Want to innovate? Then don't ask consumers
Around 95% of new product launches fail according to Harvard Business School. Every year, we see tens of thousands of new products come and go. Some burst into view in a blaze of hype only to disappear without a trace. Google Glass (those science-lab-style web searching glasses that Google tried to sell us back in 2013), smokeless cigarettes and Crystal Pepsi are examples of new products that just didn’t land; and you probably never heard of them or can’t remember them. Every day, new products suffer the same fate, albeit most without the fanfare of publicity.
Large corporate incumbents, constantly under threat from disruptive innovators, often use consumer insights as the ‘killer app’ for innovation. In my experience, however, it does little more than give the people in charge something to blame, other than themselves, for launch failures. They often call the project ‘test and learn’ often renamed ‘test and burn’.
Take Proctor and Gamble (P&G). Since 2001, they have invested around $500m (£417m) a year on consumer insight research. Yet during this period, their R&D spending as a percentage of sales declined. The company is successful and makes good FMCG products, but if its expensive consumer insight-driven innovation worked, why was it so spectacularly disrupted across multiple categories by entrepreneurs with no FMCG experience? With apparently instinct trumping insights, a part time improv comedian and full time advertising guy (Dollar Shave Club) shook up the shaving category, a venture capitalist-turned-hair colour entrepreneur (Madison Reed) disrupted hair care, and a recruitment consultant (Cheeky Panda) tore a sheet off of P&G’s loo roll market.
I’ve seen first hand people conflating consumer insights with invention, and witnessed real innovation coming from elsewhere: a corporate’s acquisitions of disruptive startups, not their own R&D departments. Case in point, after its arch rival Unilever snapped up Dollar Shave Club for nine figures, P&G splashed more than £1bn in recent years on acquiring FMCG upstarts Mielle Organics, This is L, Walker & Company, Bevel and Form, First Aid Beauty, Snowberry, Native Cos and more. Of course, having personally innovated more than 1,000 patents and selling the companies behind them to large corporates, I know this is the norm. Entrepreneurs drive more novel ideas than customer surveys.
So why is the failure of new products disastrously high?
I think a major reason for this can be summed up by this famous Henry Ford quote: “If I asked people what they wanted, they would have said a faster horse.” In other words, despite many companies relying on them for new ideas, obsession with consumer insights can really get in the way of successful innovation.
To illustrate my point, let's take a trip down memory lane. My life sciences startup had been acquired by a large corporate for more than £100 million, with our trail blazing innovation among the chief reason for the sale.
Charged with continuing our inventive streak in our new home, my well-respected colleague read a consumer insight report for inspiration to solve a new product development challenge within the electronic cigarette sector. Our new parent company at the time had probably paid tens of thousands of pounds for it, but I seldom read these reports. Almost without doubt I knew that whatever conclusion they had reached would be not just wrong but often contrary to the actual answer we needed.
“Chris, I read an insight report the other day and I wanted to share its findings because I think it's relevant here,” my colleague announced during an ideation session . “The report conclusion clearly stated that the consumer wants a bigger battery that lasts longer and that kind of disagrees with where you're headed on this”. I replied, “Ah, yes the infamous consumer insight reports. Unfortunately their conclusion is wrong and misleading and we shouldn’t really read such drivel.”
“But if you haven’t read it, how can you say that?” My colleague challenged me. “It's easy, I know their conclusion is wrong and if you look back you’ll find it's wrong because the answer they based the conclusion on was wrong and if you follow that back you’ll find the original question and methodology was wrong too. The correct answer is without doubt that the consumer wants a smaller battery that lasts longer, not a bigger battery that lasts longer.” From that moment on my new global head of engineering who had only been with us days “got me” and we continued on that same wavelength enjoying a brilliant working relationship.
Funnily enough, not only did I contradict the “insighting”, but my solution was cheaper and more profitable.
The customer is not always right
So what I am trying to say is that customers don’t always know and in fact rarely know what they really want, they often don’t challenge the status quo, or envision truly novel and new possibilities. They often stick to the safe parameters of what they already know, which creates a recipe for variation not innovation. Don’t get me wrong, consumer insights are not redundant, but I’d stick to only using them for driving sales, improving a service and making slight product tweaks, like a new scent for a shampoo or a new flavour of ice cream.
The other way I look at things like this is listen to but then decide for yourself. I was once in a meeting with the global marketing director who was listening to my team present a great product idea pipeline. His reaction was to order a multi-country consumer insights study to determine if in fact, the ideas were, indeed, good. In my typical manner, I didn’t beat around the bush, and responded to this by saying, “If you don’t know your consumers well enough to know what they like and dislike, and what in fact they would like to see, then you are in the wrong role.” Or perhaps he was in the right role - for one of our competitors. Of course lead and balloon summed up the feeling.
For radical, inventive innovation, let the innovators dream up something brilliant. Consumer insights are unlikely to lead to an electric car in a world of combustible fuel, or a reusable space ship when all others are disposable.
Indeed, beyond Ford’s horse replacing Model T, we’ve seen products that have disrupted incumbents in categories without being based on consumer insights at all. These fresh ideas have changed the world.
Elon Musk is a great example of an innovative entrepreneur who has achieved undeniable success by going against the status quo: He correctly identified the damaging effects - and the dwindling supply - of fossil fuels, but instead of simply trying to create a vehicle that would use fewer fossil fuels, he came up with something completely new, presenting the world with electric cars as an alternative that we didn’t realise we needed. Despite having a far smaller range of models, Musk’s company Tesla quickly overtook the competition to become the world’s biggest carmaker by market capitalisation.
Much like Musk, I follow the same blueprint when it comes to ideas. This strategy led me to start and sell two companies for more than £150 million, after discovering a very basic form of E-cigarette on an unsuspecting stall in a Chinese trade fair. My business partner and I helped this innovative idea catch fire and despite going against popular thought at the time, subsequently transformed the lives of smokers and the smoking-related diseases they could otherwise have had.
Important and world-improving innovation is all around us, we just need to ask the right questions and trust the right sources to find it. At all costs, avoid being completely customer obsessed as this will almost certainly result in a startup or new product failure. Be intuitive, people do not always know how to articulate their needs. As innovative entrepreneurs, we need to do this for them. Not only that but we should be confident in doing so.
Chrls Lord was the most prolific UK inventor in 2019/20 with more patents filed in his name than any other individual in the UK, totalling over 800. He's build two life sciences companies with a combined exit value of $170 million.