By Mike Collins, Author, Saving American Manufacturing
Most of the new product failures I witnessed in my many years in manufacturing were ideas dreamed up by the manufacturer or inventor.
They were always “cool” ideas and well designed prototypes, but they didn’t sell in the marketplace.
Internal new product ideas are popular, because it is fun to have an “ah ha” moment with a new idea scratched on a napkin, and the subsequent development from an idea into a real product. Too often, these internal ideas do not produce real benefit for the customer or solve their problems
As an alternative, why not connect the idea directly to the very person who will make the final decision on buying the product, the customer? It means you have to become a good interviewer and take off your selling hat for awhile, but the most obvious benefit of such a process is that if the customer likes the design, they might buy it — and you have killed two birds with one stone.
Erik von Hippel, a new product guru from MIT, notes that “lead users - often the trend setters in an industry - are often better sources of new products than the manufacturers themselves.”
He claims that in the high technology field, as many as 80 percent of the new product ideas originate with users.
Here are some examples:
Most of the innovations in scientific instruments come from scientists and researchers rather than manufacturers. Hippel’s study showed that 77 percent of 111 new scientific instrument innovations came from these users. Another study shows that 67 percent of the innovations on printed circuit board equipment came from users.
Pultrusion is a process of making fiber reinforced plastic products for aircraft and sports gear. 85 percent of the innovation in pultrusion comes from users - typically small and medium size manufacturers without R&D departments.
In the semiconductor and printed circuit board markets, the large electronics manufacturers are responsible for 67 percent of the innovations.
I have personally experienced and documented customer driven innovation with packaging machinery, material handling equipment, industrial robots, drag line shovels and ground engaging wear parts for front end loaders.
Mentor Graphics — Beaverton, Oregon
In 1981, Gerry Langeler and his partners founded Mentor Graphics to develop a new software product for the emerging computer‑aided engineering (CAE) market.
The partners spent weeks developing the specifications for the product and had progressed to the point where they were convinced that they had produced an invention that could revolutionize the CAE market.
Unlike the founders of many high technology start‑ups, Langeler and his partners knew they had to get a reaction from the marketplace before they asked people to invest the large sums of money that would be needed to launch the product.
They chose 20 companies in the U.S. that they considered potential customers in this emerging market niche, and they flew around the country presenting their ideas.
These target companies not only told Langeler and his partners about their needs and problems, they helped them to change the specifications so they would meet their future needs. After a whirlwind customer trip that lasted four weeks, the partners returned with a completely revised product and several potential customers.
There was still a lot of work to be done, but the founders had defined customer needs well enough to design a leading edge product that achieved phenomenal success. In its first year, Mentor Graphics achieved $1.7 million in sales. Within 8 years, they grew to $400 million in sales.
PASCOR — Hillsboro, Oregon
PASCOR is a small manufacturer of high voltage air switches for utility substation and transmission lines. Utilities don't always have the luxury of building new transmission lines, because of environmental pressures.
Instead, they must find ways to transmit more power over existing lines. To do so, they need components that are heavy duty and easily replaceable.
PASCOR saw this market opportunity and began looking for new product opportunities for its line of air switches.
"The way to find new product ideas was obvious,” says Kathy Wakefield, marketing manager. "You listen to customer complaints and service suggestions. We found that if you have a systematic way of documenting customer comments, many new product ideas will present themselves. All of our products have to be ANSI tested, which costs us $50 to $100,000 per product; and we cannot afford to test a product no one will buy."
PASCOR spends the time necessary for gathering customer data, and then engineers a prototype.
The new product is developed into a working prototype and is mounted on a trailer to demonstrate the idea at the customer's plant. This method gives customers the opportunity to see and feel the concept, and it gives PASCOR a perfect method for gathering the final data necessary to finalize the product for tests and certification.
"Our system to develop new products works very well," says Wakefield, "because the end users have a hand in the development and it paves the way to immediate sales."
Customer Problems
Perhaps a supplier’s product is not meeting the customer’s needs, and they want to find a new supplier to design and manufacturer a variation of the product.
As a result companies leave themselves open to attack from innovative newcomers.
Ajax Foundry — Tualatin, Oregon
In 1973, a consultant to the paper industry brought Ajax Foundry a casting called a refiner plate that was used as a wear part in a larger machine called a refiner.
The refiner is used in pulp and paper processing to prepare the wood chips and pulp stock to be used in paper manufacturing.
He'd gotten the plate from a local paper mill that was interested in finding another supplier of the wear part, because the original equipment manufacturer was high‑priced and unresponsive.
This is a classic case of a large OEM becoming successful and complacent, but not paying attention to the prices, delivery and changing needs.
First, Ajax forged an alliance with the dissatisfied local paper mill and produced a refiner plate that could replace the existing part and sell for about 25 percent less.
After this initial success, the owners of Ajax Foundry decided to go to other mills in the Northwest and see if they could copy their refiner plates as well.
Since Ajax had a 25 percent price advantage over the two other competitors in the industry, paper mills gradually took notice and sales began to improve.
The company hired an engineer away from a competitor and began improving the refiner plate designs based on their experience and ideas. At this point, Ajax was developing new plate designs that were more effective and still less expensive.
Ajax joined a paper industry association, and using the association's directory, they targeted a number of mills around the country that used refiner plates.
The primary reason for Ajax Foundry's success was that they chose to focus on the customer problems of price, delivery and quality — where they could gain a competitive advantage.
The OEM never responded to Ajax’s competitive challenge and eventually lost all of the refiner plate business. Ajax has grown from a small local foundry to $20 million, and one dominant supplier serving these market segments worldwide.
There is a message here for small manufacturers: There are always opportunities to develop new products by focusing on the weaknesses of complacent larger competitors.
Gathering customer ideas on new industrial products is a good idea that can lead to immediate sales, but gathering the necessary data requires being able to conduct an unstructured interview.
If you want a very thorough approach to interviewing, look up Erik Von Hippel’s Lead User Tutorials.
If you want a simpler approach to the unstructured interview, read Chapter Three on interviewing in my 1994 book The Manufacturers Guide to Business Marketing.
Mike Collins is the author of Saving American Manufacturing. His website is www.mpcmgt.com.