (95% sounds quite massive to me) or something in between?
Moving from Japan to India. I remember a couple of years ago observing a teenager squatting on a corner of a busy street-market in Mumbai, who proudly showed his friends what seemed to be a newly acquired mobile phone. It wasn’t a cheap no-frills model. Clearly, it was something better than his peers had (or could get). One could deduce that just by looking at the expressions of awe on their faces reflected in the gleaming happiness of the proud owner. It did not matter whether he needed all the functionality of the product or utilized it’s quality production – the others saw him owning the gadget and that made him proud. I doubt that at that specific moment, even a much more expensive possession – whether it is a gold ring or another more traditional sign of affluence - would make him more resplendent and admired than the phone, which seemed to have a very high emotional connection with this group of youngsters.
Price is a highly important aspect of the majority of purchase decisions. Yet a cheap price is not a determinant for commercial success anymore. People are looking for something they can afford but which is not available to everybody. Many are willing to pay higher prices for these newly discovered prestige attributes. Where there is an opportunity of higher prices with higher margins, there is no lack of companies wanting to jump the wagon. Some older and well-respected luxury brands believe that their name would suffice to win the war. Yet is it that simple? Compare Apple iPhone – a definitive premium product - with Prada/LG phone and Armani/Samsung phones. Despite the intimidating names of the heavy weight competition, iPhone won in most places of the Western world. iPhone is upscale albeit real and exciting while the competitors failed to establish the emotional connection with the consumers. Many new middle class consumers are not aspired by the old luxury – they are looking for new, fun experiences that the old luxury industry has yet to catch up with.
The iPhone story above is true around the world with a possible exception of …India where the consumer's obsession with value is paramount. I’ve heard a joke somewhere about an Indian consumer who was thrown out of the showroom when he asked about how economical a super luxury car was. Many prominent brands failed to find the right balance between functionality and value for the Indian market. iPod still has a phenomenal aspirational effect on the Indian consumers but does not sell well there due to the suboptimal balance.
An astute marketer Allyson Stewart-Allen chided that MASTIGE stands for “Marketers Always Seduce Shoppers To Instigate Great Expenditure”. It might be true but it sounded so adorable and appealing when a Japanese company Yosimiya started offering bags of rice printed with a newborn’s photo, name and date of birth, which many proud parents just could not resist. The bags were shaped to resemble a baby and weighed exactly as much as an infant thus giving a feeling of holding a newborn. It felt fresh and different, customized and expensive enough to feel exclusive yet reasonably affordable for middle class families. And most importantly, it appealed to the emotional side of people.
Another example. LG sells usually at the lower end of the market while producing quality products. Their persistent advertisement of low pricing was affecting the company’s ability to move up the scale. So, in the last years, LG concentrated on building a premium image in advertising without much regard to the price. And in some places it is already showing results (recon Prada selecting LG for their premium phone offering).
The economic downturn has had an impact on the trend. Many people raised the bar of their consumption to the level they could not really afford. What would happen to these consumers and the companies that target them during economic slowdown and possible recession? Michael J. Silverstein, the “grandfather” of “trading-up” who was the first prominent author to describe the trend, believes that the trading up phenomenon is recession-proof.
This belief is under heavy testing now. Would the consumers continue paying ten times more for pair of jeans made by a premium brand like 7 for All Mankind from virtually the same denim as a $30 pair of Wranglers? What if instead of trading-up in the current economic situation the consumers will trade down?
In either case, whether you are an established luxury corporation or operate in a mass products area, you can’t afford to ignore this exploding market of high-end / high-margin products. Otherwise, you could be drowned in the surrounding waters of competition.
_______________________________________
Alex Gofman is VP of Moskowitz Jacobs Inc., a NY based company. He is a co-author of the international bestseller Selling Blue Elephants: How to Make Great Products That People Want Before They Even Know They Want Them (www.SellingBlueElephants.com) written with Dr. Howard Moskowitz and recently republished in India along with translations in 14 countries. He is also a co-author of an upcoming book Premium by Design: How to Design and Market High End Products (www.FutureHighEnd.com) written with Marco Bevolo, Director at Philips Design, Stefano Marzano, CEO of Philips Design, and Dr. Moskowitz. Alex may be contacted at alexgofman@sellingblueelephants.com.
