Tailoring IT to the needs of customers

Few IT-based products and services are really a byword for intelligibility, let alone unalloyed customer satisfaction

Information Technology (IT), as it is applied in new products and services today, often lacks the power fully to convince customers of its true benefits. This article describes an approach to new product development which starts from real customer needs. The approach can also help companies to decide how to build the right kind of portfolio of information technologies for the future.

Since the collapse of the Berlin Wall and the end of the Cold War in 1989, and during the subsequent recession, many of the pillars of Western society have run into a crisis of public legitimacy. Advertising and branding, banks and governments, the United Nations and the welfare state: all have suffered a loss of respect. Even Information Technology (IT), it seems, may be subject to the same fate.

Certainly the decline in the mainframe computer, the troubles of IBM and a tough buyers’ market in hardware and software point in this direction. But, in fact, the legitimacy crisis of IT goes wider than the computer industry. Across a number of industrial sectors, there is evidence that the application of IT to products and services no longer enjoys all the popular support that it once had. IT has yet to be tailored to meet the real needs of customers— whatever demographic group they hail from.

Attitudes to IT

In Britain, Henley Centre research across 2000 customers shows that while 41 per cent of 45-59 year olds are not confident in using a computer, nearly double that amount—77 per cent—do not believe they need a computer at all. The figures are even higher for people over 60 (see Figure 1). Older people are just not convinced of the benefits of using computers.

Older people are not persuaded that IT will do their lives very much good. Yet the same people, when asked whether they think it is important to learn about computers, answer in the affirmative. It is not that they suffer from ‘technofear’. They are all in favour of computers. Personally, however, they see no need for them.

When we look at the number of British people who use cashpoint machines at banks, we find that women are conspicuous non-users of IT. More than 40 per cent of the women between 45 and 59 do not use cashpoints, and more than 70 per cent of women over 60 do not use them.

On the other hand, Henley research across 7000 consumers in Europe suggests that IT does not always endear itself to men. Broadly, European men have more contact with and liking for IT than European women. But despite all the IT that has come into domestic appliances over the past few years—in washing machines, ovens, even vacuum cleaners—men still spend little time cleaning and cooking (see Figure 2). European men enjoy consumer electronics in the lounge, but are not enthusiastic about ‘producer electronics’ in the kitchen or laundry room.

Young people are both enthusiastic about IT and critical of it. Adept in using electronic products, young people supply the computer world with most of its hackers and its viruses. Through movies (Robocop, The Terminator), magazines (Mondo 2000, Wired) and novels like William Gibson’s Neuromancer, many young people have come to believe that IT is more of a force to be mastered and overcome than a simple tool for liberation.

We get a glimmer of this in Henley research on young people’s use of remote control units and TVs. In Britain, more than one in every five 16-24 year olds uses a remote control unit to watch two TV channels simultaneously. They can see the advantages of infra-red remote control; but they are not satisfied by what they see on TV. They are demanding consumers. Tomorrow’s multimedia industry will not just have to work hard to ensure that the West’s ageing population ‘goes interactive’; it will also have to meet the growing expectations of the young.

People are not hostile to IT, but they often feel ambiguous about it. If older people think ‘What’s the point of computers, what’s in them for me?, younger people think ‘I can do it better, I can triumph over the system, I can be even better at handling IT than the people who made it in the first place’.

From photocopiers and printers to cameras and ticket machines, we have all encountered problems with IT-based products. Equally, the application of IT to services has not always been a success with customers.

Missing the Point: IT-based Services

With the help of IT, banks have installed enormous ‘customer information systems’ over the past few years. But to most consumers, this term would be greeted with some scepticism. Few believe what banks are telling them about how closely they value their relationships with their customers. In 1994, typical bank statements still contain abbreviations, calculations and charges that are hard to understand.

It is obvious to many consumers that the financial services industry, like utilities and local government, has been undergoing a whole wave of computerization. However, the benefits of this process to customers are by no means certain. An example is direct mail, an activity which is reliant on IT but one which seems to target many consumers with unerring inaccuracy. When an insurance company tries to sell a consumer the wrong kind of product for the third time, the impression can be left that all its recent IT investments have led to a loss of control, rather than an increase in precision.

If we look at expenditure on direct marketing in different European countries, and at the percentage of EU consumers agreeing, in Henley’s 7000-strong survey, that they welcome companies sending details of their offers through the post, it emerges that the more that is spent on IT-based direct mail, the less people welcome it. Our statistics show that in The Netherlands and Germany, where expenditure on direct marketing is high, people are rather disdainful toward direct mail. In the Latin countries, where mailshots are for the moment rarer, people are prepared to give this kind of IT-based service more leeway (see Figure 3).

