ON A RAINY DAY IN NEW YORK CITY, Travis Kalanick and Garrett Camp couldn’t get a cab. They quickly realized that trying to get a taxi in the rain was a horrible experience. The duo went on to found Uber, which became one of the most successful unicorns in history. If you haven’t heard the term ‘unicorn’ before, it applies to private companies worth more than $1 billion.
If you’ve got an idea for a business or a product, this could be you. Or you could be like the founders of Napster or Pets.com — famous failures that came close, but no cigar. The thing is, at the ‘idea stage’ there isn’t much of a difference between huge successes and ignominious failures.
I like to think that each of you has an idea that, if targeted effectively and nurtured properly, could grow into being the next Facebook or Alibaba. But you have to realize that your current idea for a business is very unlikely to be the one you end up going with. And it’s even more unlikely that your current idea will result in a company worth billions. What you actually have is the foundation of an idea — something that can point you in a particular direction.
If you listen very closely to what potential customers are saying, they will tell you what business you are in. In life as in business, the difference between listening and not listening is the difference between success and failure. The thing about customers is that they don’t talk very loudly. In fact, sometimes they don’t talk at all. They won’t tell you what they want or what you should create, or what triggers them to make a purchase. They also won’t tell you what barriers get in the way of them making a particular purchase. They might not even know that what you have is something they need.
In life as in business, the difference between listening and not listening is the difference between success and failure.
This is why we can’t listen passively to customers. We need to engage with them and ask them the right questions. The big issues are what questions to ask and how to interpret the answers. You can’t ask your mother whether something is a good idea, because chances are that she loves everything you do. And you can’t go out asking friends and work colleagues if they like your product or company idea; chances are that most people will say Yes because they don’t want to hurt your feelings.
What you need is a framework to help you listen to customers, to understand what triggers them, what barriers stop them, and how they view your company and the competition. You need a framework to help you understand how customers think, what they feel and how your idea relates to their lives.
But before we get to that, let’s look at what goes wrong when you don’t listen closely.
The Reason for Daunting Failure Rates
Every product or company starts with an idea. The problem is that most of those ideas are likely to fail. Thirty thousand new products are created in the United States every year, and there is a 70 to 90 per cent failure rate.
Ford’s Edsel, the company’s most public failure, has become known as the biggest product flop of all time. Launched in 1957, the vehicle never lived up to expectations. One of my favourite new product failures is disposable underwear. No, seriously, that was actually a thing back in 1998. Launched by Bic, which is better known for inexpensive pens, this attempt at diversification never did catch on.
The story for start-ups is pretty much the same: 75 per cent of all start-ups fail; and only about a quarter of venture capital-backed start-ups succeed. Coming up with an idea for a new product or business is fraught with difficulty, even for successful inventors. James Dyson made 5,126 attempts to create his vacuum; and Thomas Edison had over 1,000 failures before he perfected the light bulb.
What is going wrong here? Why is there so much failure in the world of innovation? Is it just part of the innovation process, or is there something that can be done to improve the odds?
There are five fundamental reasons why new products fail:
• The company can’t support fast growth;
• The product falls short of manufacturer claims and gets slated;
• The new product isn’t sufficiently differentiated from the competition;
• The product defines a new category and requires substantial consumer education, which for whatever reason, doesn’t happen; and
• The product is revolutionary, but there is simply no market for it.
Of these five reasons, the last three relate back to the original idea. If the idea is flawed, the product will be in limbo, hard to explain — and will find no market.
Let’s think about the Ford Edsel and Bic’s disposable underwear. Both were launched by reputable companies and had a lot of marketing support, including up-front research, but they failed anyway. In Ford’s case, it launched the car into a space with considerable competition at a time when consumers were turning to smaller cars due to an economic recession. Fundamentally, the idea for the Edsel was flawed from inception, and nothing could make up for that. As for Bic, what was it thinking? There has never been a market for disposable underwear, and people don’t want to buy underwear from a pen company anyway. Bad, bad idea. Simply put, the developers of both products failed to understand what would trigger a customer to buy and what barriers would prevent them from doing so.
As for why new start-ups fail, it’s pretty much the same thing. CB Insights did some research on 101+ start-ups and found that 42 per cent failed because there was no market need. Products and start-ups are failing for the same reasons, and it’s mostly to do with market need.
Where Big Ideas Come From
I’ve tried to figure out how people come up with ideas to see if where the idea comes from has any bearing on its eventual success. In doing so I’ve come across a whole bunch of ways that ideas germinate:
• EUREKA MOMENTS
The myth of a Eureka moment is just that: a myth. Eureka moments don’t just happen but are born from long introspection and a seemingly random collision of disparate ideas. Isaac Newton didn’t just figure out gravity when he was hit by an apple from a falling tree. No, he had been working on the issue for a long time, and that long internal process made him receptive to a solution that seemed to present itself all of a sudden.
• TECHNOLOGICAL DEVELOPMENTS
The advent of the Internet was a technological breakthrough that spawned thousands, if not millions, of products and company ideas that were not possible without it. But before that, a young entrepreneur named Steve Jobs was looking for ideas to follow up his recently developed Apple II computer.