Wednesday, August 20, 2008
Saturday, March 15, 2008
My upcoming article with Daily News and Analysis
The President as a Food ProductAlex Gofman
If a presidential candidate were a food, what would (s)he be, and what kind of shoppers would be putting him/her in their carts? Would it be a pizza or a pickle?
This phrase might sound a bit politically incorrect, but it is actually a modified quote from an article in The New York Times written by the well-known columnist John Tierney (in the context of 2004 Presidential Election in the USA) after he learned about the authors, of the future Selling Blue Elephants book, experiments in politics. Tierney named these political experiments “supermarket,” to underscore the surprising similarity between product optimization and political messaging. The original quote was meant for George W. Bush, but the approach applies well regardless of one’s political affiliation.
Voters don’t usually think of political candidates as consumer products. The democratic heritage instills within citizenry a sense of civic pride and responsibility. But reality must intrude, of course. At some level, we recognize that, for an official to get elected, it is important to know what the citizens want, how to express these wishes, and how to create the appropriate political machinery to drive the vote. When you think of it that way, politics is not much different from product and service marketing.
Certainly, the president is promoted as a product in the media. Today’s presidential candidates hold focus groups, try to understand public opinion, and, in general, do all the things that we might expect from the astute marketer. The candidate is searching for volume—not volume of purchases, but volume of votes. The U.S. president is more or less similar to a big-ticket item purchased once every four years.
Then why not treat the president as a product to be sold to do a job? The ‘seller’ just needs to find the right marketing strategy with targeted messages for each ‘consumer group’ (constituency). If you read my previous articles in DNA, you might already be familiar with a very powerful yet simple to use business process called Rule Developing Experimentation (RDE) introduced in the book Selling Blue Elephants: How to Make Great Products That People Want Before They Even Know They Want Them. RDE is widely used for reading the mindsets of the consumers and creating messages targeted to their ‘hot buttons’. In the case of political elections, RDE pinpoints messages that the candidate ought to broadcast to the public—that is, the advertising appropriate for this “president as a product.” If, in fact, we treat the candidate as a product, the job of electing a president becomes a bit easier. Simply monitor the environment, identify what issues come to the fore, let RDE discover hot buttons that drive the consumer (voter interest), and present those new ideas to candidates. Why not? And why not do so on a micro scale— say, in neighborhood after neighborhood? The Internet makes it easy, rapid, and affordable. Maybe even fun.
Let’s look at the 2004 US presidential campaign and focus on messages chosen by John Kerry and George Bush. What did they say? More important, what they should have emphasized and whether the candidates’ messages hit the best hot buttons throughout the campaign?
Let’s begin by deconstructing the candidates’ messaging at the start of his campaign: collecting the speeches at a certain time and identifying the themes and simple quotes. Content analysis works here, as long as we make every effort to keep the candidate’s words and, of course, the tonality of the message. Let’s see the results from executing the exact same RDE project once a month, on the third Wednesday, for the eight months prior to the 2004 election.
The advantage of the RDE way of thinking is that people do not have to and cannot be politically correct in their responses, which they do in direct polls or focus groups. Participants in the RDE exercise cannot figure out exactly which issue they are supposed to be responding to because each vignette comprises a combination of messages. RDE’s computerized interview tool throws a lot of information at voter participants and does so quickly, forcing participants to respond at a gut level. Then RDE picks up the pieces simply by sorting through the data to figure out which issues sway them.
For George W. Bush, we find three mind-sets of voters who would be swayed to vote for him if given the appropriate messaging. The Self- Centereds, as we called the first group, mainly wanted tax relief. The Safety Seekers cared primarily about protection from terrorism. The Better Living Standard Seekers liked hearing promises to revitalize cities, create jobs, and reduce dependence on foreign oil. What is nice about these segments is that at the same time the segments emerge, the candidate knows exactly what messages resonate with the segment. That is, by using actual messaging, RDE guides the candidate, first providing knowledge and then suggesting the specific messages. Not bad for business thinking applied to the social sector.
A few issues were tricky, even for Bush voters:
· Promises to hang tough in Iraq appealed to the Safety Seekers but turned off the other groups.
· Talk of environmental protection won over the Better Living Standard Seekers but yet made the rest less likely to vote for Mr.Bush.
