On a rainy day in New York City, Travis Kalanick and Garrett Camp couldn’t get a cab. They quickly realized that trying to get a taxi in the rain was a horrible experience. The duo went on to found Uber, which became one of the most successful unicorns in history. If you haven’t heard the term ‘unicorn’ before, it applies to private companies worth more than $1 billion.
If you’ve got an idea for a business or a product, this could be you. Or you could be like the founders of Napster or Pets.com—famous failures that came close, but no cigar. The thing is, there isn’t much of a difference at the ‘idea stage’ between huge successes and ignominious failures.
I like to think that each of you has an idea that, if targeted effectively and nurtured properly, could grow into being the next Facebook or Alibaba. But you have to realize that your current
idea for a business is very unlikely to be the idea that you end up going with. And it’s even more unlikely that your current idea will result in a company worth billions. What you actually have is the foundation
of an idea, something that can point you in a particular direction.
If you listen very closely to what potential customers are saying, they will tell you what business you are in. In life as in business, the difference between listening and not listening is the difference between success and failure.The thing about customers is that they don’t talk very loudly. In fact, sometimes they don’t talk at all. They won’t tell you what they want or what you should create, or what triggers them to make a purchase. They also won’t tell you what barriers get in the way of them making a particular purchase. They might not even know that what you have is something they need.
This is why we can’t listen passively to customers. We need to engage with them and ask them the right questions. The big issues are, what
questions to ask, and how to interpret the answers. You can’t ask your mother whether something is a good idea, because chances are that she loves everything you do. And you can’t go out asking friends and work colleagues if they like your product or company idea; chances are that most people will say Yes because they don’t want to hurt your feelings.
What you need is a framework to help you listen to customers, to understand what triggers them, what barriers stop them, and how they view your company and the competition. You need a framework to help you understand how they think, what they feel, and how your idea relates to their lives.
But before we get to that, let’s look at what goes wrong when you don’t
listen closely. I don’t mean to be negative, but it’s important to see what you can avoid if you listen closely. Think of the following as cautionary tales.
The Reason for Daunting Failure Rates
Every product or company starts with an idea. The problem is that most of those ideas are likely to fail. Thirty thousand new products are created in the United States every year, and there is a 70 to 90 per cent failure rate, which means they don’t stay on the shelves for more than a year.
Ford’s Edsel, the company’s most public failure, has become known as the biggest product flop of all time. Launched in 1957, the vehicle never lived up to expectations. One of my favourite new product failures is disposable underwear. No, seriously, that was actually a thing back in 1998. Launched by Bic, who are better known for inexpensive pens, this attempt at diversification never did catch on.
The story for start-ups is pretty much the same: 75 per cent of all start-ups fail; and only about a quarter of venture capital-backed start-ups succeed. Coming up with an idea for a new product or a new business is fraught with difficulty, even for successful inventors. James Dyson made 5,126 attempts to create his vacuum; and Thomas Edison had over 1,000 failures before he perfected the light bulb.
What is going wrong here? Why is there so much failure in the world of innovation? Is it just part of the innovation process, or is there something that can be done to improve the odds?
There are five fundamental reasons why new products fail:
• The company can’t support fast growth;
• the product falls short of manufacturer claims and gets slated;
• the new product isn’t sufficiently differentiated from the competition;
• the product defines a new category and requires substantial consumer education, but for whatever reason, doesn’t get it; and
• the product is revolutionary, but there is no market for it.
Of these five reasons, the last three relate back to the original idea. If the idea is flawed, the product will be in limbo, hard to explain—and will find no market.
Let’s think about the Ford Edsel
and Bic’s disposable underwear. Both were launched by reputable companies and had a lot of marketing support, including up-front research, but they failed anyway. In Ford’s case, it launched the car into a space with considerable competition at a time when consumers were turning to smaller cars due to an economic recession. Fundamentally, the idea for the Edsel
was flawed from inception, and nothing could make up for that flawed idea. As for Bic, what were they thinking? There has never been a market for disposable underwear, and people don’t want to buy underwear from a pen
company anyway. Bad idea. Bad, bad idea.