When he and one of his software engineers were given a tour of Xerox’s Palo Alto Research Centre, he had a chance to see what was being developed there. To say that he got quite excited would be an understatement. In fact, at the end of a demo, he started leaping around the room and shouting himself hoarse. That demonstration sparked a complete change of thinking in him and led to his introduction of the graphical user interface for computing. Just try and imagine life without that today.
When you think about it, the idea wasn’t even Jobs’, but his understanding of customers — and Xerox’s failure to do so — enabled him to capitalize on a technological breakthrough.
• YOUR OWN PROBLEMS
Stewart Butterfield, the founder of Flickr, launched a new gaming company called Glitch that eventually went under. However, while he was developing Glitch, he incidentally developed software for internal team messaging. When Glitch failed, Butterfield started to see the potential for team messaging and created Slack, an application that has grown into another unicorn. The irony is that Flickr itself was created from a failed gaming company that needed photo sharing. In two cases, Butterfield launched successful products based on things he himself needed. And both times he launched these as a result of failed companies that came out of other ideas.
The need-recognition phase starts with a trigger that results from a change in the buyer’s circumstances.
• COMPETITIVE PRODUCTS
Google started its life as a research project at Stanford, undertaken by Larry Page and Sergey Brin. At the time, search engines, of which there were many, ranked results by counting the number of times a search term appeared on a page. As you can imagine, you could easily game a system like that to improve search rankings. Page and Brin figured out that a better way to rank search results would be to analyze the relationships between sites, to see how many sites linked to each other, and to rank the importance of pages linking back to that site. In short, Google was started as a response to the failures and shortcomings of its competitors.
Chip Wilson, founder of Lululemon, had been in the surf, skate and snowboard business for 20 years when he started getting into yoga. These were early days, but to Chip, it looked like yoga would be a good wave to ride. At the time, cotton was used for yoga apparel, and this seemed completely inappropriate to Chip,
whose specialty was technical athletic fabrics. So he started a studio to design yoga wear. That was in 1998, and 22 years later, the company does over a billion of annual revenue — all from a growing trend in yoga.
• OTHER PEOPLE’S PROBLEMS
IBM is actually the combination of three separate businesses. One of them, the Tabulating Machine Company, had been in the business of leasing machines for tabulation to a railway company. But they saw one other problem that they knew needed to be solved. The 1900 U.S. Census was the biggest statistical challenge of the day, and IBM’s predecessor won a government contract to build a new machine to tabulate the results. In short, IBM became a successful company by listening closely to other people’s problems.
Understanding Triggers and Barriers
Before going any farther and looking at why people do or don’t buy new products and services, I will set the stage by looking at the stages that consumers — both corporate and individual — go through before finally making a purchase. Generally speaking, the process consists of five stages.
STAGE 1: NEED RECOGNITION
Before the buying process begins, buyers often aren’t even aware that they actually need something. They are blissfully unaware of how much better their life would be if only they had your fantastic new product. Then, all of a sudden, something changes and they become aware that they need something. They may have run out of a product, or perhaps there’s a change in their life, or a new regulation has been introduced. Whatever it is, this is the start of the buying process. A need has been identified and the buyer is off to the races.
Take eyeglasses, for example. People buy new eyeglasses for a variety of reasons, but what is it that starts them off on a search? There may be two factors at work here. The simplest one is that they have an eye exam and the doctor tells them they need glasses for the first time or that they need a new prescription. Alternatively, perhaps they’re fashion-conscious; they see a new style of eyeglasses that makes them realize that their current pair are out-of-date. Whatever the case, now that they are aware of the need, the buying process starts in earnest. To summarize, the need recognition phase starts with a trigger that results from a change in the buyer’s circumstances, which causes them to react.
STAGE 2: INFORMATION SEARCH
Now that they know they need something, buyers start to search for information about this need. They will seek answers to a whole variety of questions: Is this really a need? Do other people have the same need? There will probably be many other questions. The buyer might then move on to look at various product features, costs, or how to buy. This is also the stage at which they will come to evaluate the internal and external barriers that could cause them to abort the whole process. For instance, they might find that the new purchase is too risky or that they won’t gain much of a benefit from it. These barriers are what will stand in your way as you try to convince a buyer that really has a problem and needs to do something to solve it. Take the case of eyeglasses. Let’s say a hypothetical potential customer has a new prescription that requires a combination of distance correction and reading lenses. She’s going to look at bifocals, at progressive lenses, or at buying two separate pairs of glasses. She might even look at getting the lenses in her old frame replaced. After weighing her options, she may decide that the change in prescription is not big enough to warrant a purchase now and she might decide to wait a while before moving ahead. In this case, the buying process has been started, the buyer will forever know that she needs something new, but the idea will sit on the shelf until the trigger becomes stronger or the barrier becomes weaker.
