The Press, July 2012
Two North American stars graced our shores last week, one who made teenage girls swoon, the other who had the potential to have a long-lasting effect on our economic prosperity.
While neither his singing-voice or hairdo is as impressive as Canadian pop star Justin Bieber, US marketing expert Rob Adams was preaching a message we must heed if we want a high-tech economy to rival our traditional strength in agriculture.
Adams’ expertise is in helping firms introduce launching new products, a key part of which is validating those ideas in a target market before money, time and effort is spent developing them.
According to Adams, who ran a national seminar series, not enough firms do this market validation effectively, leading to a failure rate of 65% for new products in the USA. The figures are probably similar, if not worse, in New Zealand.
The more you can do to reduce that risk the better, and as New Zealand tries to accelerate its high-tech economy we need to get much better at it. Our government understands that as a country we produce lots of ideas, but sell more of them on a large, international scale.
At least that was the message from last week’s announcement of the new Advanced Technology Institute last week. “The main purpose of the Advanced Technology Institute is to help get our best, most innovative ideas out of the lab and into the marketplace more quickly,” said Science and Innovation Minister Steven Joyce.
Market validation is an absolutely critical part of realising this goal. Too often technology firms get seduced by a new idea and rush to build it before trying to establish the level of demand, or indeed what competition exist. Adams calls it the ‘build it and they will come’ syndrome.
Of course the ultimate validation is customers buying your product, but you have invested huge time, money and capital by that stage. By this time companies can’t afford to fail, and often avoid the potential embarrassment of a market validation process.
Examples of this litter the New Zealand tech scene, firms that limp along for years without achieving any profitable growth, surviving on the funds of optimistic shareholders and government hand-outs. Market validation allows you to either abandon the idea early, or at least focus its development more narrowly to maximise the chance of success.
So how do you validate a market for your idea? Is there a magic formula allowing you to predict the likely success of your clever idea?
No, because in business there is always an element of risk, and because no matter how market-ready your idea, you still need to produce a quality product, price it properly, have the right channels in place, promote and sell it effectively, and provide good after-sale support.
There are a couple of steps that can at least open your eyes to the market opportunity or lack thereof.
First is proving the customer need.
Forget about your product at this point, instead try to understand if there is a compelling, urgent problem customers would be willing to pay good money to solve.
What are the issues and challenges they face, and what ways are they solving those now? Is there an opportunity for new ways of addressing this issue?
This part of market validation is often overlooked. It involves gathering objective information from the market to increase confidence that the problem you are targeting is big enough to invest in.
Second is testing your actual solution at an early stage. Getting some marketing material together and pitching it to a sample of potential customers to gauge their level of interest, their typical objections and the buying process they might go through. For many technology products a lot of this can be done online, and the responses easily analysed.
A simple piece of magic underlies all of this validation activity - talking to ‘real’ people i.e. potential customers and other players in your target market.
Any credible market validation project must include objective market interviews. Often it only takes a dozen or so conversations to start gaining a very clear picture – but it must be done. While face to face interviews are best, conducting interviews by phone is adequate.
It’s easy to gather information on the internet (market research studies, industry analyst reports, media articles) to support just about any business case, but you gain a much richer insight talking to people. You start to understand the challenges they face, including the emotional drivers that mean for no logical reason they might never buy your product, regardless of its ingenuity. The Bieb gave us some excitement last week, but it’s the likes of Adams that will give New Zealand the skills to succeed as ’ideas people’ on a world stage.
Which is a lot more exciting in the long run.