Tuesday, August 07, 2007

Incremental Innovation tool: Buyer Utility Map

In my earlier article titled "Dimensions of Innovation", I had mapped when one should pursue incremental innovation and when to pursue radical innovation.

Product managers are responsible for improving the product throughout the product life cycle. In order to enhance the product life, the company will invest in the product in form of incremental innovation.

Incremental Innovation is primarily driven by very high competitive pressures and low risk tolerance. Companies that rely on technology based products (or manufacturing process) often tend to follow incremental innovation. Product managers at Intel, Dell, Lexmark, Cisco, AMD, Lenevo, Nvidia, ATI, Adobe, Microsoft, Oracle, etc. survive solely on incremental innovation.

Product managers have a clear mandate in terms of innovation they can pursue - Incremental innovation, the challenge for the product managers is then to figure out what incremental steps to be taken. Identifying these steps are not easy. However there exists several systematic process or a method to identify opportunities.

One such method is: The Buyer Utility Map.

The Buyer Utility Map was developed by W.Chan Kim & Renee Mauborgne. It was first published in Harvard Business Review, September-October 2000.

Buyer utility map is a tool which helps product managers to identify which business ideas have real commercial potential, identify areas of incremental innovation - by enhancing customer (buyer) utility.

Mapping a product across the buyer utility matrix - will help identify the current positioning w.r.t competitive products. This will help create new products/services - that offer exceptional value for its customers and differentiate from competitive products. Understanding the utility of the product and reposition of existing products/services is vital for market segmenting & positioning.

What is Buyer experience cycle?

Buyer experience cycle refers to all the activities the buyer will do with the product - right from purchase to its disposal. The buyer experience cycle covers the total customer’s product experience. It is based on the customer resource life cycle and consists of six stages:

  1. Purchase
    Purchase stage includes buying experience, product evaluation, Financing, negotiation, Contracts, SLAs, Pricing etc. Concentrating on each phase of the purchase experience will help improve the buyer experience. For example, Dell’s success to a great extent can be attributed to its ease of purchase via web or phone. Similarly, AOL succeeded initially by widely distributing its software (for free) at stores, with newspapers etc. The ease of purchase or easy availability has a significant impact on the buying decision.

  2. Delivery
    Delivery stage is the one between the actual purchase to its commercial/actual use. This includes physical delivery, training, installation, on-site testing etc. The initial success of Amazon.com can be directly attributed to the delivery - i.e., customers could order rare or difficult to get tiles & have it delivered to their homes. Another success story is that of 1-800-FLOWERS. The company excelled in delivering fresh flowers anywhere in the US - thus making it a household name.

  3. Use
    Use stage refers to actual use of the product/service for its intended purpose. Often times the user will be different than the purchaser - but user will have a high level of influence over the buyer in all buying descisions. Understanding how people use a product/service and knowing their pain points is vital for incremental innovation. (see Innovator’s Toolbox: Customer Anthropology ) Nokia became the world leader in cell phone handset market mainly by focusing on how customer’s use cell phones and then developing (incremental innovation) its products to make Nokia phones even more easier to use.

  4. Supplements
    Supplement stage refers to how users use your product along with other products/services. Most products/services will need other supporting products. Knowing how your product/service works with other products and improving the interaction will make customers happy.

    Recently Microsoft made it difficult for "Google Desktop" software to function smoothly with its Vista software. Similarly, Apple made it mandatory for users of iPod to use iTunes as MP3 management software. These are the cases where companies which have monopoly in the market place create hurdles for competitive products.

    Today, companies follow standards to ensure ease of interoperability. Wi-Fi, WiMax, Bluetooth, Ethernet, etc., are the common standards which ensure ease of interoperability. Understanding the complete list of supplements that are needed for the customer to use your product gives you an edge in terms of incremental innovation. It allows you to improve your product such that the customer can eliminate the use of a suplemental product. This strategy has been adapted by Microsoft in is Windows product line. Microsoft initially included Internet explorer with its Windows operating system. This eliminated the user’s need for another browser - Netscape.