STAGE 3: THE EVALUATION OF ALTERNATIVES
As the buyer goes through the information search, she is simultaneously going through some sort of evaluation of alternatives. To get to this phase, she has to decide that the triggers to buy are stronger than the barriers that prevent a purchase. Having decided that, she will start to look at various alternatives. For you, the seller, this means that she is going to start comparing you to your competition. That could be an existing supplier, a whole new batch of potential suppliers or somebody offering a completely different type of solution. Whatever the basis for comparison, this is where you’ll need to be differentiated competitively in order to succeed. If you are new to the buyer, you’ll need to wow her with something that is totally different (that is to say, better) than what others are offering. Your difference could be in quality, in speed of access, or just in cost. Whatever it is, you’re going to have to really stand out to get the buyer to pay attention to you. In her search for new eyeglasses, our mythical buyer will first have to decide on some specifics: whether she’s looking for low cost or something stylish; whether she wants something that’s available quickly or if she’s happy to wait a while for the right pair. Once she has figured that out, she’ll have a basis for comparison that will enable her to narrow down her choices. If she’s going for style, for instance, she’ll probably look only at stylish frames and compare a number of brands before coming to some general decision on her final few choices.
STAGE 4: THE PURCHASE DECISION
Having decided to go ahead with a purchase, a buyer now has to take action. She will now decide when to buy and who she is going to buy from. Maybe she’ll want a trial purchase. She’ll try to figure out what other issues go along with the purchase and what types of other decisions she’ll have to make. She might try to negotiate the price and other terms and conditions, and in the process, she’ll get closer and closer to a final purchase. Then, bingo! All of a sudden, it’s done. Whether it’s because the vendor was good at closing or because the buyer decided to go ahead on her own, the deed is done and you, the vendor, better have been the chosen one.
STAGE 5: POST-PURCHASE BEHAVIOUR
So, it’s over, right? Not quite. The final stage is the post-purchase stage, where the buyer goes through a complete evaluation of the purchase and whether or not it met her needs. She’ll look at her expectations and consider and decide whether she feels she got value for her money. And she’ll look at how the actual purchase was handled and whether she will use the same vendor again. For you as a vendor, this stage is important if you want to have a repeat customer. What you don’t want is a one-hit wonder that might visit your competitor next time. That is no way to build a business.
If our legendary eyeglass buyer bought progressive lenses, it’s going to take a while to get used to how they feel when walking. She’ll worry about the new fit of the glasses and whether they slide down her nose. And, perhaps, she’ll be looking at whether anyone notices the new glasses and compliments her on them. All of this information will lead her to a set of decisions regarding what she’ll do next time.
With nothing to trigger a purchase, the product was left in the hands of technology enthusiasts.
Not every buying process is identical, but buyers generally do go through these phases. This really is important to you as a vendor: If you know how a buyer comes to a purchasing decision, you can take the necessary steps now, when you’re designing the product, to make sure that your product is responding to appropriate buyer triggers. And you can ensure that customers have the ability to get over the barriers.
Google Glass is perhaps the best recent example of a product that ignored triggers and barriers. The product caught on with a small number of technology enthusiasts, exactly as one might expect for as radical an innovation as a head-mounted, wearable computer. But it provoked a firestorm of protest about privacy rights and the surreptitious recording of private conversations. Google Glass users became known as ‘Glassholes’. There were safety concerns about driving while ‘Glassing’, concerns about a Wi-Fi signal inches from your brain, and all sorts of other problems.
But perhaps the biggest issue was that Google never explained what problem it was trying to solve. While the product was accepted by tech enthusiasts, I’d guess that even visionaries had a tough time seeing any long-term benefits in it. Certainly, the pragmatists didn’t buy in because they couldn’t figure out how they could benefit from it. Put simply, the product’s failure came down to triggers and barriers. The first problem was that there was nothing to trigger either visionaries or pragmatists to purchase Google Glass. There was no long-term vision that could be achieved through using the product, and no obvious problem that could be solved by purchasing it. With nothing to trigger a purchase, the product was left in the hands of enthusiasts, who just like trying things out for the sake of trying things out.
It is entirely possible that Google itself was just trying something out and this wasn’t a true product launch; after all, Google Glass was only released as a Beta version. But I don’t buy that. I think what happened is that they fell in love with their own creation. Even the most successful company in the world can launch a product that fails, simply because it doesn’t understand triggers and barriers.
In a recent blog post, Y Combinator co-founder Paul Graham writes:
“Why do so many founders build things no one wants? Because they begin by trying to think of start-up ideas. If you look at the way successful founders have had their ideas, it’s generally the result of some external stimulus hitting a prepared mind. The verb you want to be using with respect to start-up ideas is not ‘think up’ but ‘notice’.”
I myself have noticed that the best ideas tend to come out of conversations with potential customers — with people who would actually pay for something in time or money. When founders fail to consider triggers and barriers, they stray from creating something that someone would pay for. And they risk creating a lousy product.
is a Senior Fellow with the Impact Centre at the University of Toronto and the author of Triggers and Barriers: A Customer Perspective on Innovation
(Narwhal House Press, 2019). He has been an officer, director or investor in several dozen technology companies and was co-founder and CEO for 15 years of Synamics, a telecommunications software firm.
This article appeared in the Winter 2020 issue. Published by the University of Toronto’s Rotman School of Management, Rotman Management explores themes of interest to leaders, innovators and entrepreneurs.
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