In August 2003, Johnson & Johnson received approval from the U.S. Food and Drug Administration to sell the Independence iBOT 3000 Mobility System, an electronic wheelchair developed in partnership with Dean Kamen, the inventor of the Segway Human Transporter. At its introduction, the wheelchair received a lot of press because it can do things conventional wheelchairs can't: it can climb stairs; it can move over uneven terrain and climb curbs; and it can extend upward, bringing the user to eye level with someone standing.
These features were impressive and unprecedented when the iBOT was unveiled almost a year ago. Johnson & Johnson invested eight years and $150 million to bring the iBOT to market, and created a new company, Independence Technology, to drive sales.
Was the investment worth it? The headlines may say yes, but do they tell the whole story? Through work I've done since 2001 researching the promises and prospects of innovative products and services, I've developed a set of four benchmarks that can help companies evaluate and improve the probability of success for their new offerings. Measured against these criteria, the iBOT looks to face a rocky future. Using this framework can help you forecast the future of products or services that you may be developing.
Mapping a product's advantages
My approach compares a product or service with what's currently available. The result is a map of the product's comparative advantage in the market. The genesis of this work lies in the jobs framework developed by Harvard Business School Professor Clayton Christensen. The central idea of this concept is that "when a consumer buys a product, they are really 'hiring' it to get a job done. Companies are successful when they make it easier for their customers to get done what they were already trying to do," says Christensen.
In other words, a new product or service will be successful if it does a better job than existing products at satisfying the needs of a targeted customer group. But "doing a better job" actually has four dimensions. If a new product or service can exceed existing offerings across all four of these dimensions at once, then we can guarantee that the targeted customer group will purchase it.
The four dimensions fall into two categories, purchase motivators and purchase barriers. The new product has to excel at:
- Providing high purchase motivators
A. It must be less expensive than existing products (lower price).
B. It must provide better features than existing products (greater benefits).
- Eliminating purchase barriers
A. It must not have any switching or adoption costs (easy to use).
B. It must be readily available (easy to buy).
Customers for whom all four conditions apply will purchase the product or service because there are only benefits and no barriers. The closer any new product comes to succeeding in all four dimensions, the greater the chance that the product will be a winner. And, of course, the innovation will be a financial success if these conditions can be met at a profit. The figure below illustrates the graphic representation of a sure winner:
In reality, it's a very rare new product that excels in all four dimensions simultaneously. Sometimes, however, a company manages to create something that comes awfully close.
SpinBrush: A clear winner
Procter & Gamble (P&G) began marketing the Crest SpinBrush line of inexpensive electric toothbrushes in 2001. By 2002, the SpinBrush was the best-selling electric toothbrush in the United States. The product's market share grew in less than twenty-four months to generate more than $200 million in annual sales for P&G.
The four-dimension model makes it easy to see the attraction of the SpinBrush compared with other electric toothbrushes. Price was the primary motivator for purchase. While competitive toothbrushes retailed for more than $50, the SpinBrush was designed to sell for upward of $5, depending on the model. What's more, many customers found that the SpinBrush delivered better performance. For example, since the product runs on disposable batteries, it is more portable than most electric toothbrushes.
P&G's strong distribution capabilities made the product easy to buy, as did a "try it" feature built into the packagingshoppers could test the battery and see the brush in action at the store. Its straightforward design and reliance upon battery power made the toothbrush easier to use than its competitors.
With this kind of profile, the product had a very high probability for market success. Market research supported the predictions of the four-dimension model. The entrepreneurs who first developed the SpinBrushthen sold the company and the product to P&Gran a test market at Meijer, a Midwest discount chain, where SpinBrush outsold the leading manual toothbrush by a factor of nearly three to one. When P&G tested the product in focus groups, participants raved about it.
SpinBrush's success is not surprising. If you can launch a product that excels in all four dimensions of this model, you will have a winner.
Specifications and limitations
As a rule, the motivators (low price and greater benefits) are more important than the barriers (easy to buy and easy to use). A necessary, though not sufficient, condition of success is that a product excels along at least one of the two motivator dimensions. For instance, many products providing superior performance are successful despite being more expensive than other offerings on the market.
However, even if it excels in one or both motivators, a product or service may not be successful because there may still be high barriers to usage. One thing is certain: a product or service will not succeed if its performance is worse than existing offerings and its price is higher.
A final point: many products and services have succeeded by excelling in only one dimension. (See the sidebar "One-Dimensional Excellence: Palm") In these cases, the dimension is one of the two purchase motivators.