· The Self-Centereds did not like hearing about health care benefits, but the other two groups did.
On the whole, though, the three groups agreed more than they disagreed. The Bush voters were generally middle-class, upwardly mobile people who responded to promises of more money and security. There were not that many polarizing issues among the Bush voters (relative to Kerry’s).
Bush reminded one of pizza: variations on a theme. Someone who would eat one kind of pizza would eat most other kinds as well, unless that person disliked the toppings.
To locate Kerry in our “supermarket”, we have to leave the pizza in the frozen-foods aisle. When we analyzed the Kerry voters, we saw something like the flavor polarization one found in pickle consumers.
· Some people like high-impact sour and garlic pickles; others hate them and like a pickle with a mild crunch. You absolutely cannot please people by giving everyone a middle-of-the-road pickle. It’s impossible when flavor segmentation shows up.
· Kerry’s overall support was about equal to Bush’s, but the voters who could be swayed to vote Democratic fall into three radically contrasting groups, sort of Kerry’s own personal flavor segments, his “political pickles.”
· Some are Improvement Seekers, whose priorities were education reform and new energy policies.
· Others are Idealists, who could be wooed with promises to fight discrimination against women and minorities, improve health care, protect abortion rights, and defend workers against corporations.
· And then there are the Issue Aversives, who were so strongly predisposed to vote for Mr. Kerry that none of his campaign promises could further strengthen their loyalty. In fact, specifics were liable to drive them away because they were turned off by some promises, such as protecting abortion rights, fighting discrimination, and reforming education. The Issue Aversives weren’t so much pro-Kerry as they were anti-Bush. The more Kerry promised the other groups, the more chance he had of offending the Issue Averse voters. It was a tough challenge for Kerry to figure out a coherent strategy that straddled the needs of very different people.
In retrospect, it is clear now that it was not that easy for each of the candidates to keep the voters in their camps. Bush had to yoke a group of ‘dogs’ that generally haul along the same path. Kerry got to harness a clutter of ‘cats’ with individual and conflicting view points. In either case, this information was readily available through RDE’s ‘scanning’ of what people were ‘buying’ or ‘shopping for’ in their political ‘supermarket’. This type of information has been proven time after time to be much more reliable compared to what people claim they like when asked directly in polls and focus groups.
_______________________________________
Alex Gofman is VP of Moskowitz Jacobs Inc., a NY based company, and a co-author of the book Selling Blue Elephants: How to Make Great Products That People Want Before They Even Know They Want Them (www.SellingBlueElephants.com) written with Dr. Moskowitz and recently republished in India (it is also currently translated in thirteen countries). He may be contacted at alexgofman@sellingblueelephants.com
If a presidential candidate were a food, what would (s)he be, and what kind of shoppers would be putting him/her in their carts? Would it be a pizza or a pickle?
This phrase might sound a bit politically incorrect, but it is actually a modified quote from an article in The New York Times written by the well-known columnist John Tierney (in the context of 2004 Presidential Election in the USA) after he learned about the authors, of the future Selling Blue Elephants book, experiments in politics. Tierney named these political experiments “supermarket,” to underscore the surprising similarity between product optimization and political messaging. The original quote was meant for George W. Bush, but the approach applies well regardless of one’s political affiliation.
Voters don’t usually think of political candidates as consumer products. The democratic heritage instills within citizenry a sense of civic pride and responsibility. But reality must intrude, of course. At some level, we recognize that, for an official to get elected, it is important to know what the citizens want, how to express these wishes, and how to create the appropriate political machinery to drive the vote. When you think of it that way, politics is not much different from product and service marketing.
Certainly, the president is promoted as a product in the media. Today’s presidential candidates hold focus groups, try to understand public opinion, and, in general, do all the things that we might expect from the astute marketer. The candidate is searching for volume—not volume of purchases, but volume of votes. The U.S. president is more or less similar to a big-ticket item purchased once every four years.
