QFD for product & business development

Value-Driven Innovation

Value-Driven Innovation

In depth understanding of the Voice of the Customer is the first challenge in Value-Driven Innovation.

   Innovation is defined as the act of “introducing something new”. This can be a product, process, or a practice that can increase the commercial success of a company in the marketplace. Innovation on its own has no or little value. It becomes valuable, when it leads to satisfied and therefor loyal customers. Key is to understand the customer. If a product fails on the market, in majority of the cases, there is a gap in really knowing the customer.

   Customer value can be defined as the solution that removes problems, frustration, challenges and impossibilities at the customer side. On their own, products and services do not offer any intrinsic benefit to the customer. Value is determined by the level the product provides the result or outcome that a customer is looking for and only a few features have a core value that encourage customers to buy.

   Three focus area’s circle around customer value and are inseparably connected to it: Company Strategy, Customer Needs and Product Portfolio. One cannot be optimized without addressing the other two. Customer value can only be maximized if all three dimensions are part of the process. This is a continuous loop of information, where each item is influenced by the others.

Customer value

Company Strategy: Vision, Mission, Strategy and Tactical Execution.

Good business leaders create a vision, articulate the vision, passionately own the vision and relentlessly drive it to completion.

Jack Welch, former chairman and CEO of GE.

   Without a formulated strategy, companies don’t know where they are going and how to get there. The strategic plan addresses topics like: company strengths and weaknesses, business opportunities, competitive position, short and long term objectives and priorities. But it includes also performance monitoring and contingency planning. The product portfolio is an explicit outcome of this strategic plan.

   Although executive management defines the company Vision and Mission statements, it needs to be rolled out throughout all layers of the organization to get buy in and support at all levels (Strategy Deployment). Tasks and objectives are aligned and “ivory tower” behavior is prevented. Each layer in the organization will have its own, measurable objectives. The ultimate objective however is the same: maximizing customer value.

Product Portfolio

   The portfolio is not just a selection of products targeted to meet the company’s sales objectives or capitalize on existing technologies and competencies. The portfolio should be based on the value it is bringing to the customer. When customer value is becoming part of the strategy development, the company can develop a portfolio that delivers value to the customer but which is also in line with the company strategy. This interaction might show that not always disruptive innovation is needed, but increased revenue can be obtained from neighboring markets or small product adaptations (low hanging fruit). Also market data might indicate that specific market segments do not match strategy and portfolio and should be dropped.
   One should be careful that not internal roadmaps or platforms drive the strategy, based on the urge to reduce time to market or limit investments. This can lead to incremental product enhancements which offer low risk but do not necessarily create the highest customer value. This can lead to lower market acceptance and lower return on investment.

Customer needs

   Typically when companies evaluate their portfolio, they rely on analytical analysis of market share, return on investment, competitive position and time to market. Strange enough customer value is often missing. It is possible through proven and qualified processes, to capture the true voice of the customer. These processes are qualitative but also quantitative. With these processes, companies can determine which functionality the product must fulfill and which features will delight the customer in search for the “golden nugget”. These data allow the company to separate upfront the winners from the losers and prevent the loss of valuable development time and money. This way of thinking must be part of the executive management process for designing strategy and product portfolio.
   Customer relationship management (CRM) tools do provide information about complaints returns, comments and demographics. However this information only relates to existing products, not to products or services yet to be developed. As such CRM is not an alternative for proper VOC research.

   It is critical for a company’s success in the market that the focus shifts from product features to customer’s needs. This is the only way successful innovation can be sustained. VOC is the most important driver to successful product and service innovation.
   Quality Function Deployment (QFD) offers proven tools to collect spoken and un-spoken customer needs and to analyze these in a qualitative and quantitative way. Only when the VOC is clear, a meaningful value proposition can be created.

   The above encourages an integrated and continuous approach of Strategy, Customer Research and Product Portfolio management.This approach starts with the ownership of executive management, but needs to be rolled out through all layers of the organization. Based on factual, objective data about what is important to customers, decisions on product portfolio and resource allocation can be taken to provide the competitive edge every company is looking for.

Written by:
John Smit

John Smit

   After receiving a Masters degree in Engineering from the Technical University of Delft, John worked for more than 30 years for global companies like AES, Dräger Medical and TYCO Electronics. He started his career as Project Manager for AES, where he introduced one of the first optical scanners into the market. With Dräger Medical, he lead several Product Management and Business Management teams and as Marketing Operations Manager...
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