The Top 5 ways indirect observation can benefit your company:

1. Tap into areas of your customers’ thoughts that are generally unobserved.
2. Make your customers feel that they are playing an integral part in your product development and innovation. A sense of involvement gives customers a feeling of belonging and loyalty.
3. Researchers gain insights with consumer data they might not have expected. More fodder is created for future observation projects.
4. Your company is better able to make its services and products run parallel with your target customers’ wants and needs.
5. Your customers are able to show you their emotional thoughts with product association. This is especially beneficial because typically target customers only reveal their analytical, rational thoughts. The “why” of their purchases is revealed, and thus the foundation of a competitive business advantage is gained.

Source:, “Technology, indirect observation yield insights”, Marketing News, May 15, 2007, Pages 25 and 27

However, it is also one of the most gratifying experiences life has to offer. Creating a new product from scratch means having to think through the technical processes of the product itself. It means understanding, in advance, what need the product fills. It means gathering the investment dollars required to bring it to market. And it means creating and sustaining a business in order to make the product successful in the marketplace. Failure at any one of these stages will doom the product.

That said, if your product makes it, you will change the ways lives are lived. And what could be better than that?

But the company can also make a claim that its longevity is no accident. The company today earns about two-thirds of its revenue from products that are less than five years old. And one of the biggest reasons why is that company is ‘fanatical’ about research and development. “Innovation is about more than invention,” the company’s CEO, Dieter Kurz said in the article. “It is about creating something useful that gives the company an advantage.”

The process that Carl Weiss goes through to ensure a stream of innovative products is as intense as the resources that go into it. Some 1,600 R&D employees bring hundreds of new ideas to its annual innovation conference; about 25-30 of those will be selected for a six-month review process. Those that make it this far then go to prototyping and further vetting. It’s a process that ensures the place of ongoing creativity within the company.

And it has been a big problem to solve. Essayist Peter Georgescu wrote on this subject in the October, 2007 edition of Fortune magazine (p. 74). In the essay, he discusses how over the past decade or so, companies have struggled against what he calls “the cancer of 21st century commerce,” which is the presence of fierce price competition as a way of differentiation to drive market share.

The problem with price competition is that it will, eventually, hit the point of diminished returns. At some point, companies will either have to learn how to make products and services stick out on the basis of what they do for consumers, or face one form of extinction or another.

The essay raises a hopeful note, which is that creativity, far from being an airy skill set, available only to the anointed, can be learned and taught. While it might at times be mysterious, it can also be planned for, cultivated and expected. And in Georgescu’s perspective, it must be for companies that wish to thrive through the rest of the century.

The concept, which was developed by Bain consultant Fred Reichheld, relies on a very simple premise: if you have a sense of whether customers like your product, you will be able to sell more. And so rather than conducting cumbersome, time-consuming surveys, you can get most of the information you need by simply asking them, “would you refer this product to a friend?”

Once you have the answers to the question, you simply subtract the negative and neutral scores from the positive scores, and you have your net promoter score. Net promoter scores have been used by companies like GE, Intuit and even The Wall Street Journal to determine whether or not they are in-line with customer desires.

While it might seem simple, asking just one question of your customer base can produce volumes of information about where to go next to improve products or product delivery. And it is certainly less taxing on consumers to answer a single question rather than filling out a long survey.

What was left undiscussed in these years is the way in which this type of approach – not just to manufacturing, but to all areas of business – actually helps the customer. Obviously, the point is not to try to do more with less for customers by shutting down the call center a half hour earlier everyday because fewer customers call in that last half hour. Quite the opposite. It is about recognizing that additional resources are created through lean processes, and those resources can be devoted to improving the customer experience, either through new product development or even through keeping call center open another half hour later every day.

Thinking lean simply means thinking about optimal leverage, in all your processes, with the idea in mind that ultimately, you are in business to serve customers.

In some respects, of course, this is a positive development. More consumers have been able to afford more goods than ever before. On the negative side, though, the result has meant increasing pressure on profit margin growth for companies. Price competition inevitably reaches a point at which it no longer contributes to the ongoing health of the company.

Where companies have been able to successfully combat this trend, they have done so by getting off the price competition treadmill and on to a path toward innovative new product development. These companies, thus, have changed the conversation with consumers from “hey, I’ll give it to you for 10% less than the other guy will give it to you,” to one that sound much more like, “look at this great new product that will solve real-life problems for you and make your life better. I am the only one who can give it to you, and it’s going to cost you, but it’s worth it.”

Which conversation would you rather be having?

With this in mind, when A.G. Lafley took over the helm as CEO in 2000, he saw that the way out of the struggles the company had at the time was through the portal of innovation. The process he took to do that is well documented in the book, The Game Changer, which was written with Ram Charan. A review of the book can be found in the April 14, 2008 issue of Businessweek, p. 73, “How P&G Pampers New Thinking.

As the article highlights, the distinctive feature of this book is the way in which it provides granular look at P&G’s process, elevating it above the typical philosophizing on the subject of innovation so popular in the press today.

That stipulated, there are things that companies can do. They can learn to think a couple of moves ahead where it concerns consumer wants and needs. The most powerful new concept in product development is “anticipate.” And there is immediate sense to this. Companies must be able to look forward and anticipate demand; they must know their consumers well enough to think ahead on their behalf.

However, by its nature, anticipation requires waiting; which is a pretty passive posture for an organization that must produce positive results every three months of the year, or suffer the consequences. So there is this place where the tenants of great product development hit up against the practicalities of running a modern public business. (Or even a private business; success cannot be deferred indefinitely, even if you don’t have deliver quarterly results).

So companies must learn to develop the process and systems that not only allow them to anticipate consumer demands, but also anticipate how they will account for that process to shareholders and stakeholders.