Peter J Thomson

Net Promoter Score: A metric for love?

A client of mine recently wanted to do a written customer survey. I’m usually allergic to these generic and prosaic insight-free-zones. But Jeremy Moon from Icebreaker recently put me onto a metric called the “Net Promoter Score” that might actually be worth testing for in a customer survey.

Net promoter score in action — Icebreaker prides itself on measuring and managing word of mouth.

Jeremy is an independent advisory board member of Better By Design which is the design and innovation team within New Zealand Trade & Enterprise. He has always been a real inspiration to me because of the integrity of the Icebreaker merino products and the passionate tribe of fans that the brand attracts.

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Commercialising your Intellectual Property

Intellectual property is the heart of an innovative business. I’ve been mentoring a couple of technology start-ups on how how to take their ideas to market.

IP for startups — For an idea to be profitable it needs to be bought to life.

The sad fact is that no matter how good your intellectual property is, if no one can buy your product, then you don’t have a business, you have an empty “invention”.

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Using social media for new product development

Customer research using online tools — Social media is one of the most powerful ways to understand your consumers.

The traditional ways for a brand to communicate range between television, print campaigns, advertising and PR. All of these traditional communication efforts use design, language and flow through the normal communication channels.

Social media demands a totally different approach.

In essence, the traditional approaches to communication were one-way. A brand or business created content, infused it with key messages and expressed it through channels out to the customers. The new media channels are much more about two-way conversation.

Listening before talking

The way to encourage a brand to take the step from a one-way communication thinking into two-way communication is to really get the business and the brand to start listening. In fact, my preference would be for a brand to really become obsessed with listening so that it infused throughout the culture of the whole business before embarking on any new media.

I really want to see the senior management team, marketing team, communications, and PR all involved in listening to customers. Particularly, the new product development team, design and engineering all need to be really listening to users in:

informal ways through focus groups and end user observations
formal ways such as user surveys, feedback forms, and warranty claim analysis.

I’ve found that once you get a business listening to their customers (and to their end users) then starting to have a two-way conversation is much easier than asking a brand to go straight from one-way communication into two-way communication.

What can you learn from Apple, if you’re not Apple

Apple is often used as a case study for brand consistency, design identity and technological innovation and even for end-user centred innovation. The dirty secret of Apple’s brand is that they really don’t listen that well. Maybe they don’t have to (certainly no one can doubt their success), but as a model for other companies to learn from I would actually be looking much more at a company like Harley Davidson in terms of their engagement with their customers.

Apple has website feedback forms, they have user forums and they have the ability to provide feedback on their software built into the software itself. All of these are useful but they don’t get used, at least as far as we can tell, to drive new product development in the same way as a company like Harley Davidson which creates new products genuinely based on customer feedback and customer ideas does.

Apple regularly takes an intuitive leap beyond customer feedback, which is great if you have Apple’s design team. But if you don’t, then I’d suggest you start by listening to your customers more closely.

If you are going to be listening to your users, and observing their behavior to derive insights then you will need a new set of tools that go beyond normal market research. It’s likely that you’re going to need to adjust the culture of the whole organisation to be more customer centered. This may take some time but is almost always worth it.

Tools to listen

This really highlights the overlap between social media and new product development based on end-user centred design. A practical focus for your company could be to run through 3 steps when you start getting into social media:

The first step is to diagnose exactly where you are up to across the organisation in terms of your online presence.
The second step is to identify the key goals that you want to achieve using social media. Think in terms of consumer engagement, increased sales and/or increased customer retention.
And the third thing to do is to set priorities in terms of online presences and particular websites or web tools that are going to use.

Getting these 3 things sorted is going to help start off your brand down the track of building a conversation rather than a cacophony where only one side is talking.

Note: This post was dictated into my iPhone while having a coffee at one of the hidden cafes in Melbourne’s cobbled side-streets. It was transcribed in the UK by a virtual assistant from elance and the photo was taken by a local Melbourne DJ.

The difference between marketing and design

Marketing and design a very different mindsets and professions. I’m guessing that both your company’s marketing and your design probably sucks. But then again so does everyone else’s. It’s been driven to blandness by a combination of focus groups that couldn’t “get” your new idea, repeated changes from your management team, internal squabbles and old ideas left over from a time when advertising spend equalled market success. But maybe there is an even deeper problem…

What's the difference between design and marketing — The difference between marketing and design is the focus on the end-user as an individual.