As with direct mail, so with airline ‘frequent flyer’ programmes. Again these are backed by extensive IT, yet they seem designed to maximize customer irritation.

Because it offers new capabilities, IT can solve old problems. But it can create new problems, and can become a major source of customer dissatisfaction. The managerial and human resources tangles which surround the introduction of new IT systems in the service-sector workplace – when the ‘customer’ for IT is not a consumer, but rather an organization – confirm our thesis.

Whatever the recent improvements in service-sector productivity which have been achieved by IT, often under programmes of Business Process Re-Engineering, there has been, since the 1980s, a certain disillusionment with what it can really offer. IT has

• put more decisions in the hands of front-line service staff—but whether they are genuinely ’empowered’ is doubtful: as Malone and Rockart point out, upper-level managers have retained or even increased centralized control over decisions, and visibly use IT to survey those made by juniors; (1)
• led to concerns, in the workplace, about security, privacy, and health issues;
• signally failed to reduce working hours.

For the service provider as much as for the service consumer, the purchase and use of IT can be a boon, but also a mixed blessing.

How then should companies more properly integrate IT into their strategic planning? How, above all, can companies incorporate into new products and services the kinds of IT which deliver palpable customer benefits, and which can begin to close the credibility gap IT often has with its users?

Some Japanese Rules in New Product Development

Tomorrow’s new IT-based products and services are very hard to subject to market research. Ask most people whether they would like this or that gadget or service, and the answers are unlikely to be too revealing. Few planners, let alone consumers, can precisely conceive what a full-cable cable/multimedia offer in the home might look like, do, or cost. People have very little experience of the products which they may encounter in the next few years. Market research has its place, but on its own can contribute little.

We believe that the approaches of Akira Okamoto and Fumio Kodoma, two Japanese authors, offer a starting point for seeing how IT might best bring tangible rewards in new products. (2) Both authors suggest that the investigation of future customer needs demands special resources. On the other hand, both recognize that research-led competence in particular Information Technologies can independently lead managers to successful new products—without them engaging in what Okamoto calls a ‘needs-oriented process’ of enquiry and discussion.

At Ricoh, Japanese makers of office automation equipment, Okamoto says that research into customer needs is first performed by planners, who make an analysis of social and technical trends, and write scenarios (as in ‘Mr R’s morning in 2001’) so as to generate hypothetical products. Then R & D staff break the best hypothetical products down into technology themes which deserve research in the laboratory.

Kodoma recommends something similar. He notes that while ‘technology strategy traditionally has emphasized the supply side of technology development’, what is now required is ‘a technology strategy that works from the demand side’. In that context, Kodoma recommends ‘demand articulation’, a two-step process of translating market data into a product concept, and decomposing the concept into a set of R & D development projects.

The Henley Centre’s own methods of new product development (NPD) provide a number of specific tools with which to build upon the ideas put forward by Okamoto and Kodama. Below, we look at the development of new consumer products and services.

A Needs-based Approach to NPD

With corporate clients, the Henley Centre has an approach to NPD which goes through a series of divergent and convergent phases in order to maximize creativity and minimize, partly by quantitative methods, market error.

Phase 1: The ‘Big Picture’
We start by looking at the ‘Big Picture’ surrounding consumers in general, seeking to spot future trends in society, technology in general, and IT in particular. In this opening, divergent phase of our work, we seek to map out, as objectively as possible, the broad shape of consumer attitudes, behaviour and circumstances over the next 10 years—mindful of, but not confining ourselves to, the realm of IT or the particular product domain in which the client is interested.
We use

• worldwide economic, political, industrial and technological forecasts,
• market forecasts based on the traditional categories of consumer income and expenditure patterns, type of household, location, gender, etc.

The effect is to give a qualitative and quantitative account of the broad context of consumer needs in the future. The phase is essential if there is to be any kind of precision in the sort of scenario-writing described by Okamato.

We use what Kodoma describes as ‘market data’. But we are not trying to arrive at a product concept yet. Note, too, that our focus, being ‘needs-oriented’, is on demand-side factors above all. So though we want to predict what microprocessor speeds will be available in the year 2000, that is because we want to discuss the products and services which will become possible as a result. We are interested in the practical, price-sensitive launch, diffusion and user modification of IT, not in IT by itself.

