Market Driven Innovation

Market Driven Innovation (MDI) is designing, managingMarket Validation are the critical elements. In this
and implementing your innovation process based onmodel, Leadership does not resource technology
the needs and wants from your key markets. MDI isdevelopment until sufficient market evidence and
not new, but still today, many companies have foundvalidation provides the basis for resourcing.
it difficult to transform their innovation work fromTechnology resources only work on market validated
their entrenched technology and product forwardconcepts. Leadership's ownership of the process
approach they have been using to a market backmeans they:o Demonstrate the value and set
approach. Often, their entire business processes haveexpectationo Focus and align the organization around
been built around their assets and products theystrategic direction and core capabilities.o Identify, and
produce and their go-to-market strategy based onguide the performance requirements necessary to
their historical sales experiences. The result of thisgenerate the profit results.o Organize people to
behavior is premature commoditization of their valueassure the right combination of organizational
propositions, their most important assets. Marketstrengths are applied to both know and act
Driven Innovation is based on a strict set ofeffectively on markets.
principles:o Engineering/technical resourcing decisionsThree crucial questions are answered in market
are made based on a validated market need and anvalidation and business case development:
attractive business case.o Organizational Focus is1. Is there an external basis for believing the concept
achieved from understanding market segments andhas sufficient value to the market to proceed?
targeting the most attractive segments for growtho2. What is the best validated value proposition that
A cross-functional team approach, marketing,sets the design basis for development?
technical, and sales all contribute to the growth3. Can we make money from developing and
initiative together, and thus are aligned on thecommercializing this value proposition?
strategy:o Accelerated ramp up after launch from aBuilding the Necessary Skillset
higher operational knowledge of the marketoThe Innovation provides the basis for skill
Accelerated technology development because betterdevelopment and tool utilization. Each element of the
design specifications from a segmented marketoframework requires specific work designed to deliver
Driven by business leaders who make resourcedecisions to move from one element to the other. A
allocation decisions consistent with the strategicshort description of the work elements are describe
direction of the business, and link development tobelow.
marketing process.Concept Development and selection: Developing and
Market Driven innovation begins with a businesscharacterizing concepts (sometimes called the "Fuzzy
orientation towards specific and targeted markets.Front End"). Idea generation methods are generally
These markets define strategy which defineswell-known and most work well enough to assure a
resource allocations especially those resourcesgood set of concepts to evaluate. What we uniquely
dedicated to the innovation process. In this contextrequire is a concept characterization approach that
we define innovation as the creation of value, andhelps the evaluators better understand and choose
Market Driven Innovation as placing emphasis onamong several concepts.
customer values, beginning with choices as how aMarket Validation: Once a project has been
business goes to market; to how they position theirchartered, a decision (stage gate) is made to
brand and products in those markets theyresource to development and includes four key
proactively choose to serve; to the nature of theircomponents, validated market landscape; Value
product improvements; and to their search for newProposition Development; Competitive Alternative
products and services that may more effectivelyAssessment; and Business Model Evaluation. A
meeting the emerging future needs of their targetedvalidated market landscape identifies and
markets.characterizes the market spaces in which the
Identifying these target markets is core to Marketconcept may bring value. In this context, it provides
Driven Innovation. Understanding what drives marketthe basis for demand, and thus the first real attempt
growth and major unmet needs of the key marketat generating revenue potential. It identifies the key
players as well as how they define value andspecifiers and influencers, and begins to describe their
establish the basis for generating growth ideas andunmet needs that the concept may address as well
concepts - straight from the market. These ideasas key hurdles that must be overcome to have a
and concepts are the genesis of the innovationsuccessful and sustainable initiative.
process. The more market back concepts, the moreThe Value Proposition is a description of the value
opportunities for successful growth. Knowing targetyour concept will bring to the targeted market, the
markets enables a business to:o Design,benefits the market will receive, and how you will get
communicate, and deliver more robust valuepaid for bringing the value. Value proposition
propositions aimed at specific market segmentsodevelopment is the holy grail of marketing. If you
Capture more of the value we provide because theylearn your value proposition, and it truly brings the
can measure the value and make strategic pricingmarket real value, you can build the remainder of
decisions that are consistent with their marketingyour growth initiative around it. Value propositions
strategy.o Apply resources more effectively wheremust be measurable and actionable.
they bring value by focusing them only on whereBusiness Case Development: Before you engage in
value is identified.o Develop and bring new offeringsdeveloping the required technology, answer the
to the market faster because they know what thequestrion - "Can we make money on this value
market values and how to deliver their offeringproposition?". Market Driven Innovation often requires
based on value.o Evaluate new markets where theya new way to go to market to accelerate and
can bring more powerful value propositions and newmaximize acceptance and value capture. Value adding
offeringschain analysis through to the end user is an important
These elements of business design when generatedskillset to utilize for business model evaluation.
