Last week I saw a tweet from Oracle OTN architect Bob Rhubart pointing me to a post from the Jake Kuramoto at Oracle AppsLab entitled “Do users want innovation?” [Editorial note: in the rest of the post I will refer to “users” as “customers”. I think the psychological implications of how you look at the people who buy your products – users = necessary evil, versus customers who you value – is important…at least to me.] Now without reading the full post, my initial reactions was: “users want value. true #innovation usually = value. But most new features masquerade as innovation but not valuable.”
I thought I’d take the opportunity now to amplifying my thought, especially after closely reading the Oracle blog post.
Too Much Energy Used to ‘Keep the Lights On’
Kuramoto rightly points out the tension in every product development organization: how do I effectively split my resources between:
- fixing yesterdays problems (fixing bugs)
- adapting to environmental factors (e.g. updates to code for regulatory changes)
- finishing what you started (features that didn’t get into the current release); and
- introducing honest-to-goodness innovations.
According to a number of different research sources, the cost of ‘keeping the lights on’ (the first three bullets) can take up in excess of 80-90% of R&D budgets. That’s a terribly inefficient use of resources (especially in this economic environment). It ties up resources that would be better used to build tomorrow’s next hit product and adds to margin pressures. More importantly, it’s not seen as valuable by customers and doesn’t add value to the company – yet it’s where software companies spend most of their money. These are things that you have to do, but don’t really have much impact on existing customers’ satisfaction or increase the perceived value they’re getting from what they bought. Yes you’re fixing bugs, but they didn’t want bugs. They wanted software that worked in the first place! And more importantly, none of these activities really help attract new customers. Already today many enterprise application companies are looking at Maintenance : New License revenue ratios of 4:1 or higher. If companies could just convert, even 5% of R&D expenditures to truly innovative, new product development imagine the impact on new license sales and margins.
You Can’t Ask Users to Tell You What they Want
There’s another aspect of the AppsLab post that troubles me. Kuramoto writes: “So, we yearn to push the envelope and experiment with new technologies, but all our users really want is incremental improvement.” There are two elements to this statement that I want to address:
- The first part of the sentence reads as if “innovation” is about experimenting with new technologies. First let me say that I’m a big fan of experimentation…no matter the subject…and feel that it’s an integral part of developing innovations. But I think the statement misses a crucial point about innovation. The biggest innovations have much less to do with technology as they do with behavioral change. The VCR (or for those of you under 25, the DVR) was a huge success because it enabled viewers to record and watch shows when it was convenient for them, not because they were looking for a replacement for 8mm video to watch home movies. Technology is often an enabler of innovation. But in the software industry too often the focus is on the technology for it’s own sake, so be sure that you’re stepping back and re-evaluate what you’re doing in terms of meeting your customers’ needs. This is probably also a good time to differentiate between inventions and innovations. An invention is a new idea, concept or product, but doesn’t have any intrinsic value. An innovation is an invention that you can monetize. If you can’t monetize it, it means that no one sees enough value from the idea to spend money on it and therefore you shouldn’t either. If you’re consistently wasting time working on things that no one wants to buy, that should tell you something.
- The back half of the sentence is the other aspect that product managers need to think about. Of course your product’s current users want minor changes that they may have seen on a competitors’ product or something that is an obvious extension of how they’re using your product today. Most users of any product can’t see three feet in front of themselves or at least can’t readily articulate what they really want. So to say that “users really want incremental improvement” doesn’t mean that they don’t want innovation. I go back to my tweet: Users do want innovation because innovation usually means a significant improvement in the value that they get from the product they own. But incremental improvements (I’m not even sure that people should use the term incremental innovation anymore – it’s oxymoronic) don’t meet that threshold. So you need to interpret what changes in behavior will mean for the way they want to use your product. Look at how they are using your product (and not using it), don’t listen to what they’re telling you. Especially with SaaS/Web/Cloud-based software, there’s reams of clickstream data that can give you insight to what users want to do.
I think the AppsLab post draws the wrong conclusions from the examples cited, such as Facebook and the integration of social technologies into enterprise applications (nee Enterprise 2.0) . Facebook’s (and similarly Twitter’s) dramatic success was due to the way that these applications allowed people to interact and engage with others (of similar interests or long-lost friends). The backlash against Facebook’s redesigns had more to do with the fact that they forced new behaviors and a small element of re-training that seemed to provide no additional value to them (not to mention the associated TOS and data ownership issues).
So I encourage all product managers, CTOs and heads of R&D to find a way to put more resources towards true innovative enhancements to your products and don’t get intellectually trapped by the things your customers vocalize. Similarly don’t get trapped by waiting for the mega idea. Clayton Christensen coined the term ‘disruptive innovation’, but not everything has to be truly disruptive to be valuable. If you think that you have a great idea go for it. Otherwise you’ll be stuck with empty marketing messages promoting “new and improved” features masquerading as innovation. It doesn’t often work in consumer packaged goods and frankly most tech buyers are much more knowledgeable about the technology they buy for work versus the laundry detergent they buy at home (Can any of you tell me why Tide is better than Cheer? I have no clue).
But you can’t wait for your customers to tell you what innovation is. By the time they do, your competitor has already built it. The truth is that for most of your customers, innovation is like the judicial definition of pornography…they will know it when they see it – and the market will reward you for it.