The difference between marketing and design isn’t obvious. They’re different professional disciplines but the real difference is in the mindsets that they bring to approaching a problem.

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Business Model Strategy: One widget at a time

The whole of your business model can be analysed by imagining one widget at a time. Usually, design thinkers and product managers want to wait until a new product is in the market before testing the financial impact that it has had on the business.

Business planning — William Stout Architectural Books, in San Francisco for DMI conference.

I’m proposing that for your new product development projects that you include an accountant in your early team and that as part of the story-telling process you include financial models of how the new product would work for the business.

Continue reading Business Model Strategy: One widget at a time

Five cubicle grenades about design

Using design thinking in your business is all about organisational culture. To change culture, you need to change conversations. To change conversations you need a conversation starter or maybe a “social object”.

When was the last time you talked with someone in your organisation about ethnography, deep empathy, future thinking, prototyping, end-user focus or niche marketing? A great way to start these sorts of conversations is to drop a cubicle grenade which prompts a story or a question. Try this:

Print one of the cartoons below on an A4 sheet and put it somewhere visitors to your workspace will see.
Talk to people about it, ask them what they think of it, ask them what they think of the idea behind it, tell them about why it matters to you, how you found it or who made it. – Tell them a story.

“Cube Grenade” is a new word for an old idea. An object or picture that prompts a meaningful conversation. Each of the cartoons below have the potential to prompt conversations about design thinking, stories about users, a narrative about your brand, insights and even empathy:

1. The Hughtrain:

2. Quality:

3. It’s not what the software does:

4. Wolf vs. Sheep:

5. Dinosaur:

These cartoons are all by Hugh Macleod. Hugh is a seriously talented copywriter, artist, strategist and creative business person. I’m pretty excited about his “end-user cause” based approach to marketing Stormhoek Wines (and other clients like Microsoft). In future posts we’ll come back to Hugh’s work to look at how you can use the design thinking tools of empathy, research, prototyping and story-telling in more and more creative ways.

Hugh has recently invited readers to use twitter to suggest which of his cartoons are their picks for publication as fine art prints. You can tweet him your thoughts at @gapingvoid.

Of course, all the images above are absolutely copyright to Hugh MacLeod. You should check out his blog to find out more about how you can use, share and enjoy his work.

Easiest way to value your intellectual property

You might not want to hear this, but if you can’t put a dollar value on the benefit of your design project then you may not have a project at all. You may have a registered trade mark to protect your brand design. Maybe even a patent or design registration to protect your product designs. But how much intellectual property is there really in your business? And how much is it worth?

In previous posts we’ve mentioned accurate but hard ways to value your intellectual property using financial analysis. There is also a fast and easy way of valuing intellectual property. I call this approach Naked Valuation™ because you are going to compare your business to a similar business without your intellectual property.

This technique will help you make the business case for design thinking more easily by quickly providing additional economic evidence that investment in design will increase the value of your business. To get started, ask:

“If I copied all your land, buildings, equipment & machinery, and then employed dozens of well trained but totally inexperienced laborers to do your jobs. Then what can you do today that they couldn’t do?”

The answer may well tell you a lot about where the real intellectual property is in your business.

Asking yourself this question about the comparable “naked” business will often bring up the value of relationships, channels to market, designs, production problems you’ve solved, trade secrets, tweaks to your systems and even deep knowledge by a couple of key staff.

Whether it’s product design, brand design or innovation processes. Each time you invest in design you are going to add value to the assets that are hardest to copy. It may seem easy to replicate intellectual property such as a physical design or a logo but once you realize that the IP is infused into every element of your business its easy to realize how hard it is to replicate.

To perform a Naked Valuation™ on a product instead of a business, simply identify the value of an asset with the trait that you are valuing and compare it to a similar asset without the trait. For example:

Coca Cola sells for $2.69 for 1.5 litres at my local store, the private label store brand sells for $1.39 for the same volume. A value on intellectual property of 48% of the total price.

A 2009 Lexus ES sells for $41,000 whereas a Toyota Camry from the same manufacturer with the same design sells for $32,000. To be fair the Lexus includes upgrades that if added to the Toyota would cost around $3,000. Even so, the branded premium is still $6,000 or 15% of the total price.