Then why not treat the president as a product to be sold to do a job? The ‘seller’ just needs to find the right marketing strategy with targeted messages for each ‘consumer group’ (constituency). If you read my previous articles in DNA, you might already be familiar with a very powerful yet simple to use business process called Rule Developing Experimentation (RDE) introduced in the book Selling Blue Elephants: How to Make Great Products That People Want Before They Even Know They Want Them. RDE is widely used for reading the mindsets of the consumers and creating messages targeted to their ‘hot buttons’. In the case of political elections, RDE pinpoints messages that the candidate ought to broadcast to the public—that is, the advertising appropriate for this “president as a product.” If, in fact, we treat the candidate as a product, the job of electing a president becomes a bit easier. Simply monitor the environment, identify what issues come to the fore, let RDE discover hot buttons that drive the consumer (voter interest), and present those new ideas to candidates. Why not? And why not do so on a micro scale— say, in neighborhood after neighborhood? The Internet makes it easy, rapid, and affordable. Maybe even fun.
Let’s look at the 2004 US presidential campaign and focus on messages chosen by John Kerry and George Bush. What did they say? More important, what they should have emphasized and whether the candidates’ messages hit the best hot buttons throughout the campaign?
Let’s begin by deconstructing the candidates’ messaging at the start of his campaign: collecting the speeches at a certain time and identifying the themes and simple quotes. Content analysis works here, as long as we make every effort to keep the candidate’s words and, of course, the tonality of the message. Let’s see the results from executing the exact same RDE project once a month, on the third Wednesday, for the eight months prior to the 2004 election.
The advantage of the RDE way of thinking is that people do not have to and cannot be politically correct in their responses, which they do in direct polls or focus groups. Participants in the RDE exercise cannot figure out exactly which issue they are supposed to be responding to because each vignette comprises a combination of messages. RDE’s computerized interview tool throws a lot of information at voter participants and does so quickly, forcing participants to respond at a gut level. Then RDE picks up the pieces simply by sorting through the data to figure out which issues sway them.
For George W. Bush, we find three mind-sets of voters who would be swayed to vote for him if given the appropriate messaging. The Self- Centereds, as we called the first group, mainly wanted tax relief. The Safety Seekers cared primarily about protection from terrorism. The Better Living Standard Seekers liked hearing promises to revitalize cities, create jobs, and reduce dependence on foreign oil. What is nice about these segments is that at the same time the segments emerge, the candidate knows exactly what messages resonate with the segment. That is, by using actual messaging, RDE guides the candidate, first providing knowledge and then suggesting the specific messages. Not bad for business thinking applied to the social sector.
A few issues were tricky, even for Bush voters:
· Promises to hang tough in Iraq appealed to the Safety Seekers but turned off the other groups.
· Talk of environmental protection won over the Better Living Standard Seekers but yet made the rest less likely to vote for Mr.Bush.
· The Self-Centereds did not like hearing about health care benefits, but the other two groups did.
On the whole, though, the three groups agreed more than they disagreed. The Bush voters were generally middle-class, upwardly mobile people who responded to promises of more money and security. There were not that many polarizing issues among the Bush voters (relative to Kerry’s).
Bush reminded one of pizza: variations on a theme. Someone who would eat one kind of pizza would eat most other kinds as well, unless that person disliked the toppings.
To locate Kerry in our “supermarket”, we have to leave the pizza in the frozen-foods aisle. When we analyzed the Kerry voters, we saw something like the flavor polarization one found in pickle consumers.
· Some people like high-impact sour and garlic pickles; others hate them and like a pickle with a mild crunch. You absolutely cannot please people by giving everyone a middle-of-the-road pickle. It’s impossible when flavor segmentation shows up.
· Kerry’s overall support was about equal to Bush’s, but the voters who could be swayed to vote Democratic fall into three radically contrasting groups, sort of Kerry’s own personal flavor segments, his “political pickles.”
· Some are Improvement Seekers, whose priorities were education reform and new energy policies.
· Others are Idealists, who could be wooed with promises to fight discrimination against women and minorities, improve health care, protect abortion rights, and defend workers against corporations.
· And then there are the Issue Aversives, who were so strongly predisposed to vote for Mr. Kerry that none of his campaign promises could further strengthen their loyalty. In fact, specifics were liable to drive them away because they were turned off by some promises, such as protecting abortion rights, fighting discrimination, and reforming education. The Issue Aversives weren’t so much pro-Kerry as they were anti-Bush. The more Kerry promised the other groups, the more chance he had of offending the Issue Averse voters. It was a tough challenge for Kerry to figure out a coherent strategy that straddled the needs of very different people.
