“We’re so afraid of financial disaster that we’re afraid to spend money to avoid financial disaster.”
Most of us are just getting our arms around how bad our economic future looks. First quarter earnings are being reported, and the news is poor, even with two of the three months reflecting the pre-Covid world. Bankruptcies have started, unemployment has skyrocketed beyond Great Depression numbers, and GDP forecasts for the US are down by double digits for the year. Our wish for a quick V-shaped recovery looks more like it will be a long L-shaped recession.1
For Leaders and Innovation Professionals
Many innovation thought leaders are scrambling to figure things out. We’re calling clients to gauge what they’re thinking. And what we’re hearing is a two-sided message. The first is a cheer-leading call to be resilient, keep focused, and get work done. It’s a call to employees to be strong and do everything they can to help solve the virus and healthcare issues. The resiliency message sets a positive tone for innovation.
But the second message is tougher. It calls for a business to respond to the economic disruption. The goal is to hold off financial disaster. And this second message does not bode well for innovation professionals.
Many companies have moved past the resiliency stage and are now responding to critical business issues. And the response can crush a company’s product development work. Unless your new product targets healthcare needs or is essential to avoid financial hell, it’s likely been put on hold. Or count your blessings. You may work for a company that has the exact products customers want in the Covid economy and can print money at will.
Where’s Your Cheese?
I’m reminded of a book I read a few decades ago called Who Moved My Cheese2. It’s a parable about change in which Cheese is a metaphor for what you want out of life. The book follows two mice along their journey through a maze trying to figure out where the Cheese went. It sets up deep lessons in dealing with life-altering change. And unfortunately, the Covid economy just moved many innovation professionals’ Cheese. This is true for serial innovators and intrapreneurs, engineers and marketers, plus researchers and project managers.
Innovation and R&D are the first items cut when large companies see economic hardship. I know the innovation cheerleaders will point to studies showing how great companies don’t cut innovation. But that’s a baloney factoid. The first thing great companies do is survive. And if your innovation spending doesn’t tie direct to survival, then great companies will declare it’s time to stop that cash out-flow, regardless of what the innovation pundits say.
The Game Plan
The big challenge for many innovation professionals is to match your skills to work that drives your company’s survival and a game plan to carry it out. And at this specific moment, the job is to figure out the game plan. The problem most are grappling with is that targets on which to focus innovation are moving quickly. And the uncertainty about behaviors caused by Covid creates a dense fog that obscures the targets even more. But that’s the challenge. And its much different than previous economic downturns.
Figuring out the game plan is a big job, and not for the faint of heart. Everyone’s problem is that we lack a clear understanding of how customer needs and preferences have already changed or will change in the months and years ahead. To the Design Thinking community, this is “consumer desirability.” Jobs-to-be-Done thinkers may see it as “Outcome Priorities.” And in Responsive Roadmapping, which I focus on, it’s the “Verb-base Segments” that are in flux.
I don’t mean a lack of clear understanding only relates to consumer markets. It’s a challenge in B2B, in high-tech and fin-tech, and in software systems and professional services. You name it, and you’ll find a high likelihood there’s been a change. In fact, you’ll probably find the change is ongoing. And be mindful of the ongoing customer behavior change. Ultimately, your game plan must respond to a flow of new and different behaviors. Please don’t think you can target the next best product and be done with it.
Big Company, Big Challenges
There’s a major challenge for large companies. Most have become big by purposely building infrastructure to help their offerings match their customer’s old preferences and priorities. And some managers may think the best course is to cut costs by leaning out the infrastructure. If your customer’s old preferences and priorities are holding steady, that may be smart.
But if a company takes the lean approach, they’re also doubling down on the customer’s old behaviors. And that may be a poor strategic move. Making matters worse, the approach may lean out more than the infrastructure. It may cut the flexibility a company needs to respond to the new behaviors. Because the Covid recession is driving notable customer changes, especially compared to previous recessions, the lean approach may not be wise. Pushing on lean is like fighting the virus war with weapons for a ground war.
Find or Create Work That Matters.
I believe there’s an important job that fits most innovators skills. It’s to figure out how to adapt your company’s current products. It’s to make existing products fit the new customer behaviors and markets. It’s not to innovate new products. That job will follow. Instead, the first job is to correct existing products, if that’s at all possible. This is much-needed work to protect your company’s lifeblood revenue.
Understand the challenge before jumping at it. Think of each product as a set of attributes. Each attribute set generates revenue only when it matches customer needs. In good product line strategies, marketers define the needs, and developers create attributes that matched those needs. Plus, a sales force will grease the pathway between your attribute set and the customer’s needs, often correcting any mismatches. But for many companies, the Covid recession has thrown these connected pieces into disarray. For product lines, overall demand is down. Plus, customer needs have shifted.
The immediate challenge is with existing products. It’s to Pivot your existing offerings, as best you can, to match customer needs. And the size of the change will be different for each product and each product line. But it’s unlikely that any set of new, not yet launched products will offset the negative impact from the existing product attributes to customer need mismatches.
