Obtaining a deep understanding of customer needs is central to any new product development process. Over the last decade tools and techniques for obtaining customer intelligence in B2C industries have become increasingly sophisticated. Digitalisation now provides a vast reservoir of hitherto untapped analytical data, and customers are becoming increasingly engaged in the design process itself.

Companies in B2B industries, on the other hand, have a much narrower base of customers, many of whom have regular personal interactions with their suppliers. This interaction should make the process of understanding customer needs more straightforward.

Arthur D. Little, together with the Eindhoven University of Technology, conducted in-depth interviews with over 30 product development leaders in 15 companies across multiple sectors to identify effective approaches to gathering, understanding and synthesising information related to customer needs.

In this article, we review the highlights from the analysis and offer some guidance to help companies organise their customer-needs intelligence teams. Our research showed that most companies tend to either use a one-size-fits-all approach, or else approach the situation with ad hoc arrangements.

However, the research also showed that ‘getting it right’ can lead to doubling of innovation success rates and have significant impact on R&D effectiveness. This is something B2B companies cannot afford to ignore.

Four approaches to organising teams for customer-needs intelligence

First of all, it is helpful to consider what sort of typical organisational approaches companies choose when their R&D and commercial functions interact with customers. Four typical approaches are commonly used: Expressed customer needs, latent customer needs, expressed technology needs, and latent technology needs.

The ability to identify latent needs and translate them into concrete product requirements can be referred to as ‘solution design skills’. Different situations call for different solution design skills, and the availability of the right solution design skills is of critical importance for effective needs recognition. Because latent needs are highly dependent on context and difficult to tease out of data sets, product development practitioners must be familiar with effective approaches to identifying latent needs and know when to apply a given approach.

Choosing the optimum organisational approach

The four approaches described above can be mapped to the four quadrants of a ‘Customer needs/technology needs’ matrix.

Expressed customer and technology needs – indirect single-channel approach

In the simplest situation, both sets of needs are clear and applicable to a broad range of customers. In such cases it may not be necessary for R&D to have direct contact with the customer, and a single commercial focal point with the appropriate solution design skills may be sufficient.

Expressed customer needs, latent technology needs – direct R&D approach

Here, the customer needs are clear but the technology needs are not. This could occur, for example, when a technically complex product is being developed to order for a single customer. In this situation, an approach in which R&D has direct contact with the customer may well be the most suitable, especially if the customer also possesses the technical competence to engage in the design process.

Latent customer needs, expressed technology needs – indirect multichannel approach

In this situation the customer needs are not clear at the outset, although the technology requirements are known. This might be the case for, say, a major product revamp in which there are a number of different customers with differing needs, while the technological aspects of the revamp are relatively simple and known. Here, a heavier approach led by commercial functions, such as sales and marketing and potentially service, may be the most suitable.

Latent customer needs, latent technology needs – hybrid approach

Here, a customer need has been identified but the solution is unclear in terms of both commercial and technical aspects. An example could be a complex new product opportunity that would be developed for a key customer and then rolled out to a broader range of customers. The solution design skill set for this situation is often varied, and a truly cross-functional team approach is often most suitable. The main downside of such an approach is the risk of miscommunication with the customer, and managing the multiplicity of goals.

Key success factors in making it work

The approaches detailed above and their applications may seem relatively straightforward. However, the study showed that in practice few of the sample companies actually followed these optimal approaches, and most were unsatisfied with their current efforts. Analysis of the most common shortcomings revealed five key success factors: avoid ‘one-size-fits-all’ approaches, ensure good knowledge sharing, be responsive and adopt regular customer interaction, deploy the right resources, and understand internal competency needs.

Impact on innovation success

How important is choosing the right approach in terms of innovation success? As part of our research we asked companies to categorise recent new-product development projects in terms of whether they used the ‘optimal’ or ‘non-optimal’ organisational approach, and whether these projects were ‘successful’ in terms of reaching their objectives. The results showed that the project success rate was actually doubled by using the optimal approach.

These results are quite stunning. In business terms, doubling the new-product development success rate means making better use of the R&D budget (and a sizable portion of sales and marketing spend too), saving a large part of whatever is now spent on unsuccessful development in both R&D and related customer interactions.

Of course, these savings would only apply to a portion of the company’s R&D budget – highly incremental and explorative research would probably not be affected. A conservative estimate is savings of up to 0.5 per cent of revenues, which provides significant bottom-line impact. In addition, the company would benefit from the increased likelihood that potential block-busters would become true market successes: impossible to quantify in general terms, but an excellent additional reason for companies to ensure that new-product development teams have organisational structure in which appropriate solution design skills enable customer needs to be embedded in new-product development.

This article was supplied by Chandler Hatton, Michael Kolk, Martijn Eikelenboom, and Mitch Beaumont.

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