Just as we abjure technological determinism, we insist on supplementing the traditional techniques of market analysis with the following concepts:

Cohorts, Lifestages and Zeitgeist
Tomorrow’s attitudes, behaviour and circumstances can each be analysed by looking at consumers in terms of the period of their formative years: for example, ‘the Depression, 1929—1939’ or ‘The Craze for Videogames, 1990-1995’. Such groups we name cohorts, in which people go on to take the experience of a particular era with them for life.

Tomorrow’s consumers can also be analysed by lifestage. Here, concepts of childhood, adolescence and retirement are very much more fluid than they were in the past. Particularly with regard to users of IT, they must be handled with great care.

In addition to psychological and demographic profiles of the future, we also consider the current and future Zeitgeist—literally, ‘the spirit of the times’. This is an aspect of consumer experience which is specific and which, unlike experiences subject to cohort effects, is not historically transferable.

A partial mosaic of the Zeitgeist surrounding particular years to come can be built up by gathering data on forthcoming events. Anniversaries, general elections, international sports fixtures, films and television specials planned for production—all these can be firmly predicted, and will be some of the messages carried by IT in the future. They will have a significant cultural impact on consumers.

Customer Buying Systems
With each product, it is possible to isolate widely differing ‘moments of truth’ which surround the customer’s experience with the product:

• hearing about or seeing the product for the first time,  
• the decision to purchase,
• the process of product research and comparison,
• the purchase transaction, and
• installation and service.

Our concern is to delineate precisely the paths by which these moments will be reached in future, and to show how, at each point, consumers’ needs can best be met. This is largely a discussion of media channels and messages, and increasingly one of IT-based media and messages.

Time Use
Here we study, in hours and minutes a day, the changing composition of people’s work, leisure and family life.

Of growing importance in time use studies is time spent commuting or reaching leisure destinations. One of the effects of the coming spread of ‘mobile IT’, in the shape of wireless phones and handheld computers, may well be to help work make further inroads on leisure time. Through understanding exactly how consumers will re-arrange their schedules, we can uncover more texture in our attempt to excavate future needs.

Hierarchies of Needs
In every market, there are certain factors which firms must offer in their products if they are to pass the threshold of competition. On the other hand, there are other factors which go one better than allowing the supplying firm to play in a game, in that they allow the firm to win that game. They are the factors, above a certain threshold, which confer competitive advantage.

By erecting a hierarchy of consumer needs below and above the threshold of competition, and by estimating how the rankings in such a hierarchy will change in the future, it is possible more easily to specify the kinds of features and values which will be necessary in a new product. In IT products in general, for example, we expect that adaptive interfaces – interfaces which adjust their presentation according to what they recognize and learn about their users -will appear at the top of the hierarchy in years to come.

Confidence, Knowledge and Interest
Consumers bring different amounts of confidence, knowledge and interest to different product markets.

Compare, say, aspirin with camcorders. Considering these factors is vital if IT products are to be designed in line with real consumer needs.

Across most product groups, confidence is strongly correlated with frequency of use. But with IT, it also appears, confidence can be negatively correlated with product sophistication. People in Britain, for instance express plenty of confidence in handling the humble phone, but are only ‘fairly confident’ with PCs and word processors (see Figure 4).

Material Culture and User-centred Design
Humanity makes technology, but technology also makes humanity. In this respect, tomorrow’s behaviour, attitudes and needs are shaped, in part, by material culture – by the artefacts, historically accumulated and newly marketed, which we see, hear and touch around us. The rise of ‘Cyberpunks’, people who prefer jockeying around computers and networks to more traditional pursuits, is vivid testimony to the effect IT has already had.

Planners also need to take into account the way in which potential users of new products are moulded by their previous experience of artefacts. With new products everyone approaches them with a mental map, based on previous interactions with other products. User-centred design is a set of principles for making sure that New Product Development (NPD) takes these fundamental consumer needs into account. (3)

Phase 2: Opportunity Identification—the Idea of Modes based on Different Occasions of Use
In this second, convergent phase of NPD, we switch from generalities to the particular product domain in which the client is interested. Our bridge for this manoeuvre is the idea of ‘modes’.

Conventional market analysis allows some insights; but our preference is to look more closely at the mode in which the consumer finds himself on particular occasions of use. At an airport, for example, a passenger can use IT in ‘familiar business trip’ mode, ‘panic’ mode and so on. We define a mode by the interaction of three factors:

• the physical and design context of the environment in which the product or service is used;
• the social situation which surrounds use;
• the ‘mental set’ consumers bring to use.