In systems-oriented Responsive Roadmapping, there’s an obvious strategy move. It’s to focus most, if not all, resources on the part of the system called PIM’s (products-in market). The job is to make current PIMs match current needs. At the same time, the strategy move demands you to transfer resources away from PIDs (products-in-development) and PICs (targets for innovation.) And I must admit, I’ve never seen this product line strategy move before. But then again, I’ve never seen such a deep impact on market demand and customer behaviors as we see in this new Covid world.
But let me be clear. The move is not to lean out waste and double down on old customer needs and behaviors. And it’s not to push forward with new product development. Each of these will come in a second and third wave of strategy initiatives once customer behaviors take root.
Carrying out The Pivot
So how do you pull off the corrective Pivot for current products? First, recognize the magnitude of the job in your company. Ask yourself if everyone understands and agrees on the needed result. I guarantee that as much as you explain the customer needs to product attribute mismatch, many managers will only hear, “we must go lean and cut out all waste.”
The question offered by one of my clients is revealing. He asked, “How do I figure out customers’ need shifts when we’re cutting costs and can’t get approval to spend any money?” It’s like saying, “We’re so afraid of financial disaster that we’re afraid to spend money to avoid financial disaster.” The circular logic is mind-boggling. It leaves the company frozen. They become a deer transfixed on the headlights of an oncoming financial Mack truck.
Learn the Job
My advice is to take a few days to embed the correct thinking into your organization. Make sure your company’s key movers and shakers learn the issue, and that their followers also learn why and how responding to customer behavior change is a crucial first step to your company’s well-being.
Start your collective thinking about changed customer behaviors by focusing on the notion of Risk. To do this, you may speculate on your own. But you also must conduct many two-way discussions with customers. There’s much to learn and much work to do. That’s why the immediacy of this work makes it an all-hands-on-deck job.
When talking with customers, consider asking how your offerings play into their perceptions toward their own Risk and the uncertainty they must deal with. Equally important, figure out how your customer sensed Risk in the pre-Covid world. Do this on a Verb-based segment by segment basis. These are segments defined by clustering jobs-to-be-done outcomes. See more HERE. The reason for stepping back to the pre-Covid world is to see the gap or difference between where you were and to where you must Pivot.
Verb-based Segments are Key
The need to drill down on changed customer behaviors within Verb-based segments can’t be stressed enough. It’s at this level that design thinking’s “consumer desirability,” and “jobs-to-be-done outcomes” play out. And you’ll find the perceptions and behaviors toward Risk are different for each customer. But your task is to cluster the new behaviors and create better targets for a smart Product Line Pivot. The goal is to improve the fit between your products and the customer’s new choices.
Once you explore the customer’s view of Risk in each Verb-based market segment, collect the feedback. Determine if there are patterns or similarities across the findings. Can you hypothesize any customer changes that you may wish to test later? Once you complete this for Risk, move to other orientations. Consider, for example:
Risk and Other Orientations
- Substitution: Learn if customers are substituting products. If so, does the substitution help or hurt your product line’s performance? What outcomes did the customer experience from the substitution?
- Value Perceptions: What do customers value differently in the Covid world? Why? How does that impact your products and services?
- Lead user Actions: What MacGyver ingenuity stories do Customers tell? Are the stories about themselves or their organization? Do these relate to direct Covid and healthcare actions, or do they aid the customer with their ongoing business? How might the ingenuity impact your product line?
- For B2B Markets: What Strategy Initiatives have the B2B customers set up? Why? What do they expect as outcomes?
- For Consumer Markets: How might packaging need to change to match consumer preferences? Why? What would make your product or service more valuable to the customer?
As with all planning, the first task is to gather the new information and data, and then assemble them into notable insights. These insights are pieces of the planning puzzle. The picture you create with these puzzle pieces will become your go-forward game plan or roadmap. And as new puzzle pieces – new insights – become available, you must alter the picture and recast the roadmap. Because the verb-based segments will continue to change, your plan will also need to change. That’s why continuous Responsive Roadmapping is essential. It drives a continuously fluid game plan and helps companies keep coherency across changes to many products.
After conducting a corrective pivot, it’s then time to move forward with new products and innovations. Of course, this work may also overlap with the back half of the Pivot work. The good news is the considerable work conducted to figure out customer need shifts for the Pivot should pay dividends in this next step. Plus, figuring out new products will both feed into and gain feedback from your fluid game plan, the Responsive Roadmap.
Moving Forward, Not Back
The Covid experience is causing many changes. And smart business leaders and innovators will ride these changes and not be overrun by them. The first step is to understand the new customer behaviors and choices and to fix your current products.
But please, take some time to figure out what it means and the work it takes to Pivot your product offerings to match customer changes. And then learn more about Responsive Roadmapping. This approach supersedes old-style roadmaps and product planning because it drives and responds to change in real-time.
Here are some resources you may find helpful.
Please reach out with comments and questions. You may reach me at:
paul.oconnor @ adept-plm.com
Adept Group’s Web Contact Here
Or call + 01-904-373-5428