Figuring out who cares, and how much they care, can mean life or death to a startup

Finding and interpreting the telltale indicators of whether a product innovation will have enough value to customers to justify bringing it to market can be a tremendous challenge to companies of any size. But, according to Innovation Works portfolio executive Stefanie Lattner, undertaking that research can be critical, especially to early-stage companies with breakthrough product ideas.

It's not always easy to figure out how the market will respond to new functions, or performance features, or cosmetic innovations a company might consider adding to a popular product line. After all, the marketing landscape is littered with the remains of product advances which never really won market acceptance. However for companies with an established product line, there's at least a baseline of customers, a history of product use, and a pattern of spending to help them gauge likely consumer response.

But what if the product is something really, really new? What if it's something that represents a true break from the past – a product in a market space all by itself? And what if the company itself is an early-stage enterprise? How do you know what the demand would be for a new technology if it doesn't have a history and there's no data to go by? For Stefanie Lattner, a portfolio executive at Innovation Works with a briefcase full of client companies whose offerings are truly on the leading edge, it is a critical question whose answer can spell the difference between a startup company's success and failure.

It is also a question that Lattner, whose current focus is mainly on life science and robotics technologies, has helped clients and previous employers to answer for much of her 20-year career. “We try to boil it down to the old ‘who cares?' question” she said. “So you have a new technology, but who cares? Are you providing a desired feature? Or are you actually solving a true pain? Companies often mix those things up and equate the word ‘value' to both. And in doing so, they don't necessarily answer the general public's question: who cares?”

Pain or pleasure?

As an illustration, Lattner cites the cell phone business and their makers' constant struggle to add new features. “They're not really solving a pain. It's not something that everybody's clamoring to get solved. What they really do is create desirable features that people love, and that's what drives their market. But that's very different than somebody who's creating a migraine medicine where it's absolutely black and white that here is a pain being solved. And there's both a different message and a different value assigned to that,” she said.

Of course, most companies' offerings fall somewhere in between adding a new ring tone and introducing the cure for a disabling disease. “So are we talking about a value added? Or are we talking about a problem being solved?” she asks. “That's where we try to work with companies: to really get it down to who cares and why should they care? And then how much do they care?”

The answers for a young company typically grow out of a combination of inputs from different people representing a cross-section of the company's business disciplines including its marketing, research, development, sales and executive staff, as well as input from customers and prospects. However, once collected, that data is sometimes compiled in more artistic than scientific ways, so its practical value to the company can also vary, according to Lattner. But that's not always the case.

Demand sensing tools

“There are lots of companies that take methodical approaches to this and go through answering these questions systematically,” she noted. “For instance, there's ‘demand sensing,' which is figuring out which indicators are the most powerful for your businesses. A really simple example is that your pulse is an indicator of heart rate. Since your pulse changes with different activities, you need to check it at different times and at different levels of activity. Then you try to figure out: how powerful is a pulse alone at indicating cardiac health? So you look at pulse, but you may have to look at something else, too, like oxymetry. The two factors together are more powerful and can give you a better indicator of cardiac health.”

The same idea applies to market dynamics. “If you equate the pulse model literally to a market, and you use the same systematic approach of trying to identify: what are the indicators? how do I go about collecting the data? how frequently should I go get it? and how powerful is it? then you have a very simple framework that tends to be effective at understanding your customer base, how you need to interact with them, and what those indicators are telling you from a business perspective.”

For established companies, there are a number of predictive tools available premised on a certain base-level volume of business and how the possible addition of certain new features would affect that baseline business. But for startup companies, without a volume base to begin with, it's a much larger problem, Latter acknowledged.

Even so, it is a discipline she urges her portfolio clients to follow. “We have systematic methods that we try to encourage our companies to use in getting as clear a picture as possible. There are lots of unknowns, but we want them to try to characterize the profile of the marketplace, the customer behavior, what solution they're actually providing to that customer, and how these customers are going to react,” Lattner said. “Then we strongly encourage an early sanity check with those customers, to test what their assumptions were, to see if they're way off course, to find out how much variability exists between what they were assuming and what they're actually seeing with their customers. The key is trying to control that variability. If you're way off course, or you don't understand the variability in your customer base, it can make or break a young company.”

Indirect research

One common mistake in carrying out this type of research is neglecting to measure the new product against its alternatives. “What are you being compared to? How remarkable is the solution you're providing or the technology you're providing?” she asks. “Understanding people's expectations is the essence of sensing. So how do you go about sensing in a smart way so you don't just collect data that's not meaningful to reaching your end goals? One is the ‘willingness to pay' question. Companies go out and do primary research by talking to customers and asking those questions. Unfortunately, they often don't put it in the framework of asking ‘what are the customer's alternatives?' If you don't put it in that framework, you're mostly going to get back information that's not particularly helpful or actionable. It's absolutely critical for whoever is asking those questions to understand the options that the consumer or the purchaser has in front of them.

“Even more importantly, what are their decision-making patterns? And what is their behavior in using the technology?” she continued. “If you ask those questions too directly instead of looking at their actual behavior, you're probably going to get information you can't act on. So if you study 50 people's behavior, instead of asking them ‘will you pay $100?' you'll likely get more information that's better qualified.”

Help!

At the same time, she acknowledges, conducting this sort of research can be difficult – particularly for those who haven't done it before. In addition to taking a significant amount of time, the research is susceptible to unintended biases and oversights which can undermine its value. But help is available. “There are many professionals who specialize in understanding new technology, but in a very unbiased way, for the purpose of conducting focus groups. They are trained at seeking contrary opinions as well as what is likable about the solution so they can frame the development effort a little bit better,” Lattner pointed out. “That can work very well. The danger is that if the person asking those questions doesn't have a great technology background and the technology itself is highly sophisticated, sometimes the questions don't have enough depth for the development team to act upon.”

About the Author:

Peter Longini is the Managing Editor for Inside Product Strategy. He can be reached at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it