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How Product Lifecycle Management makes a difference in your industry: 
AEROSPACE
AUTOMOTIVE
CONSUMER
CONSUMER ELECTRONICS
DEFENSE
EDUCATION
INDUSTRIAL EQUIPMENT
HIGH-TECH ELECTRONICS
LIFE SCIENCES
PLASTICS
SHIPBUILDING
TELECOM
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Value Opportunity Five: Develop & Define New Markets By Kevin P. Hopkins The experience of Chrysler Corporation vividly demonstrates the power of a great idea--and the ability of an innovative, customer-focused product to help companies prosper. Few concepts are more powerful in business than a great idea. In industry and after industry, it has been the compelling new idea--from personal computers to Post-It notes--that have helped companies break out of the constraints of existing product definitions in order to forge lucrative new markets. But not all new ideas are created equal. Some new ideas, like those just cited, have caught on spectacularly. Yet others, ranging from electric cars to selling pet food online, have never captured consumers' imaginations--nor their pocketbooks. Is there a fundamental difference between the successes and the failures? And if so, is there a way for a company to know instinctively which potential market-making innovations are likely to win consumers' interest before spending millions of dollars developing new products, services, and markets? That's a vital question in part because the idea of developing new products to satisfy consumers' needs is the centerpiece of what product development software maker PTC calls its fifth Value Opportunity, "Defining and Developing New Markets." (As discussed in previous columns, PTC's Product First Roadmap defines paths and strategies that companies can take to create and capture value for their firms.) PTC refers to these new product concepts as "big bang" ideas--breakthrough innovations that can drive the creation of entirely new market opportunities. Breaking Compromises But how does one spot them in advance? George Stalk, Jr., and David K. Pecaut of the Boston Consulting Group, writing in the Harvard Business Review, suggest several productive strategies: thinking like a consumer, paying careful attention to how the customer really uses the product or service, and looking for high-value niche markets. But one strategy with perhaps the biggest potential payoff (which, ironically, tends to receive less attention than the others) is: exploring and mining customers' latent dissatisfactions. "Most companies ask their customers to describe their dissatisfactions with existing products and services," Stalk and Pecaut write, and they go on to concede that such surveys "usually lead to helpful improvements" in product design and features. But truly significant breakthroughs are generally the result of tapping into much deeper dissatisfactions. "Those are called 'latent dissatisfactions' because consumers are unable to articulate their unhappiness with the product or service category." To buttress their case, the authors point to the example of the station wagon market in the early 1980s. Once a staple of the American road, station wagons had become a dying breed by that time, partly because of a general perception that their styling was antiquated, but mostly because of their limits in functionality. Station wagons simply did not hold the cargo that the new generation of more active families needed, and removing items from the backs of these vehicles could be exceedingly difficult. Yet there appeared to be no good alternatives: full-size vans, the only other reasonable option at the time, did offer more cargo space and easier access, but they weren't viewed as fun to drive and, if anything, were perceived as less stylish than station wagons. A New Class of Products The Chrysler Corporation, a leading station wagon maker of the day, responded to these latent consumer dissatisfactions by employing a process that Stalk and Pecaut term "breaking the compromise." Why couldn't consumers be allowed to have both space and style? And why couldn't automobile manufacturers make a vehicle that was both functional and fun to drive? Chrysler answered these questions by creating an entirely new class of product: the minivan. According to Stalk and Pecaut, minivans "broke the compromise" that had been forced on consumers "by 'cubing out' the box design of the station wagon." They explain that both Ford and GM "had researched customers' feelings about station wagons and had found that they could meet obvious needs with features such as two-way doors, electric rear windows, and third seats." But the other car companies "did not explore the 'white space' between station wagons (based on car platforms) and vans (based on truck platforms). The minivan--a van based on a car platform--was hidden in this white space defined by customers' latent dissatisfactions." And this "hidden" product idea turned out to be a spectacularly successful innovation. During the next ten years, minivan sales grew eight times faster than did the automobile industry overall. Indeed, for the full 16-year period between 1984 and 2000, minivan sales climbed 12.7%--among the biggest gains of any vehicle segment. And the market leader: Chrysler, the company whose "compromise-breaking" thinking produced the idea of the minivan. By 2000, in fact, Chrysler held a 35% share of the minivan market, a figure that dwarfed the shares of most of its competitors. Thinking Outside the Box The key lesson from Chrysler's experience? Simply this: think outside the box by developing dramatic new products and markets that respond to customers' often hidden needs, preferences, and dissatisfactions, and you'll be able to define new markets and fuel both growth and revenue creation. That's a key element of PTC's Product First strategy--developing and defining new markets--and one that Chrysler used to create what has become one of the most popular classes of vehicles on the American road. PTC's Product First Roadmap highlights this and eight other Value Opportunities, which we will continue to explore in upcoming columns. |
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Copyright 2003, by The McGraw-Hill Companies, Inc. |
