The Amazing ROI for Voice of the Customer
Some would say that investments in Voice of the Customer are “too expensive and time consuming.” After all, does it really make sense for employees to spend time on VoC projects? For them to be on the road, interviewing customers? Instead, shouldn’t they be doing things that “drive sales?” Like working more shows? Assisting sales professionals with customer demos? Helping customer support with current issues?
Well yes, your product management and marketing should be doing Voice of the Customer work. And no, if they do not have time to properly gather customer needs, they should not be spending more time helping sales and support. When a business merely dabbles in VoC, it’s because the leaders do not understand the true potential nor what it takes to succeed. For those willing to pay the price, the hidden rewards are amazing.
When a business merely dabbles in VoC, it’s because the leaders do not understand the true potential nor what it takes to succeed.
The potential is tremendous because VoC returns are asymmetric and non-linear. To realize these returns, a business must invest in a large number of executed projects, and allow for sufficient time.
Voice of the Customer Investment Returns are Asymmetric
The opposite of asymmetric would be symmetric. To understand symmetric returns, think about a sports bet that you might place with a friend. You bet $10 on the outcome of a baseball game. You’ve wagered $10, so that’s all you can lose. But it’s also all you can win. Your losses are capped at a max of $10 and your potential gain is also capped at $10. This is “symmetric” because the potential gain or loss is the same.
However, you would have the potential for an asymmetric return with your friend if you bet just $1 against his $10. You only have $1 at risk and with some luck, you could win 10x your investment.
Voice of the Customer investments are like this second case, asymmetric. Your company can only lose the time and money spent. It can’t lose more. But, behind the power of your distribution and capabilities, the gain from a successful new product could be 100x, 1000x or 10,000x the original investment or much, much more.
Voice of the Customer Investment Returns are Non-linear
To understand non-linearity, let’s make sure that we understand linearity. Linear means that you could plot the input versus output, and the result would be a straight line. If a product manager spends one hour supporting sales, let’s say that this helps move one additional unit. If this is a linear relationship, then your product manager could spend 10 more hours and expect to assist in selling an additional 10 units. With 100 hours, an additional 100 units and so on. It’s linear. One additional unit per hour spent helping the sales force.
A unit of time spent understanding customer needs generates something far more valuable: a unit of customer insight.
But what if we spent that same amount of time to understanding customer needs? Peter Drucker reminds us that “The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself.” A unit of time supporting sales moves an additional unit for which we have a profit. But a unit of time spent understanding customer needs generates something far more valuable: a unit of customer insight. To create a pipeline of new products or to launch an entirely new product strategy.
And like any endeavor of learning, the knowledge builds upon itself. The more a company commits to becoming a learning organization, the more it will profit from each additional insight. This is hard to grasp for our linear-thinking brains, which probably explains why B2B companies substantially under-resource VoC.
So, what is required for VoC success? To realize great rewards, we must execute many projects and allow enough time for the harvest to arrive. (And a bit of VoC training is a good idea as well!)
Voice of the Customer Success Requires Many Executed Projects
Imagine that a business only conducted a single VoC project. Perhaps they even called it a “pilot” as they consider it as an experiment to verify if “VoC works.” But if the single project does not result in a massive new product success, then what? What was learned? Was the investment wasted?
Executing a single project is like planting a single apple seed. If it doesn’t germinate, what would you conclude? That “seeds do not work?” That “agriculture doesn’t work?”
A Game of Numbers
Instead, they should have planted lots of seeds. If they’d planted 500, nobody would care if seed number 73 or number 481 germinated or not. It would only matter that enough grew out of the ground. The world has randomness and luck. Sure, the odds are in our favor with VoC, but that only matters if we play the game enough.
Mathematics guru Edward Thorp innovated the process of card counting in blackjack. It turns out that by counting cards, a player can actually beat the dealer by changing strategy based upon what cards remain. In the course of a blackjack session, the gambler may still win some hands with poor odds and lose some with great odds. But in the long run, the actual probabilities prevail, always. And in New Product Development, we put the odds in our favor when we commit to Voice of the Customer as a way of life.
But in the long run, the actual probabilities prevail, always.
In short order, the inputs to our product development funnel will become a list of unmet customer needs rather than our internal ideas. Then we can release our engineers to solve real problems that customers care about. Resulting in new products with superior value propositions.
But first, we must add a critical element of success, time.
Voice of the Customer Success Takes Time
If VoC benefits were immediate, then every company would be committed. But despite all their financial models, leaders do not seem to understand the power of compounding. Or at least, they don’t understand that Voice of the Customer investments work this way. I can’t invest in a stock today and expect to retire from the appreciation tomorrow. I can’t begin a new exercise routine today and expect to compete in a triathlon tomorrow. Einstein taught us that “Compound interest is the eighth wonder of the world. He who understands it, earns it… he who doesn’t… pays it.”
Part of “understanding it”, is the awareness that compounding takes time. Sometimes, lots of time. And it takes steady investments along the way, with the understanding that the fate of any single investment is irrelevant. It’s the overall return that matters.
A Tale of Two CEOs
Imagine that our B2B company is actually the previously mentioned apple seed business. Our CEO’s name is George. To generate more apple seeds to sell, George begins with a question, “How many seeds are in an apple?” Then, noting that there are five per apple, he begins his business by buying apples to procure the seeds.
Meanwhile, the CEO of a competing apple seed business, Phillip, understands the power of asymmetric and non-linear investments. He also understands the power of compounding, and that it takes time to work. Phillip asks a different question, “How many apples are in a seed?”
In the short term, George seems to have made the better choice because he actually has seeds to sell. Phillip has none. Poor Phillip only has saplings across his green acres. What good is that? However, the future does come. Soon, Phillip has many trees. In which, each tree will produce 500 apples per tree, which in turn can create 2,500 seeds per year, which in turn can create 1,250,000 apples per year, which in turn can produce 6,250,000 seeds per year, etc.
Phillip’s business explodes beyond what even he could have imagined. Meanwhile, George still has a small business of buying apples and selling seeds.
An Opportunity for Competitive Advantage
Small thinking, small business. Big thinking, big business. If we’re spending all our time supporting current sales, with no time spent understanding customer needs, we’re buying apples for seeds and forgoing a more profitable future. We can even use reasons that seem plausible such as, “We’ve got to boost profits to meet our EBITDA goal.” But this is just what George would say. In the name of EBITDA, George would also cancel all Voice of the Customer training. He would insist that product managers spend their time working shows, performing product demos, and answering field questions. He would cancel VoC initiatives, customer visits and current market research projects. Or worse, he’d just postpone some of these activities. “Worse” because it creates confusion among the ranks as to what the priorities really are. If we’re going to be short-term focused, let’s at least be honest enough to admit it.
Great News for Innovators and Stockholders
This bigger scenario is all too common. And it’s great news.
Why is this great news? Because so few understand that Voice of the Customer provides asymmetric and non-linear returns, making these excellent investments in the form of tools, training, and people. And even for those who do, most remain frustrated with poor results because they don’t plant enough seeds, or they don’t have the patience to let them grow.
It’s absolutely great news. It’s fantastic news. It creates an opportunity for lasting competitive advantage. For the wise. For the enlightened, for the aggressive, for the patient companies who care enough about their customers to solve their most painful challenges. In return, customers will reward them with a prize valued by stockholders everywhere, an amazing ROI.