In retrospect, it is clear now that it was not that easy for each of the candidates to keep the voters in their camps. Bush had to yoke a group of ‘dogs’ that generally haul along the same path. Kerry got to harness a clutter of ‘cats’ with individual and conflicting view points. In either case, this information was readily available through RDE’s ‘scanning’ of what people were ‘buying’ or ‘shopping for’ in their political ‘supermarket’. This type of information has been proven time after time to be much more reliable compared to what people claim they like when asked directly in polls and focus groups.
_______________________________________
Alex Gofman is VP of Moskowitz Jacobs Inc., a NY based company, and a co-author of the book Selling Blue Elephants: How to Make Great Products That People Want Before They Even Know They Want Them (www.SellingBlueElephants.com) written with Dr. Moskowitz and recently republished in India (it is also currently translated in thirteen countries). He may be contacted at alexgofman@sellingblueelephants.com
Tuesday, February 26, 2008
Improving the "Stickiness" of Your Website, Part 2: If They Like A and B, Would They Like "A+B"?
Financial Times Press (FTPress.com) just has published my latest article "Improving the "Stickiness" of Your Website, Part 2: If They Like A and B, Would They Like "A+B"?" (the second installment of the article published by FT in September, 2007).
Click here to access it: http://www.ftpress.com/articles/article.aspx?p=1172745
There is a small mix-up with the table but the publisher will make changes shortly.
axg
Click here to access it: http://www.ftpress.com/articles/article.aspx?p=1172745
There is a small mix-up with the table but the publisher will make changes shortly.
axg
Saturday, January 5, 2008
My column at Daily News and Analysis (Dec. 27, 2007)
Here is the latest column at DNA.
AxG
Lessons from HP’s “Always-On” Intelligence system
Alex Gofman
Charles Darwin inherited his love for experimentation from his genes. His grandfather, Erasmus Darwin, believed that “A fool ... is a man who never tried an experiment in his life.” It did not matter if the experiment was expected to have a negative outcome or if everybody believed it was crazy and called them ‘fool’s experiments’. In fact, the creator of the evolution theory remarkably acknowledged: “I love fools' experiments; I am always making them”.
Although his views on the history of living species cause some controversy, the implicit applications of genetic approach to New Product Development (NDP) is quite interesting.
The legendary success of Tom Kelley, General Manager of IDEO, is in part based on his belief in the “cheaper, faster, simpler approach.” If you have the luxury to spend months and months on research and in-depth observation of your customers and at the end come up with a “perfect” product, you are lucky, but you occupy a rather unusual position in today’s market. Your competition might not be willing to wait that long and might grab the market share before you. Remember the runaway success of Microsoft Windows 3.0 (followed by 3.1) released shortly before the competing IBM’s product? The latter system, OS/2 2.0, was superior to Gate’s creation in many aspects, but it sadly failed. One can argue that there were many reasons for this failure. But most agree that in that case as well as in many others one formidable aspect of the competition - the timing – played an indubitable role in the success and failure. Particularly, in the high-tech industry, where new products frequently become outdated before they are released.
Just a few years ago our average modern day mobile phone with a camera, an MP3 player, a personal organizer, etc. would sound like an impossible proposition. Forget about a built-in TV with live and stored programs long enough to drain the batteries long before they are over.
What some ingenious designers manage to coalesce into mundane gadgets is astounding. It does not have to be new features – just a recombination of what is known. Sometimes the product hits the ‘button’ and creates a runaway success. But in a majority of cases, it finishes collecting dust at a discount store or goes into a recycling bin. How can designers and marketers find the right combination of the features? In nature, the never-ending recombination of genes, through cross-breeding and evolution, helps species to survive. A quite popular random experimentation in NPD is much faster than nature’s process but still is inefficient and slow by our modern measures.
Critics might say that this notion of innovation by combination by itself is simply too mechanical, too utilitarian, and, therefore, is certainly void of the charisma of creativity. Others disagree. Michael Vance, a well-known American creativity expert, lecturer and Dean of Disney University, once said, “Innovation is the creation of the new or the rearranging of the old in a new way.”