  5. Maintenance
    Ease of maintenance & cost of maintenance is very important to all buyers. No user will buy a car that is difficult to maintain or that has a high cost of maintenance. Warranty & guarantee issues must be looked into at a great detail in order to identiy opportunities for incremental innovation. Understanding the maintenance issues helps identify various ways improve the product. The success of tubeless tyres, Michelin’s Tweel is a good example of captilizing on user’s product maintenance issue.

  6. Disposal
    Disposing a product also includes: selling it off, recycling, upgrading the software, data migration etc. Today due to environmental concerns companies such as McDonalds, Caterpillar, Toyota, Honda, GM, Dell, HP, etc are spending time & effort to design their products that are recyclable. Auto manufacturers also help customers dispose thier existing cars through their pre-owned car sales teams.

These six stages represent the stages in which the customer is involved with the product. Developing successful products requires a deeper understanding of buyer utility levers during each stage of buyer experience cycle.

The Six Utility levers

The six utility levers are the ways in which utility can be offered to the customer.

  1. Customer productivity
    This type of utility lever can increase customers’ productivity by helping them to do things faster, better, or in different ways. An example of increasing customer productivity is the financial information company Bloomberg. They made traders more efficient by offering instant on-line analytics. SAP’s ERP solution became a great success - despite its high cost, difficult to install & maintain - Mainly because SAP was able to improve customer productivity.

  2. Simplicity
    This type of utility lever makes life easier for the user of the product or service. IRobot’s Verro - a swiming pool cleaning robot became an instant success because it make the task of cleaning the swimming pools so simple & easy for the user.

  3. Convenience
    The convenience utility lever is a luxury, which lets a customer save time or frustration. ATM’s is an example of the convenience lever. It saves customer’s time and frustration, because he/she does not have to go to the bank anymore to get cash.
    Similarly, newspapers in the USA were able to hold-off competition from Internet & cable TV through the convenience of having the paper delivered to homes. GM took a note on the convenience factor when designing Saturn Cars - and developed a whole new way of selling cars though a chain of customer friendly dealers.

  4. Risk
    Another lever which is the risk lever. Customers in general are risk averse. Developing a product/service that lowers risk will become a product differentiator. For example, Online tracking of shipments by Fedex and UPS gives customer the satisfaction of choosing a risk free alternative over the US Post - and for that, the customer is willing to pay a premium.

    In some cases, the adventure and thrill involed in high risks can attract customers. Adventure sporting companies have sprung up all over the world to cater to this need of the customer.

  5. Fun and image
    The fun and image lever provides fun and image to the customer. Apple’s iPod is a good example of using this lever. Customers obtain a fun and a trendy image by buying one of the MP3-players from Apple. Manufacturers of luxury goods often rely on the Image factor.

  6. Environmental friendliness
    This utility lever is providing friendliness towards the environment. For example, the initiative of fast-food chain McDonalds to recycle materials and reduce material content can be seen as usage of the environmental friendliness utility lever.

The buyer utility map process

The buyer utility map can be used for four main activities:

  1. Locating new product

  2. Improving Existing product

  3. Positioning new product or repositioning existing products

  4. Market research

Locating the new product Identifying current products within the buyer utility map is the fist necessary step. For example, take Nokia’s N-series cell phones & map it. This is an existing product and it can be mapped as shown in figure below.

Positioning a new product

Apple introduced a new cell phone which does not directly compete with Nokia’s N-Series or other cell phones in the market. IPhone’s position can be illustrated as:

If Nokia were to respond via incremental innovation, then it now knows what modifications it must do & how to reposition the product.

Closing Thoughts

Buyer’s utility map is a powerful tool to develop new products. These products can be developed through incremental innovation or radical innovation. But this tool is ideal for identifying incremental innovation opportunities.

A product manager’s job is to develop the product road map, identifying product improvement areas and position/reposition the new products. In these aspects, buyer utility map is a powerful tool to identify new opportunities, identify existing product gaps and develop new products.


Sayantan said...

pretty useful..thnks dude

Anand said...

Thanks for a useful article.

vivaan yadav said...

Thanks for the sharing of such information. we will pass it on to our readers. This is a great reading. Thanking you.
Utility Mapping