How product managers can create authentic demand
Today we are visiting the topic that is at the heart of this podcast—creating products customers love. To do that, we are joined by one of the co-authors of the new book The Heart of Innovation: A Field Guide for Navigating to Authentic Demand.
Our guest is Dr. Merrick Furst, a Distinguished Professor and the Director of the Center for Deliberate Innovation (CDI) at Georgia Tech. In 2011, he founded Flashpoint, a first-of-its-kind deliberate innovation studio, to develop formative leaders and exceptional technology startups. Both at Flashpoint and at CDI, Merrick works with hundreds of founders and innovators and is developing the discipline of Deliberate Innovation. He has also personally founded eight startups. He received his PhD in Computer Science from Cornell University.
Summary of some concepts discussed for product managers
[2:37] One of the aspects of your book, The Heart of Innovation, that caught my attention is the diversity of the four authors—four innovation experts from the startup world, large enterprises, nonprofits, and academia. How did that impact what the book addresses?
Many of the ideas in the book came from my work and the work of my business partner, Matt Chanoff. We created and ran a program called Flashpoint at Georgia Tech, and we learned some counterintuitive but super useful things. In the context of doing pure startups, we were unencumbered by being part of a large corporation. The difficulty for a startup is how you become of value. We realized what we learning was applicable way beyond startups.
One thing we learned is it’s hard to figure out the difference between invention and innovation. We determined a successful innovation is when people set out to do something and it continues beyond them. It doesn’t stop when they get bored or when the money runs out. It actually becomes part of the world.
Matt and I were thinking about writing a book, and we wondered who the audience would be. People told us this kind of material and way of thinking affected their whole lives. It wasn’t just they were able to raise money or be successful in business. It also changed their relationships with their spouse and kids. Additionally, this material was for the people doing innovation inside corporations. I asked my friends Daniel Sabbah, who ran software for IBM, and Mark Wegman, who is an IBM fellow and member of the National Academy of Engineering, to write a book together. We wanted to tell stories about startups, large and medium enterprise innovation projects, and how individuals can innovate in their own lives.
The hard part was taking four people who have very strong opinions and different stories and writing a book that is easy to read. We had very intense conversations. We started the conversations with reminding ourselves of the purpose of the conversation, and then we discussed the facts we could all agree on.
The thing that kills most startups is building products that customers are indifferent about. People say, “I could buy it or I could not buy it.” To be successful, you have to created something that people can’t be indifferent to. That’s the heart of the problem. You see that problem in its purest way in a startup. It’s important to ask yourself, “How is it that my customers are able to be indifferent? How can I create something in such a way that they are non-indifferent?”
[10:00] What’s an example of a product customers are not indifferent to?
Coca-Cola is super successful because everyone drinks a certain amount of liquid every day. Coke’s problem is to maintain a share of the liquid that is bought every day. If your customers find themselves in a situation in which not buying is not okay, that’s non-indifference. If not buying is okay, they can be indifferent to your product, and that kills business.
At the beginning of every successful business, there must be some non-indifference. As companies get big, they forget what was causing the customer to not be indifferent and they start to look at other things.
For example, IBM was in the disk drive business, and people were not indifferent to how dense the disk drives were. They made more and more money because their engineers kept increasing the disk drives’ areal density. When giant magnetic resistance was discovered, IBM thought it would enable them to be the absolute dominant leader by allowing them to achieve greater and greater areal density. They invested heavily in that, and the market collapsed before them because EMC figured out you can get reliability in a different way. You could put really cheap disk drives into RAID and manage the data storage with software. Greater areal density was actually not related to reliability. IBM thought they were about creating greater areal density, but they had forgotten they were about creating greater reliability.
[14:30] What is the difference between accidental and deliberate innovation?
Let me first tell you about accidental innovation. My friend Jim Balcom went to Harvard Business School and became interested in startups. He became business partners with Yang Ding, who was living on a lake in Eufaula, Alabama, and built fish-finding sonar for recreational fishing. He called it the Hummingbird Fish Finder. Jim spent a year doing everything they teach you at Harvard Business School, and they got the business to $6 million a year in sales. At that point, Yang Ding died, and Jim found himself having to run this company.
Jim tells this terribly painful story about how he had nine new product introductions and every one failed. They thought the entire market was $53 million, and they could not budge from $6 million. They were about to go out of business.
Here’s the accidental innovation: Sue Simons, a woman who worked for Jim, was in a bass fishing shop, and she saw a woman reach for a Hummingbird Fish Finder. She asked, “Would you mind telling me why you’re reaching for a Hummingbird Fish Finder?”
The woman said, “This weekend, my husband is going to make me go out on the boat with him. He and his buddy are going to be in the back of the boat. They’re going to get drunk, and between me and my friend, we’re going to have four kids, and they’re going to drive us crazy on the boat. I thought if I bought a Hummingbird Fish Finder, my kids would have something to play with on the boat.”