Simply put, the developers of both products failed to understand what would trigger a customer to buy and what barriers would prevent them from doing so.
How about why new start-ups fail? Well, it’s pretty much the same thing. CB Insights did some research on 101+ start-ups and Figure One shows what they found: 42 per cent of the start-ups they studied failed because there was no market need. Products and
start-ups are failing for the same reasons, which is mostly to do with market need.
Where Big Ideas Come From
I’ve tried to figure out how people come up with ideas to see if where the idea comes from has any bearing on its eventual success. In doing so I’ve come across a whole bunch of ways that ideas germinate:
• Eureka Moments
The myth of a Eureka moment is just that: a myth. Eureka moments don’t just happen but are born from long introspection and a seemingly random collision of disparate ideas. Isaac Newton didn’t just figure out gravity when he was hit by an apple from a falling tree. No, he had been working on the issue for a long time, and that long internal process made him receptive to a solution that seemed to present itself all of a sudden.
• Technological Developments
The advent of the Internet was a technological breakthrough that spawned thousands, if not millions, of products and company ideas that were not possible without it. But before that, a young entrepreneur named Steve Jobs was looking for ideas to follow up his recently-developed Apple II computer.
When he and one of his software engineers were given a tour of Xerox’s Palo Alto Research Center, he had a chance to see what was being developed there. To say that he got quite excited would be an understatement. In fact, at the end of a demo, he started leaping around the room and shouting himself hoarse. That demonstration sparked a complete change of thinking in him and led to his introduction of the graphical user interface to computing. Just try and imagine life without that
When you think about it, the idea wasn’t even Jobs’s, but his understanding of customers—and Xerox’s failure to do so—enabled him to capitalize on a technological breakthrough.
• Your Own Problems
Stewart Butterfield, the founder of Flickr, launched a new gaming company called Glitch that eventually went under. However, while he was developing Glitch, he incidentally developed software for internal team messaging. When Glitch failed, Butterfield started to see the potential for team messaging and created Slack, a team messaging application that has grown into another Unicorn. The irony is that Flickr itself was created from a failed gaming company that needed photo sharing. In two cases, Butterfield launched successful products based on things he needed. And both times he launched these as a result of failed companies that came out of other ideas.
• Competitive Products
Google started its life as a research project at Stanford, undertaken by Larry Page and Sergey Brin. At the time, search engines, of which there were many, ranked results by counting the number of times a search term appeared on a page. As you can imagine, you could easily game a system like that to improve search rankings. Page and Brin figured out that a better way to rank search results would be to analyze the relationships between sites, to see how many sites linked to each other, and to rank the importance of pages linking back to that site. In short, Google was started as a response to the failures and shortcomings of its competitors.
Chip Wilson, founder of Lululemon, had been in the surf, skate, and snowboard business for 20 years when he started getting into yoga. These were early days, but to Chip, it looked like yoga would be a good wave to ride. At the time, cotton was used for yoga apparel, and this seemed completely inappropriate to Chip, whose specialty was technical athletic fabrics. So he started a studio to design yoga wear. That was in 1998, and 22 years later, the company does over a billion of annual revenue, all from a growing trend in yoga.
• Other People’s Problems.
IBM is actually the combination of three separate businesses. One of them, the Tabulating Machine Company, had been in the business of leasing machines for tabulation to a railway company. But they saw one other problem that they knew needed to be solved. The 1900 U.S. Census was the biggest statistical challenge of the day, and IBM’s predecessor won a government contract to build a new machine for tabulation of the results; IBM became a successful company by listening closely to other people’s problems.