We now use this idea of modes to shift from the Big Picture into Opportunity Identification.

Our treatment of modes and occasions is informed by the belief that

• people today have more, more differentiated and more intense needs than ever before,
• the same individual can exhibit very different needs at different times of the day, and
• very different individuals can often demonstrate very similar needs.

We start from the consumer trends that surround the specific product domain under review and go on to characterize and quantify the number of occasions of use, by year, which are bound up with these consumer trends. This allows us to identify opportunity areas worth exploring, by establishing a few top consumer modes of use.

It would now be a short, but facile step to draw out, from these top modes of use, top NPD candidates for further assessment – the particular kinds of IT-based products which will most quickly build a mass audience of ‘early adopters’. But this can only be done after a third, divergent phase of investigation.

Phase 3: Concept Development
The bridge to this third, divergent phase of NPD is the idea that a comprehensive specification of needs around the top modes of use we have identified must still precede any and all attempts to specify products. Indeed even the category ‘products’ may subsequently prove unjustified, in that needs may be best fulfilled by services. This is especially the case in IT.

Through brainstorming, market research, ‘clinics’, field research and direct collaboration with users, we therefore generate long lists of the consumer needs associated with our top modes of use. Then, based on these needs, we hone a much shorter series of NPD candidates for further investigation.

Our bridge for passing on to Initial Concept Quantification is the idea of clustering needs to generate a few core species of products and services worthy of further consideration.

There will inevitably be rather different kinds of users associated with the products and services generated so far. These users will be cast in segments, each of which will want particular variants of the IT product. For example, some business PC users will want a joystick to enable them to play games with their machines. The idea of clustering is to bring together, in a few core product species, the maximum number of different user segments’ product variants, but with a minimum of compromises in terms of functionality, price and design.

This work of clustering done, we can now examine each product species more closely.

Phase 4: Initial Concept Qualification
So far, we have pursued the process of NPD in terms of searching for good product ideas. We now want to see just how good these ideas are – to gain some sense of the size of them.

In our fourth phase, we converge once again. In this phase we take into account a number of very real constraints on what is technologically and economically feasible in NPD. The procedure involves:

• Using market data to make quantitative estimates of the size of the full potential universe of users for each of the different product species we have identified.
• Using our Big Picture analysis of needs to award subjective ratings to the future prospects of each particular potential product.
• Using the idea of modes to multiply the likely frequency of use of product by the gravity of the need it fulfills. This subjective measure we term the intrinsic value of the product.
• Using industrial and technological forecasts to construct a derivative of intrinsic value by comparing each of the products offered to its competition – in the widest sense. How well will both rival products, and unaided human faculties, compare with each of the products planned? This second subjective measure we call term the competitive value of the product.
• Using economic and pricing forecasts to construct a derivative of competitive value by comparing it, across each of the products offered, to product prices. This gives a subjective measure of the value for money bound up with each product, and thus a measure of rate of likely market take-up.

From the five factors listed above, it is possible to establish just how good an idea each of our NPD candidates is. Also, because this process of initial quantification is performed before going out to fullscale market research, it can save companies a lot of unnecessary spending. It can ensure that the right questions are asked in market research. It can also lay the basis for marketing and product design strategy.

Building the Right Competences in IT: the Example of Cars

A special merit of our needs-based approach to NPD is that it can be used to unveil the kinds of IT which, if researched early and on their own account, are likely to generate new products that enjoy rates of take-up so favourable that their appliers can gain short but sweet ‘technological rents’ from them.

Which Information Technologies should firms be in? The question is relevant not just to the IT industry, but to others. The race is on to ‘convert automobiles to electronic products’, argues Toyota’s Toru Sasaki, who also notes that how much investment should be made on IT in new car development is one of the most important items in corporate decision making. (4)

Kodoma rightly argues that tracking the technological performance of rivals is essential. Firms need formal and informal intelligence on, and technological benchmarks from, both direct and indirect competitors. (5) They also need to form cross-industry alliances. Kodoma makes a strong case for the selection of Information Technologies which ‘fuse’ with other disciplines, such as optics (to form optoelectronics), entertainment (to form multimedia) and mechanical engineering and materials (to form mechatronics).

If Kodoma is right, there will be competitive advantage in fundamental research. Moreover R & D efforts will have to be centralized, so as to get round parochial boundaries of product division and technological discipline. At the same time, every line manager will be expected to contribute insights on how technologies can usefully be combined.

