New, technology-driven businesses in established organisations often focus too much on developing technology when they should be talking to customers about opportunities to build a positive human future. This often leads to over-investment in a technology that fails to impress.
The solution is a simple one – talk to customers early in the development process and in the right context. This isn’t a new idea. Eric Ries authored a compelling book on the topic, The Lean Start-up, in 2011. And below are two first-hand experiences of where pushing to engage customers had a huge positive impact on the direction of new businesses.
A start-up I worked with had won many awards for low-cost laser development aimed at network communications. They had a clear lead in laser technology but no commercial customer to build a business around. And that meant its backers were frustrated with the lack of commercial progress.
The way around this dilemma was to go to a VP of Engineering at one of the leading network equipment OEMs and say to him, “you want lower costs in your next generation gear, we have the laser technology to do this. Tell us what product you want, and we’ll use all our available resources to deliver it. Interested?”
This potential customer then defined exactly what he wanted. He directed his staff to evaluate and qualify the product and was willing to say to the start-up’s investors, “if you can deliver the product I need, I’m very interested in purchasing it.” This was enough for the investors to put tens of millions more into the start-up over the coming years.
Having a senior manager at a top target customer clearly state what he needed and suggest the OEM would purchase such a product if developed was an inflection point for the start-up. The needs outlined by the VP of Engineering became the catalyst for low-cost optical communication technology for the industry.
Many large industrial suppliers excel at managing their existing businesses but struggle to create new ones. Uncertainty is the big challenge. Suppliers aim most internal rewards at minimizing uncertainty and doing what they said, under-committing and over-delivering.
An innovation project aimed at starting a new business in a new area brings massive amounts of uncertainty. The project team members face this challenge, as does the management. This leads to slow progress and a conservative perspective in terms of next steps. Time drags out, spending continues and you end up with poor investment return.
It’s possible to solve this by adding team members that are outside of the company’s reward system. These external team members, working together with internal team members, should focus on identifying key customers and developing a leader at the customer that provides direction on what they need.
The most important aspect of this approach is a clear statement from the customer, direct quotes are best, about what they need and why. This input reduces uncertainty, empowers the project team to better deal with uncertainty and builds interest and enthusiasm with the senior management responsible for new business investment.
Getting direct input on the needs from a leader at a top target customer can become a decisive element of successful investment. For established companies, adding external team members who aren’t part of the ‘minimize uncertainty’ mindset and reward system can speed up new business success.