Understanding Triggers and Barriers
Before going any farther and looking at why people do and don’t buy new products and services, I will set the stage by looking at the the stages that consumers—both corporate and individual—go through before finally making a purchase. Generally speaking, the process consists of five stages
STAGE 1: Need Recognition
Before the buying process begins, buyers often aren’t even aware that they actually need something. They are blissfully unaware of how much better their life would be if only they had your fantastic new product. Then, all of a sudden, something changes and they become aware that they need something
. They may have run out of a product, or perhaps there’s a change in their life, or a new regulation has been introduced. Whatever it is, this is the start of the buying process. A need has been identified and the buyers are off to the races.
Take eyeglasses, for example. People buy new eyeglasses for a variety of reasons, but what is it that starts them off on a search? There may be two factors at work here. The simplest one is that they have an eye exam and the doctor tells them they need glasses for the first time or that they need a new prescription. Alternatively, perhaps they’re fashion-conscious; they see a new style of eyeglasses that makes them realize that their current pair are out-of-date. Whatever the case, now that they are aware of the need, the buying process starts in earnest.
To summarize, the need recognition phase starts with a trigger. This trigger results from a change in the buyer’s circumstances, which causes them to react.
STAGE 2: Information Search
Now that they know they need something, buyers start to search for information about this need. They will seek answers to a whole variety of questions: is this really a need? Do other people have the same need? There will probably be many other questions. The buyer might then move on to look at various product features, costs or how to buy. This is also the stage at which they will come to evaluate the internal and external barriers
that could cause them to abort the whole process. They might find that the new purchase is too risky or that they won’t gain much of a benefit from it. These barriers are what will stand in your way as you try to convince a buyer that she really has a problem and needs to do something to solve it.
In the case of eyeglasses, let’s say a hypothetical potential customer has a new prescription that requires a combination of distance correction and reading lenses. She’s going to look at bifocals, at progressive lenses, or at buying two pairs of glasses. She might even look at getting the lenses in her old frame replaced. After weighing her options, she may decide that the change in prescription is not big enough to warrant a purchase now and instead decide to wait a while before going ahead. In this case, the buying process has been started, the buyer will forever know that she needs something new, but the idea will sit on the shelf until such time as the trigger
is stronger or the barrier
is weaker. So, the second phase of the buyer’s journey is when a buyer recognizes the barriers to a purchase.
STAGE 3: The Evaluation of Alternatives
As the buyer goes through the information search, she is simultaneously going through some sort of evaluation of alternatives (as I’ve said, these stages aren’t fixed, but are slightly fluid). To get to this phase, the buyer has to decide that the triggers to buy are stronger than the barriers that prevent a purchase. Having decided that, she will start to look at various alternatives. For you, the seller, this means that she’s going to start comparing you with your competition. That could be an existing supplier, a whole new batch of potential suppliers or somebody offering a completely different type of solution. Whatever the basis for comparison, this is where you’ll need to be differentiated competitively in order to succeed. If you’re new to the buyer, you’ll need to wow her with something that is totally different (that is to say, better
) than what the others are offering. Your difference could be in quality, in speed of access, or just in cost; whatever it is, you’re going to have to really stand out to get a buyer to pay attention to you.
In her search for a new pair of eyeglasses, our mythical buyer might look at a whole bunch of alternatives. She will first have to decide on some specifics: whether she’s looking for low cost or something stylish; whether she wants something that’s available quickly or if she’s happy to wait a while for the right pair. Once she’s figured that out, she’ll have a basis for comparison that will enable her to narrow down her choices. If she’s going for style, she’ll probably look only at stylish frames and compare a number of brands before coming to some general decision on her final few choices.
STAGE 4: The Purchase Decision
Having decided to go ahead with a purchase, a buyer now has to actually make
that purchase. She’ll decide when to buy and who she’s going to buy from. Maybe she’ll want a trial purchase. She’ll try to figure out what other issues go along with the purchase and what types of other decisions she’ll have to make. She’ll try to negotiate the price and other terms and conditions, and in the process, she’ll get closer and closer to a final purchase.
