When the Customer is not King

Most entrepreneurs start thinking about their innovative idea in terms of the new product required. This is natural because the viability of the new business is the topic of immediate concern. Nobody wants to spend time and money developing a product which turns out to be infeasible.

In the early days of a start-up, it is essential to separate these two questions:

• What is the customer’s problem we will solve?
• How will we solve the customer’s problem?

It is not useful to ask customers for their opinions about your new product until they understand which of their problems you are able to solve.  Customers find it hard to imagine how new technologies will change their lives. As a founder, you need to have a clear vision and know what you want to achieve. Then you can focus on educating the customer about the benefits. For example, when Netflix started it was hard to imagine that it would take the place of traditional TV. The popularity of video services delivered by streaming is a success story similar to rise of the television in the mid 20th century. The introduction of streaming video services has redefined programme production, business models and how customers’ use their time.  Customers did not expect that watching video while travelling would have such a far-reaching effect on their lives.

Will the customer buy my product?

As a founder, it is extremely easy to define benefits which customers would like to have. Very often the products required are too expensive or will become possible too late. An example would be the space tourism. Some consumers would like to experience weightlessness and the sight of earth from space. The space vehicles and launch services to deliver their dreams will take a long time to reach maturity. Virgin Galactic was formed in 2004 and has yet to achieve its inaugural commercial flight. Delays and setbacks are the norm for advanced engineering projects.

Who is my customer?

Customers can mean businesses or individual consumers. In the sports world, consumers mean the individual fans and the businesses are sports clubs, leagues and organizing bodies such as UEFA, FIBA, FIFA and IOC. Sports clubs can purchase new products directly but often their needs and preferences are controlled by the fact that the leagues they play in and their organizing bodies either mandate or restrict the specifications for products to be used. As an extreme example if you want to supply Formula 1 teams with engines the engines must be 1.6 litre displacement and V6 configuration. The specification is mandated by the sport’s governing body, FIA.

Taking into account the needs of the marketplace in addition to the needs of your customer is called “design for distribution”. This covers all of the influencers who affect you customers’ purchasing decisions.

In sports, the use of technology has brought many benefits. Earlier, a coach would tell athletes how to train on the basis of their age or ability. Now, wearable devices such as WIMU PRO monitor every moment of their training sessions to enable coaches to provide personalized advice. To begin with, athletes were sceptical about the benefits but currently they trust the data and see that it improves their results. It required actual use to convince athletes of the benefits.

The framework for thinking about the customers’ problem consists of five questions:

• Does the customer recognise that they have a problem?
• Is the customer looking for a solution?
• Can the customer solve their problem today? How?
• Does the customer have a budget to solve their problem?
• What is the market potential for solving the problem?

An example, which is being played out in the market today, is the management of sports rights. Do consumers want the right to view a sports event on their smartphone as they travel anywhere in the world? Or, are consumers happy to live with the fact that traditional media rights are limited to one specific country or region? A high proportion of content available on Netflix is not locked to a specific region. A much lower proportion of content on Amazon Prime is not restricted. It’s not yet clear whether customers think they have a problem.

The objective in the early stages of the project is to define the Minimal Viable Product (MVP). The MVP can be used to test the critical assumptions that determine the feasibility of the project. This is not a linear process. Every new insight about the nature of the customers’ problem can result in a change to the product required to solve the customer’s problem. The revised product may be a better or worse solution to the problem in the opinion of the customer.

Designing an innovative new product requires much more than asking the customer what they want. It requires insight into the customers’ problem and how a new product can be developed and delivered at acceptable cost. This is the entrepreneur’s unique skill – understanding how to solve customers’ problems in new and unique ways.

David Carratt