In a complex customer relationship, finding the best way to organize and manage customer interaction is anything but simple, especially when the product is technically complex. However, a deep understanding of customer needs is essential to new-product development processes. Rather than adopting a “one-size-fits-all” approach, companies need to choose the best organizational method for their particular needs. This article outlines four approaches and the circumstances in which each should be applied.

Identifying Customer and Technology Needs

First of all, it is helpful to consider what sort of typical organizational approaches companies choose when their R&D and commercial functions interact with customers. The four stereotypical approaches commonly used are shown in Table 1. In order to decide which organizational approaches might work best in each situation, it is helpful to consider the different types of customer needs that have to be identified in B2B industries, and therefore the skill combinations that may be required within the team.

By identifying the degree to which B2B customer needs are clear (expressed) or unclear (latent), and the degree to which technology needs are known (expressed) or unclear (latent), we can start to characterize the most appropriate skill set that a multifunctional product development team will need in order to develop a winning product. The ability to identify latent needs and translate them into concrete product requirements can be referred to as “solution design skills”.

Different situations call for different solution design skills, and the availability of the right solution design skills is of critical importance for effective needs recognition. Because latent needs are highly dependent on context and difficult to tease out of data sets, product development practitioners must be familiar with effective approaches to identifying latent needs and know when to apply a given approach.

Choosing the Best Approach

Companies can use the analysis above to help make informed decisions about how best to organize their teams. The four approaches described above can be mapped to the four quadrants of a “Customer Needs/Technology Needs” matrix, as shown in Table 2.

Having the right solution design skills on the team to suit customer or technology needs is critically important. With this in mind, we can consider each quadrant of the matrix in turn:

  • Expressed customer and technology needs – an indirect, single-channel approach: The simplest situation, in which both sets of needs are clear and applicable to a broad range of customers.
  • Expressed customer needs, latent technology needs – a direct R&D approach: The customer needs are clear, but the technology needs are not, so R&D has direct contact with the customer.
  • Latent customer needs, expressed technology needs – an indirect, multichannel approach: Customer needs are not clear at the outset, although the technology requirements are known, and a heavier approach led by commercial functions is the most suitable.
  • Latent customer needs, latent technology needs – a hybrid approach: A customer need has been identified, but the solution is unclear in terms of both commercial and technical aspects. The solution design skill set for this situation is often varied, and a truly cross-functional team approach is most suitable.

The approaches detailed above and their applications may seem relatively straightforward. However, the study showed that in practice few of the sample companies actually followed these optimal approaches, and most were unsatisfied with their current efforts.

Analysis of the most common shortcomings revealed five key success factors: avoiding “one-size-fits-all” approaches; ensuring good knowledge sharing, being responsive and adopting regular customer interaction; deploying the right resources; and understanding internal competency needs.

How important is choosing the right approach in terms of innovation success? We asked companies to categorize recent new-product development projects in terms of whether they used the “optimal” or “non-optimal” organizational approach (as described above), and whether these projects were “successful” in terms of reaching their objectives. The results showed that the project success rate was actually doubled by using the optimal approach (Table 3).

Conclusion

Our research showed that most companies tend to either use a one-size-fits-all approach, or else approach the situation with ad hoc arrangements. However, the research also showed that “getting it right” can lead to doubling of innovation success rates and have significant impact on R&D effectiveness. This is something B2B companies cannot afford to ignore.

Authors: Chandler Hatton, Michael Kolk, Martijn Eikelenboom, Mitch Beaumont

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About The Author

For almost 130 years, the Arthur D. Little name has been synonymous with technological ingenuity and innovative thinking. Arthur D. Little’s management consulting services were traditionally sought after not only by corporations but also by state bodies, federal agencies and governments worldwide. Its project work focused on corporate finance, environmental risk, information management, operations, strategy and organisation, technology and innovation, and a host of other services to maintain the competitiveness of its clients.