As with any approach to improving the market success of new products and services, the four-dimension model has its benefits as well as its limitations. Among its benefits:
- It can scale with available data. The framework can be used with qualitative or quantitative data and is effective at varying levels of rigor.
- It provides a basis for clarifying product intent. The framework can serve as a mechanism for ensuring agreement on the product system's intent and design.
- It enables straightforward comparisons across differing products and markets. The history of these evaluations can serve as a mechanism for systematically improving product and service success within a business as well.
Without a doubt, the greatest limitation to this approach is that it does not address the business model underlying the new offering. Nevertheless, if the metrics indicate that you've got a promising product, you'll at least know what your next big challenge will be.
All of the above illustrates why Upromise, an affinity investing service that contributes a small percentage of a member's purchases to a college education fund, may well succeed as a service because it addresses three crucial customer needs, though it may fail as a business if it has to build a direct sales force.
Performing well along three of the four dimensions of the framework, the product has a profile that looks like this:
However, the service is somewhat cumbersome to buy. You have to register your credit cards and grocery cards on Upromise's Web site and then open a 529 college savings account. Because there are multiple ways to earn money, getting the most out of Upromise requires close attention to detail.
This is a complex process, and one of the insights gained by using the four-dimension model is that Upromise, to improve its chances of success, needs to make its service easier to buy. Commissioning a sales force to help potential customers sign up for the service would enhance the service's performance along this dimension. Its business model, however, probably cannot support the added cost of a human sales force.
With an understanding of the framework's parameters, I've found the four-dimension model to be a useful tool both for designing products and for predicting how successful the products will be. Let's return to the example discussed at the outset to see what insights the benchmarking process can provide.
J&J's iBOT 3000: Great benefits, high barriers
Currently, the iBOT 3000 yields the wrong answer to three of the four questions in the framework. While it may serve as a pioneering product for later extension, its current prospects are bleak.
- The iBOT's price is more than ten times higher than the price of existing products. The iBOT is currently priced at $29,000. A state-of-the-art powered wheelchair costs anywhere from $1,600 to $7,500. Insurance companies' existing policies will be a major barrier to purchase.
- The iBOT's benefits are significant, but they come with tradeoffs. One of the early product testers, Dr. Rich Barbara, found himself yearning for his conventional wheelchair. Given the iBOT for a short trial in 2001, he told the New York Times, "I was glad when my two weeks were up." His reason: While the iBOT can do things that conventional wheelchairs can't, it also can't do things that conventional wheelchairs can. For example, it can't fit into a small car, and it takes up more space when in use. These drawbacks will serve to limit iBOT's market further, to those with large cars and enough space to accommodate it.
- Switching costs are high. Users need training, and not all existing wheelchair users can use the iBOT. Since the iBOT requires the use of one hand to operate the chair by manipulating a joystick, doctors can prescribe it only to patients who pass a physical and cognitive test.
- Current availability is limited. We can anticipate widespread availability, given Johnson & Johnson's strong distribution systems, but not immediately. The company is currently rolling it out in ten clinics across the United States.
All major new innovation is a challenge. Based solely on probability, an innovation's chances of success are less than one in ten. The simple framework I've discussed here is useful in two ways: in evaluating the potential success of a new product or service at an early stage in its development, and in identifying areas where the new product or service can improve to increase its chances of being a winner.
One-Dimensional Excellence: Palm
In 1996, when the first PalmPilot models were introduced, sales were less than $50 million. By June 2000, sales reached $1 billion, and the personal digital assistant (PDA) product category had been born.
The early PDAs did not score well on the four-dimension model. While the devices provided a number of features that were not available in the market (such as the ability to sync with a computer), they did so at prices that were more than ten times higher than the paper-based organizers they were replacing.
Further, the devices had high barriers to adoption.
- They were difficult to useentering data directly into a PalmPilot required the user to learn a new handwriting recognition system called Graffiti.
- Syncing the PDA with a computer wasand in newer versions still isproblematic, as the PDA's software often did not mesh with the computer's e-mail software (as any user of Lotus Notes will attest).
- While the devices were widely available, they were not particularly easy to buy. Companies who want to make a product or service easy to buy will often provide trial periods, for example, or bundle a set of products together (as Intuit does with its Quicken and TurboTax programs).
Even with such a poor profile, the product became a huge success, pioneering the PDA category.
There are numerous new products that have profiles similar to the original PalmPilot, such as Gillette's new battery-powered vibrating razor, the M3 Power Razor. These types of products promise higher performance at a higher price and require training before users can get any benefits. Occasionally (as with the Palm), these products become winners. More often, they cannot overcome the barriers to success that have been built into their design.