Our work for a major supplier of IT-based automotive products, however, shows that a needs-based approach to NPD can give still clearer guidance on the organization of R & D. For this client, we first of all outlined the big picture in relation to future consumer attitudes, behaviour and circumstances, paying particular attention to the future of cities, public transport, journey portfolios, security and safety. Then we focused on the automotive product domain in particular. Even in Japan, we suggested, the agenda in cars will move further toward interior functionality and away from the styled exterior, or fashion statement. People would spend more time in cars, as congestion mounted. Their concerns would be more realistic in future.

Looking at the dynamics of driver and passenger behaviour, we isolated three major modes of car use. In each of these, manufacturers and service providers had only just woken up to the opportunities for transforming the car as a living and working environment. When we came to brainstorm the consumer needs which will ‘open up the space inside the car’, it was easy to come up with a wide range of surprising ideas.

In the clustering these needs together, we came up with about 15 NPD candidates worth reviewing. In turn, we found that these 15 products stood upon a total of seven distinct technology platforms. Some of the platforms we came up with in the automotive project did not centre on IT, but rather suggested the kinds of partner our client might seek strategic alliances with in future. Other platforms, such as mobile telecommunications, were already the subject of R & D by the client. Still other platforms for example, technologies with which to counter noise in the car – were not the subject of R & D programmes by our client, but shortly will be. That is because the products which relied on this particular technology came out well in our Initial Concept Quantification.

A significant spin-off from our needs-based approach to NPD is that it can highlight, for any company, what are likely to be the main elements in its optimum portfolio of Information Technologies in the future. This spin-off effect applies just as much to the development of new services as to manufactured products.

Conclusion

Loss of faith in technology has coincided with recessionary tendencies in the past. In 1929, for example, the ‘computer trading’ of the day, in the form of the tickertape, was widely blamed for bringing about the Wall Street Crash. (6) But this time there is something bigger and different on the horizon.

People are no longer certain that every supplier of IT-based products or services is in control of its business. Too often, today, governments appear out of control. The same has recently seemed to be the case in genetic engineering. Why then should more doses of IT necessarily lead to a healthier, more controlled system? Anyone who has had the privilege of a mobile phone cutting out in mid-conversation will know that IT can compound chaos as much as reduce it.

Of course, many people understand very well that it is not the fault of computers that things go wrong. As the old saying goes: rubbish in, rubbish out. Nevertheless, more than 10 years after Peters and Waterman enjoined the management world to get ‘close to the customer’, few IT-based products and services are really a byword for intelligibility, let alone unalloyed customer satisfaction. (7)

Large, established corporations are not always adept at tailoring IT to customer needs. ‘Supply-side push’, the predilections of particular researchers and the prejudices that are born of departmental structures, can all too easily dominate the process of NPD, to the detriment of ‘customer pull’.

Considerations of space and confidentiality prevent us from going into further detail about our methods of clarifying the future of customer needs in IT. Nevertheless, we think that a mixture of creativity and rigour in describing and weighing these needs, and in evolving the product analogues to match them, can do much to help companies avoid expensive NPD flops, find NPD winners, and lay out definite avenues for R & D.

(1 ) Thomas W. Malone and John F. Rockart, ‘How will IT reshape organizations? Computers and coordination technology, in Stephen P. Bradley, Jerry A. Hausman and Richard I. Nolan, Eds, Globalization, Technology and Competition: the Fusion of Computers and Telecommunications in the 1990s, Harvard, (1993).

(2) Akira Okamato, Creative and innovative research at Ricoh, Long Range Planning, 24, (5), 9-16 (1991); Fumio Kodoma, Technology Fusion and the new R & D, Harvard Business Review, July-August (1993).

(3) For more on user-centred designed, see John Seely Brown, Research that reinvents the corporation, Harvard Business Review, January-February (1991); and Donald Norman, The Psychology of Everyday Things. Basic Books (1988).

(4) Toru Sasaki, How the Japanese accelerated new car development, Long Range Planning, 24(1), 17 (1991).

(5) See also on this point Robert G. Eccles, The performance measurement manifesto, Harvard Business Review, January-February (1991).

(6) See J. K. Galbraith, The Great Crash 1929 (1954), Pelican (1975).

(7) See Tom Peters and Robert Waterman, Jr, In Search of Excellence, Basic Books (1992). In his latest work, Peters has gone back on his doctrine of ‘close to the customer’, being more keen to stress the good in ‘downsizing’ companies. See his Liberation Management: Necessary Disorganization for the Nanosecond Nineties, Knopf (1993).