from a market back learning model, form the basisBusiness models are defined by what customers are
for a market driven organization, and moreselected; how we capture value; our level of
specifically, Market Driven Innovation as a core driverstrategic control; and the scope of our value
of your growth process:o Provides businessproposition. The Business Case should be determined
management with facts from direct contact with theas early in the innovation process as possible.
marketplace to decide which concepts merit movingOpportunity modeling can provide the necessary
forward with resourcing.o Balances depth and speedbasis for understanding the top line potential and the
in this disciplined approach using an organized set ofmarketing cost for the innovation.
activities.o Enables cross function teams to develop aTechnical Development:Effective market validation
common understanding, direction, and shared valuesprovides the product developers/designers a clear
throughout the innovation cycleo Enhances chancesand crisp basis for building in the necessary design
of successelements into an innovation. We now know the
Voice of the Customer (VOC) captured early andneeds (what the market is willing to pay for) and the
operationally is an essential component of creatingwants (potential areas of uniqueness). No more starts
and delivering value with the growth process.and stops caused by changing specifications from
Capturing VOC is not a trivial or casual activity, andlearning on the fly. Product developers can utilize their
well thought our and designed VOC is critical tobest practices with the certainty that they are on
Market Driven Innovation. Effective VOC requires:othe right track. Because we begin the development
Learning Customers desired outcomes - what theyprocess with clear market understanding, we now
want to happen to help them become morecan bring the key customers into the development
successful.o Getting to Fact based and data drivencycle early and often. We know their testing
information that can be translated into offeringprotocols, and their current standards by the
features that address the customer outcomes.ocompetitive alternative they are using today. We
Clearly identifies the benefits the customer willdesign, we test, we engage the customer to test,
receive and thus the discrete value they will place onwe upgrade. Active parallel processing accelerates the
an effective solution to them.o Must be welldevelopment process and we get to launch faster.
understood by both marketing and technical in theCommercial Launch: Preparing for the launch includes
same way with an aligned sense of the relationshipthe short term developing the marketing entry plan
to strategy and core competencies.and the marketing mix, and the longer term
VOC is the work you do and do well before youmultigenerational planning. These should be done
even think of applying technical resources to dotogether since the longer term positioning could have
product development work. In this regard, you don'tan effect on the launch protocol. The launch plan
misuse valuable and limited technical capacity.includes the target market; the offering positioning
Technical people need to focus on projects thatbased on the value proposition; the communications
have been market validated both to focus theirstrategy and plan; the channel strategy and plan; the
limited resources and provide them with advancedpricing strategy and implementation plan driven by
market specifications that help accelerate thelong term optimal pricing decisions. Multigenerational
development cycle.planning (beyond the launch); includes second and
To this end, as we will discuss more later, youthird generation offerings; strategy mapping; and a
engage your technical resources along side of yourrevenue acceleration plan. The managing process and
Marketing people to co-learn VOC, and thus both arecontrol plan are incorporated into the commercial
better prepared to do their work that is defined bylaunch to assure optimum demand creation and
your targeted markets. In this way our resources aredelivery
aligned from day one of an innovation effort throughProviding a Useful toolset
to launch of a new offering. A key outcome of anThe toolset necessary to enable Market Driven
aligned and shared approach is achieving successInnovation consists of an integrated qualitative and
faster and at less overall cost. No wasted costs as aquantitative set that enables the Market Driven
result of false starts and lingering stops.Innovation team to successfully address the critical
The three key components or a successful changemarket questions identified in their chartered project.
to market oriented MDI are:o Creating The RightTwo interdependent approaches make up the
Mindset - Leaders set the agendao Building thecomposite of Voice of the Customer (Market Driven).
necessary skill set - A common framework forTogether, they are designed to answer all the
implementingo Providing the best toolset - Fact basedquestions necessary to progress through the
information guides decisionsinnovation process defined earlier.
Incorporating all three into the business process is aA qualitative market learning tool should be installed
requirement for successful transformation to ato translate concepts into possible value propositions,
market driven organization. It's as straight forward asbegin the segmentation process, define the industry
knowing where you are going, how to get there, andstructure and dynamics, and expose the relative
a map to take you there. We will discuss each ofvalue vs. competitive alternatives. It also provides the
these three success drivers in more detail belowbasis for design of the quantitative VOC that follows
Creating the right mindsetonce a decision is made to proceed to the business
Leaders must take charge of the agenda beginningcase and technical development stages.
with examining and changing how they lead, whatA quantitative instrument that captures: concept
marketing and technical practitioners do differently,tests including value elements and price; attribute
and most importantly, how they work together usingimportance rankings and current performance ratings;
a rigorous framework from concept selection throughoutcomes rankings; feature benefits; and competitive
to offering commercialization. Leadership owns theratings. Other pertinent information to assist in
MDI process highlighted below. The first two levels insegmentation should also be incorporated.
the process, Concept Development/selection and