If you had a chance to read the book Selling Blue Elephants, you might know about the “Always-on intelligence system” established at Hewlett Packard a few years ago. Applicable to virtually any part of the process, the system based on Rule Developing Experimentation (or RDE - see my previous columns) brought the consumer to the table in every design initiative or marketing decision in a way and scale that was unprecedented for HP. RDE changed the way the company thought about answering the problem of “What shall we put into this product to make consumers want to buy it?”
Unlike the data from most ad hoc research projects, which varies in structure and topic, HP used RDE’s discipline to uncover the broader “meta patterns”—patterns that reveal the bigger pictures, across products, across categories, across countries, and over time.
The accumulating library of RDE studies opened a new, virtually effort-free opportunity for the consumer insight team to integrate data across diverse knowledge-development tasks. It became clear that across its many product lines, HP attracted two radically different segments of consumers, with drastically varied mind-sets:
· Segment 1—Technologically savvy individuals who mix and match separate components, and who enjoy and occasionally even revel in the challenge of getting them to work together.
· Segment 2—Individuals who prefer a complete package with all the accessories that work straight out of the box.
This knowledge helped HP to focus and target its ongoing design and marketing efforts, making them more efficient and, as time would prove, far more profitable. RDE provided the specific numbers—what ideas compelled and just how compelling the ideas could become when properly framed. The latest RDE tools also estimate the synergies between the elements – what works well together and what does not.
In turn, the process of data-basing the ideas’ performances could reach the critical mass with a profound impact on effectiveness in the generation of new ideas. Here is another example from a major high-tech company where five years ago, more than four out of five marketing ideas were ineffective (only 18% of about 1800 tested ideas had a positive consumer influence). In 2006, the “institutional learning” through disciplined deployment of RDE has more than doubled the number of ideas with positive consumer influence to about 38%!
Evolution is based on nature’s ‘fool’s experiments’. Good combinations of genes thrive, bad ones do not. NDP does not have to be that painfully slow and cruel. Ideas that come out of the genomics recombination of elements from different products and that perform well in these types of studies tend to do well in subsequent tests and in the market itself. The reason is pretty simple. Unlike “beauty contests” whose goal is to pick one winner from a limited set of contestants subjectively pre-selected according to a ‘heavy-weight’ HiPPO (Highest Paid Person's Opinion), RDE is more like a ‘torture test’ - with the mixing and matching and the rapid-fire presentation of test concepts to the consumers. Any element that does well in this type of survey stands out against many thousands of combinations in which it appears. Betting on that element is like betting on a horse with a great track record in many races, climates, on many different tracks, with many jockeys. The odds are that winning elements, like winning horses, have something good going on that’s worth incorporating into a product. Good genes do increase the chances of survival, don’t they?
_______________________________________
Alex Gofman is VP of Moskowitz Jacobs Inc., a NY based company, and a co-author of the book Selling Blue Elephants: How to Make Great Products That People Want Before They Even Know They Want Them (www.SellingBlueElephants.com) written with Dr. Moskowitz and recently republished in India (it is also currently translated in twelve countries). He may be contacted at alexgofman@sellingblueelephants.com.
AxG
Lessons from HP’s “Always-On” Intelligence system
Alex Gofman
Charles Darwin inherited his love for experimentation from his genes. His grandfather, Erasmus Darwin, believed that “A fool ... is a man who never tried an experiment in his life.” It did not matter if the experiment was expected to have a negative outcome or if everybody believed it was crazy and called them ‘fool’s experiments’. In fact, the creator of the evolution theory remarkably acknowledged: “I love fools' experiments; I am always making them”.
Although his views on the history of living species cause some controversy, the implicit applications of genetic approach to New Product Development (NDP) is quite interesting.
The legendary success of Tom Kelley, General Manager of IDEO, is in part based on his belief in the “cheaper, faster, simpler approach.” If you have the luxury to spend months and months on research and in-depth observation of your customers and at the end come up with a “perfect” product, you are lucky, but you occupy a rather unusual position in today’s market. Your competition might not be willing to wait that long and might grab the market share before you. Remember the runaway success of Microsoft Windows 3.0 (followed by 3.1) released shortly before the competing IBM’s product? The latter system, OS/2 2.0, was superior to Gate’s creation in many aspects, but it sadly failed. One can argue that there were many reasons for this failure. But most agree that in that case as well as in many others one formidable aspect of the competition - the timing – played an indubitable role in the success and failure. Particularly, in the high-tech industry, where new products frequently become outdated before they are released.
