Tuesday, August 12, 2008
Paul Graham has reduced the recipe for a successful startup company to just four words: “Make something people want.” This is hard enough if you're building a product for yourself, but at least you have firsthand knowledge to guide you. Figuring out what other people want seems like a black art. What if you could learn what customers want before you invest in building a product?
Most companies build products the wrong way. They come up with an idea, build a product and then try to sell it to people. Only at the end do they learn whether anyone actually wants what they've built. This approach is insane. I've endured this horror myself, burning through time and money while hoping my product would actually sell. While you can never eliminate risk, I've recently learned about an approach that can greatly improve your chances of building something of real value to customers.
My good friend Dave Richards recommended a book by Tony Ulwick called What Customers Want. What a pretentious title, I thought. This guy claims to have found the holy grail of building a successful startup. How can anyone tell me what customers want if the customers themselves don’t even know what they want?
Developers quickly become jaded about customer-driven design. We try to learn what our users want, to let their needs drive the design process, but we often fail to please them. The customer signs off on a spec, we build it and they hate it. Many programmers come to believe users don’t have the faintest clue what they want, and that our job as software designers is to consider all our observations and experience and then magically synthesize the perfect product. Is such an art quantifiable?
Feeling skeptical but willing to suspend my disbelief, I pushed aside my stack of half-finished business books and dove into this one.
Ulwick teaches you how to learn what customers want using the outcome-driven approach. The focus is not on the customer. You have to silence the “voice of the customer” and look beyond to the job the customer is trying to accomplish. The job itself is the unit of analysis. Customers have their own ways of measuring success in getting the job done. Once you know how customers measure success at accomplishing jobs you can figure out which outcomes for a given job are important and unsatisfied, and come up with ideas that better satisfy these outcomes.
Just talking with customers or watching them do their jobs isn’t enough. You’re looking for the metrics they use to judge how well a job is done. Customers express these metrics in their own language and terms. In order to make this feedback useful, you have to translate each statement into a specific form called an outcome. Each outcome consists of a direction of change ("minimize" or "increase"), a unit of measurement (number, time, frequency, or likelihood) and a description of the task. An example outcome from a circular saw user might be to "minimize the time it takes to make bevel adjustments.” This precise statement form allows you to clearly understand how the customer evaluates performance.
With a list of outcomes in hand you are ready to find the opportunities for innovation. You'll need to administer a survey to a group of customers asking them to rate the importance of each outcome along with their satisfaction with the current product or service they’re using. Finally, you plug these ratings into a formula called the opportunity algorithm to produce an opportunity score for each outcome. The opportunity score tells you where you should focus your energy and creativity to generate the maximum benefit for your customers.
A deep understanding of the jobs, outcomes and opportunities relevant to your customers forms the foundation for everything else you do in your business. This knowledge becomes an objective standard against which you measure all your activities. The latter half of the book illustrates how to apply this knowledge as you select the best opportunities for innovation, create marketing messages that communicate clearly the value of your product, and devise breakthrough concepts. As Ulwick says, “Knowing where to focus creativity is the key to successful innovation.”
Just as software developers simplify their thinking and communication with Design Patterns, Ulwick’s book provides a conceptual framework and language for thinking about innovation. The book covers four types of innovation, four different growth options, and when it makes sense to use each one. Understanding these concepts dispels the haze surrounding many issues and helps you make decisions with confidence.
While the book primarily targets established companies, these principles apply equally well to startups. The most time-consuming part of the process is learning about your customers’ many job outcomes and finding the opportunity score for each one. Many startup founders will write off this method as a waste of time, but this is a mistake for two reasons:
First, you have to connect with potential customers sooner or later, so you may as well do it now. Building relationships with customers takes time, and you'll need as many as possible for a successful product launch.
Second, the information you gain from this research will literally be your most valuable asset. It drives every decision you make about what to build, what features to add, how to craft your marketing message, and which problems are most worthy of your attention. You would be a fool to skip this research, because it’ll pay for itself countless times as you move forward with your business.
Nowhere does Ulwick reveal a secret method to come up with innovations. What he gives you is far better: a tool to focus your creative energy on your very best opportunities.
It's still up to you to create the miracle.