And Bingo! All of a sudden, it’s done. Whether it’s done because the vendor was good at closing or because the buyer decided to go ahead on her own, the deed is done and you, the vendor, better have been the chosen one. When she’s looking to make a final decision on her eyeglasses, our buyer has all sorts of secondary decisions to make. What type of lens? Should they have an anti-glare coating or not? Should she have them tinted for the sun. Other product types have other concerns to worry about, like warranties and a whole host of other add-ons.
STAGE 5: Post-Purchase Behaviour
So, it’s over, right? Well, not quite. The purchase has been made but the buying process isn’t over yet. The last stage is the post-purchase stage, where the buyer goes through a complete evaluation of the purchase and whether or not it met her needs. She’ll look at her expectations and consider and decide upon whether she feels she got value for money. And she’ll look at how the actual purchase was handled and whether she’d use the same vendor again.
For you as a vendor, this stage is important if you want to have a repeat customer. What you don’t
want is a one-hit wonder that might visit your competitors next time. This is no way to build a business.
If our legendary eyeglass buyer bought progressive lenses, it’s going to take a while to get used to how they feel when walking. She’ll worry about the new fit of the glasses and whether they tend to slide down her nose. And, perhaps, she’ll be looking at whether anyone notices the new glasses and complements her on them. All of this information will lead her to a set of decisions regarding what she’ll do next time.
Not every buying process is identical (or even similar to the one I’ve outlined above), but buyers generally do go through these phases. This really is important to you as a vendor – if you know how a buyer comes to a purchasing decision, you can take the necessary steps now, when you’re designing the product, to make sure that your product is responding to appropriate buyer Triggers. And you can ensure that you have the ability to get over the Barriers.
Exhibit A: Google Glass
Google Glass is perhaps the best recent example of a product that failed to cross Geoffrey Moore’s infamous chasm. The product caught on with a small number of technology enthusiasts, exactly as one might expect for as radical an innovation as a head-mounted, wearable computer. But it provoked a firestorm of protest about privacy rights and the surreptitious recording of private conversations. Google Glass users became known as ‘Glassholes’. There were safety concerns about driving while ‘Glassing’, concerns about a Wi-Fi signal inches from your brain, and all sorts of other problems.
But the biggest issue was that Google didn’t explain what problem it was trying to solve. While the product was accepted by tech enthusiasts, I’d guess that even Visionaries had a tough time seeing any long-term benefits in it. Certainly, the pragmatists didn’t buy in because they couldn’t figure out how they could benefit from it.
Put simply, the product’s failure came down to triggers and barriers. The first problem was that there was nothing to trigger either visionaries or pragmatists to purchase Google Glass. There was no long-term vision that could be achieved through using the product, and no obvious problem that could be solved by purchasing it. With nothing to trigger a purchase, the product was left in the hands of technology enthusiasts, who just like trying things out for the sake of trying things out.
It’s entirely possible that Google was just trying something out and it wasn’t a true product launch; after all, Google Glass was only released as a Beta version. But I don’t buy that. I think they fell in love with their own creation. Even the most successful company out there can launch a product that fails, simply because they don’t understand the triggers and barriers for consumers.
In a recent blog post, Y Combinator co-founder Paul Graham writes:
“Why do so many founders build things no one wants? Because they begin by trying to think of start-up ideas. If you look at the way successful founders have had their ideas, it’s generally the result of some external stimulus hitting a prepared mind. The verb you want to be using with respect to start-up ideas is not ‘think up’ but ‘notice’.”
I myself have noticed that the best ideas come out of conversations with potential customers—with people who would actually pay for something in time or money. When founders stray from something
someone would pay for, they risk creating a lousy product.
About author: Charles Plant is a Senior Fellow with the Impact Centre at the University of Toronto and the author of Triggers and Barriers: A Customer Perspective on Innovation (2019). He has been an officer, director or investor in several dozen technology companies and was co-founder and CEO for 15 years of Synamics, a telecommunications software firm. Over his career he has also been a venture capitalist, investment banker and corporate banker.
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[This article has been reprinted, with permission, from Rotman Management, the magazine of the University of Toronto's Rotman School of Management]