Just a few years ago our average modern day mobile phone with a camera, an MP3 player, a personal organizer, etc. would sound like an impossible proposition. Forget about a built-in TV with live and stored programs long enough to drain the batteries long before they are over.
What some ingenious designers manage to coalesce into mundane gadgets is astounding. It does not have to be new features – just a recombination of what is known. Sometimes the product hits the ‘button’ and creates a runaway success. But in a majority of cases, it finishes collecting dust at a discount store or goes into a recycling bin. How can designers and marketers find the right combination of the features? In nature, the never-ending recombination of genes, through cross-breeding and evolution, helps species to survive. A quite popular random experimentation in NPD is much faster than nature’s process but still is inefficient and slow by our modern measures.
Critics might say that this notion of innovation by combination by itself is simply too mechanical, too utilitarian, and, therefore, is certainly void of the charisma of creativity. Others disagree. Michael Vance, a well-known American creativity expert, lecturer and Dean of Disney University, once said, “Innovation is the creation of the new or the rearranging of the old in a new way.”
If you had a chance to read the book Selling Blue Elephants, you might know about the “Always-on intelligence system” established at Hewlett Packard a few years ago. Applicable to virtually any part of the process, the system based on Rule Developing Experimentation (or RDE - see my previous columns) brought the consumer to the table in every design initiative or marketing decision in a way and scale that was unprecedented for HP. RDE changed the way the company thought about answering the problem of “What shall we put into this product to make consumers want to buy it?”
Unlike the data from most ad hoc research projects, which varies in structure and topic, HP used RDE’s discipline to uncover the broader “meta patterns”—patterns that reveal the bigger pictures, across products, across categories, across countries, and over time.
The accumulating library of RDE studies opened a new, virtually effort-free opportunity for the consumer insight team to integrate data across diverse knowledge-development tasks. It became clear that across its many product lines, HP attracted two radically different segments of consumers, with drastically varied mind-sets:
· Segment 1—Technologically savvy individuals who mix and match separate components, and who enjoy and occasionally even revel in the challenge of getting them to work together.
· Segment 2—Individuals who prefer a complete package with all the accessories that work straight out of the box.
This knowledge helped HP to focus and target its ongoing design and marketing efforts, making them more efficient and, as time would prove, far more profitable. RDE provided the specific numbers—what ideas compelled and just how compelling the ideas could become when properly framed. The latest RDE tools also estimate the synergies between the elements – what works well together and what does not.
In turn, the process of data-basing the ideas’ performances could reach the critical mass with a profound impact on effectiveness in the generation of new ideas. Here is another example from a major high-tech company where five years ago, more than four out of five marketing ideas were ineffective (only 18% of about 1800 tested ideas had a positive consumer influence). In 2006, the “institutional learning” through disciplined deployment of RDE has more than doubled the number of ideas with positive consumer influence to about 38%!
Evolution is based on nature’s ‘fool’s experiments’. Good combinations of genes thrive, bad ones do not. NDP does not have to be that painfully slow and cruel. Ideas that come out of the genomics recombination of elements from different products and that perform well in these types of studies tend to do well in subsequent tests and in the market itself. The reason is pretty simple. Unlike “beauty contests” whose goal is to pick one winner from a limited set of contestants subjectively pre-selected according to a ‘heavy-weight’ HiPPO (Highest Paid Person's Opinion), RDE is more like a ‘torture test’ - with the mixing and matching and the rapid-fire presentation of test concepts to the consumers. Any element that does well in this type of survey stands out against many thousands of combinations in which it appears. Betting on that element is like betting on a horse with a great track record in many races, climates, on many different tracks, with many jockeys. The odds are that winning elements, like winning horses, have something good going on that’s worth incorporating into a product. Good genes do increase the chances of survival, don’t they?
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Alex Gofman is VP of Moskowitz Jacobs Inc., a NY based company, and a co-author of the book Selling Blue Elephants: How to Make Great Products That People Want Before They Even Know They Want Them (www.SellingBlueElephants.com) written with Dr. Moskowitz and recently republished in India (it is also currently translated in twelve countries). He may be contacted at alexgofman@sellingblueelephants.com.
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