When Jim heard this, he realized he was not in the fish-finding business. He was in the entertainment-on-recreational-boats business. He went back to his team and said, “You’ve been asking people how to make a better fish finder. They’ve been telling you they want to know where the bottom is or they want to see little fish. Forget all that. Make it as big as a TV screen. Make it visible in daylight. Make it multicolored.”
They did all that, and the first year sales was $75 million in what they had thought was a $53 million market. The second year was $125 million.
How was Jim supposed to figure out he wasn’t in the fish-finding business? He should have asked, “Is it okay to not find fish?” If it is not okay to not find fish, you’re not getting drunk in the back of your boat. For recreation, it’s okay to not find fish. But it’s not okay to not have a good time on your boat.
Deliberate innovation is doing this sort of innovation intentionally instead of relying on accidental innovation.
[19:16] How do you recognize authentic demand?
All the tools like iterations and market research make sense if there is authentic demand, but they don’t tell you what demand is. Founder are often in a waking dream about what customers want, like Jim thinking he was in the fish-finding business or IBM thinking they were in the business of creating greater areal density on their disks. Everybody says to go find things that customers want, but this won’t work. There are many more things you want that you don’t buy than there are thing you do buy. Instead of finding wants or needs, answer, “What is not okay to not have?” If there’s an alternative that’s okay, you don’t have authentic demand. You can build the product once you have identified products such that it is not okay to not buy them, a not-not. Deliberate innovation is deliberately identifying not-nots.
[26:53] How do you create authentic demand?
Creating demand has nothing to do with the product. Seeing people’s reactions to products does not work to discover authentic demand. To understand why, listen to this story. A young woman is walking home from her job, exhausted. The front door bursts open and the cutest little girl runs out and says, “Mommy, I made you a mud pie!” The mother says, “Oh my, that’s the most beautiful mud pie I ever saw! I can’t believe you knew I wanted a mud pie!”
In that situation, every person is acting completely authentically. But the little girl would be making a serious error if she thought there were any other mothers in the neighborhood who wanted a mud pie, or if she thought her mother wanted a mud pie tomorrow.
One of the startups I started sold a product that would save companies on the internet a lot of headaches and a lot of money in fraud. I knew the chief information security officer at eBay, and he said our product would say eBay $40 million a year in fraud. I said it cost $150,000, and he didn’t blink. I went home, and we made the product. Six months later, we went back to eBay, and they were very excited, but they never bought. It would save them $40 million and cost $150,000, but they never bought.
There was nothing in my interaction with the chief information security officer that indicated authentic demand. I was like the little girl in the story, and he was like the mother. We were friends, and he was excited about something I was showing him. There was no authentic demand. I wish I had asked him if there are ways eBay could save $40 million. My guess is he would have listed three or four other things, none of which he was doing. By making something that could save $40 million, we were just one more thing that he also wasn’t going to do.
If you want to know whether there’s authentic demand, you can’t do it by showing people a product.
[27:14] How do you know if it’s not okay for someone to not buy?
You’re not looking for someone to make you feel good that they might buy. Give the potential customer a chance to buy, and if they don’t buy then not buying was okay, so you didn’t have a not-not. You can ask potential customers, “Suppose you don’t buy. Is that okay?” It’s unbelievably difficult for human being to ask this question. The potential customer acts like they don’t want to make you feel bad, so you don’t ask them questions that make is possible for them to make you feel bad.
I might convince a customer to buy because I’m present, but all I did was create a situation in which not buying from me was not okay. That’s different from finding a situation in which not buying the product is not okay.
The work of the innovator is to figure out what about the customer situation makes not buying not okay.
[30:33] Sometimes people think they need to find a problem that is big enough to be worth solving. How do you reflect on that?
Sometimes product managers ask people what their biggest pain is. The problem is, there are a lot of pains people live with. Bigness is not the important thing. What’s important is whether not doing something about it is okay. You want to see your customers so clearly that you see where they’re already impelled to go, and you see how they can’t get there because there is something restraining them. Your product removes the restraint. They reach for your product because they were already going that way anyway.
You don’t have to look for really big problems. Instead, ask yourself, “Is not reaching for something okay?” If it is not, then you can find a way to make the thing they’ll reach for.
Every person is incredibly expert on their own lives. Every single moment, they’re doing what they know how to do. They’re coping with the world just fine already. How is it plausible that you can do something for them that is meaningful for them, given that they’re already incredibly expert on their life, which you have no idea about?
That’s why innovation is so difficult. Part of the puzzle is walking into situations where there is no current consumption yet there is authentic demand. The answer is, you have to know your customers better than they know themselves. You have to understand how they’re already impelled.
Put the information Merrick shared into action now. Click here to download the Action Guide.
“The place an innovator is called to is the place where their deep gladness and the world’s deep hunger meet.” – adapted from a quote of Frederick Buechner
Thank you for taking the journey to product mastery and learning with me from the successes and failures of product innovators, managers, and developers. If you enjoyed the discussion, help out a fellow product manager by sharing it using the social media buttons you see below.