3a. What is Customer Value

Welcome to another wonderful chapter of product development content!

Weekly Preview:

• Customer value
• What does good product development look like?
• The PD team
• Recap of weeks 1–2, with more great resources

What is Customer Value?

Source. This dude must have terrible eyesight.

Customer value is computed as BENEFITS — COST.

Products are designed to deliver value. That’s why people buy them. People spend money to gain benefits. Customers seek value.*

Remember, value is always relative to cost. Something can be a good value at any cost, depending on how significant a benefit is delivered.

*Important Nerd Note: Customer or Consumer?

These terms do not mean the same thing. The customer is the person who is buying the product. The consumer is the end-user. When your mom buys you a toy, mom is the customer, and you are the consumer. The two words should not be used interchangeably, but sadly, I do interchange them sometimes, especially when talking about the “voice of the customer.” So, for brevity in future posts, I’m going to assume the customer is the consumer unless otherwise specified!

Main Source: Innovation — The Five Disciplines by Carlson and Wilmot (This book explains innovation and product development and focuses on delivering new value to consumers.)

3b. What is Good Product Development?

I think it’s worth noting the desired outcomes of good product development. These may make you say “duh,” but oh well.

• Good product development serves clear objectives and goals — goals which connect to a larger corporate goal.
• Good product development anticipates customer needs.
• Good product development gets to market “on time.”
• Good product development results in a quality product.

Main source: Revolutionizing Product Development Chapter 1 — Steven C. Wheelwright and Kim B. Clark. (This book is a really well-respected book on Product Development, but it’s dense and not for beginners.)

3c. Performance Metrics for Product Development Activities

The last post discussed good product development and accomplishments:

• Serves the organizational goals
• Anticipates customer needs
• Gets to market on time
• Produces a product of sufficient quality

Now, you can accomplish all those things with a process that people find miserable and highly inefficient. Therefore it’s worth describing the qualities of a good product development process, as opposed to just the good outcomes.

Good product development is efficient, fast, and repeatable.

Efficiency makes sense — we should not be spending an inordinate amount of money and human resources on developing new products. Efficiency allows you to develop more/better products with fewer resources.

Speed, or time-to-market, allows you to the ability to get to market quickly if you want (early isn’t always optimal). Speed gives you more ability to stay ahead of your competition and to be responsive to market conditions.

Repeatability is a measure of how robust a given process is. A product development process that only works some of the time is not a high-quality system. A car that only starts half the time is not a great way to get to work every morning.

This expression is not that different than you’ve heard before: “Fast, cheap and good; pick two.” In product development, we strive to achieve all three.

Book: Revolutionizing Product Development — Steven C. Wheelwright and Kim B. Clark

3d. Who Are These People Who Work in Product Development?

This post is LONG (sorry!), and is meant to give you a frame of reference for who works on product development. I find that just describing these roles gives people a clear idea of the development process.

If this email is too long for your morning coffee, chill out, move on with your life, and come back to this later. Don’t feel guilty about it. 🙂

Strategy Team — This team has strategic decision-making authority (duh). What’s that? The strategy makes specific choices to help you win in the marketplace. It’s about deliberately choosing a different set of activities versus that of competitors. This strategy will help deliver unique value to customers and consumers. Developing a product should be an activity that fulfills a strategic purpose, so the strategy team often establishes the context and goals for a product development effort.

Marketing — Marketing’s primary function is to understand the overall market, market segments, and customers. These folks manage the “4 P’s” of Marketing: Product, Price, Promotion, and Placement (distribution). Marketing is typically responsible for identifying product opportunities, helping to specify the product, and they often oversee product launch.

Research and Development or Engineering — In a product company, R&D is typically the team tasked with identifying new technologies and developing products. Sometimes it’s the engineering team that builds products (especially in software), but that practice is not universal across industries.

Design — This discipline focuses on product aesthetics, ergonomics, and user experience (UX). There is industrial design (more focused on function), graphic design (more focused visually communicating a message), and some varieties.

Product Manager — Is the CEO of the product. Often this person cog for all teams. Someone who is responsible for advocating for the consumer within the product team.

Others — There are many roles: manufacturing, testing, quality, operations. Too many others to cover in one post, but are integral to the process.

Below is an example product that everyone is familiar with and the people who would be responsible for developing it.

Product Example: Smartphone

Strategy: Decides if the company is going to sell smartphones in Asia to grow the business segment toward certain revenue targets over the next five years.

Marketing: Determines specifics about the product, e.g., the retail price is $199, the target consumer is non-professionals, the smartphone must be more durable and last longer than competitor products.

R&D: Builds and tests prototypes, engineers the device (computing power, batteries, antennae, materials, etc.), and builds the software.

Design: Designs the size, shape, and color of the device; may design software for usability; may design physical user interfaces (i.e., one button or many).

Product Manager: Coordinates the various groups (“I need software ready for a prototype test in July!”) and provides voice-of-the-consumer guidance (“these users care more about web browsing than editing documents on the phone”).

This idea gives you a better idea of not just who is involved with product development, but the types of tasks each of these teams perform.

Source: Varied, but I think Revolutionizing Product Development — Steven C. Wheelwright and Kim B. Clark has some great content on product teams.

3e. Recapping the Chapter

Two weeks have flown! Give yourself kudos for sticking with the practice and learning more about product development!

This week, we talked about customer value being benefits minus costs.

We described “good” product development outcomes. Good product development serves objectives and goals, is focused on the consumer, happens on time, and with good quality.

You can measure your product development efforts with metrics related to speed, efficiency, and repeatability.

We also talked about the product development team and what each role brings to the table.

It has been a solid week!

To cap it off here’s a great article from Harvard Business Review about customer value: The 30 Things Customers Really Value.

See ya’ next week!