A nice New Zealand Sauvignon Blanc will retail for $30 whereas an unbranded “cleanskin” version of the same wine could sell for as little as $10. For a brand and reputation value of 66% of the total price.

There are lots of other reasons for these price differences and the total return on intellectual property is a function of both price and volume. Even so, the insight remains… to get a quick test of the value of a piece of intellectual property, look for the nearest substitute without your intellectual property and compare the economic value of the two.

Metrics to help you build the case for design

The big consulting firms (McKinsey, Booz Allen and BCG) would all love to get you to use more metrics to analyse innovation. Partly because it allows them to apply their existing left-brain analytical skills to your right-brain creative design challenges. Everyone has their own take on the role of metrics in design. Whatever side you take there is a lack of easy metrics that you can use to quickly explain to your CEO and CFO why design is important to your company’s growth.

Below are the top 5 metrics that you can pick up today to benchmark your business against your competitors. These are not the only metrics but they are the ones that you’ll be able to use to make a strong case for investing in design:

1. Vitality Index

Sales from products created in last 3 years / Total sales

2. Contribution margin

(Sales – Direct costs) / Total sales

3. Return on assets

Net profit before tax / Total assets

4. Brand value

Expected net annual cashflow from your branded products / Your target annual return on investment percentage

5. Return on intellectual property

Total sales / (Market capitalisation – Physical assets)

Warning, these are not measures that you will be using to manage your design process. Later on, we’ll cover metrics such as delivery in full on time as specified (DIFOTAS), Return on innovation investment (ROII), Time to market (TTM) and a whole host of activity measures.

Next week we’ll calculate the numbers for these metrics for a couple of example companies so that you can compare your own performance.

Slides to help you build the case for design

Frog Design, Ideo, Stone Yamishita — I’ve learned a lot about presenting complex ideas from watching how design firms pitch themselves.

Powerpoint is a dangerous tool. Nevertheless, it’s useful to see how the top design and innovation firms describe what they do. Below are examples of how these design and innovation firms present to a general business audience. A couple of them were made for specific events so don’t get too distracted by the detail.

You can certainly take your time with them but the goal is to absorb an overall picture of what would work for yourself to use as a tool in describing your own work to your CEO, CFO, engineers and even the marketing team.

Adaptive Path: Subject To Change: creating great products and services for an uncertain world

Frog: Design In The Age Of Convergence

Ideo: Design Thinking

Stone Yamashita: The Worlds Largest Innovation Lab

Each of these presentations is a different take on the core issue of how we describe end-user centred design, design processes and design thinking to a business audience. Which do you feel are the best and worst?

Forecasting for new product development

It’s hard to forecast the impact of a new product on the whole business, but it’s important to try.

Each of the levers in the post on accounting for design will affect key parts of your company’s financial statements. To convince the CFO of the value of your project you’ll be forecasting scenarios based on the proposed investment in research, design and innovation. These scenarios can be as simple as guessing the number of units that you will sell of the new product or as complex as full financial models of the entire organisation based on discount factors for out-years.

If your CFO is seeking basic forecasts then your financial analysis of the project will be persuasive. If however, your CFO asks for scenario plans and mock-financial statements then you’ll want to enroll the help of a sympathetic accountant or financial analyst.

The first question that person will ask you is would you like your forecast “bottom up” or “top down”? The right answer is “both”.

Bottom up forecast start from your existing production and supply. They then build up to forecast the possible future sales.

A top down forecast starts with the potential market demand and builds down to answer the production and supply that would be needed to meet that demand.

The flaw of bottom up forecasts is that they are often boring and do not build a sufficient case to invest in break-through innovation. We see this most often in clients as, “We grew at 10% per annum for the last five years so I guess we’ll keep on doing that.”

The flaw of top down forecasts is that they risk being “pie-in-the-sky” and ignoring the organisation constraints. We see this most often in clients as, “The Chinese market for this product will be USD$10 billion so we only need to get one percent of that and we’ll have a run-away success.”

Work with your ally to create forecasts that both stand robustly in the present and aspirationaly in the future. The most powerful technique we’ve met to achieve this is future-casting five years ahead aspirationally and then looking back from there brutally to see each step involved.

The second question your sympathetic accountant will ask is: “How are we going to account for the non-cash impacts of your project?” The safest answer at this stage is “We’re not.” Any brand benefits from a new product should be treated as a windfall.