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Generate New Ideas

To remain effective, your Research and Development department must continuously generate ideas to…

  1. Improve your product quality
  2. Add value to your products
  3. Update your product line
  4. Improve your packaging

We'll examine these activities on the pages that follow, and then we'll put together an “idea machine” or Idea Generating System to keep the ideas flowing.

Improve Your Product Quality

What does quality mean for your business? In business, quality can be viewed from two perspectives. The operational perspective views it through the eyes of your business, while the marketing perspective views it through the eyes of your customers.

  1. From an Operations perspective, quality means “conformance to specifications.” In other words, quality is reflected in the efficiency of your operation. As I mentioned before, this can have many meanings depending on your needs, but once you define it, the goal becomes universal. “Do whatever it is that you do, to the best of your ability every time.”

  2. From a Marketing perspective, your customers define quality for your business, and from your customer's perspective, quality means “dependability.” Your customers want to know that they can depend on your products and services to be everything they expect them to be; each and every time they use them.

In reality, these two definitions actually support each other. Your customers do business with you because they have some degree of confidence in receiving a consistent level of quality from your business, and a consistent level of quality comes from having efficient operations. This understanding helps us to recognize the necessity of a strong working relationship between operations and marketing.

Without this working relationship, businesses can easily, and subtly, run into trouble. Sales people may over-promise to get the sale. Products may be developed that don't serve the needs of the customer well enough for the price. Deliveries may be delayed in order to conserve money. Both sides of the company may be doing what they feel is best from their perspectives, but without a cooperative effort, they are working against each other. Customers have varying minimum expectations of quality, depending on the product, the business, and especially their needs. Basic services such as water and electricity, for example, are expected to be reliable all of the time, whereas people expect the flavour in their chewing gum to last only so long. Your first goal must be to meet your customer minimum expectations 100 percent of the time. Fall short, and you may not get a second chance. Then you can concentrate on surpassing these minimum expectations on a regular basis.

Building customer loyalty demands that you consistently delight your customers. Set your own minimum standards higher than your customers', and then continuously raise the bar on quality. Not only will your customers be pleasantly surprised, they'll become that much more loyal to your business.

Ray Kroc, the founder of McDonald's was once visiting a Canadian McDonald's franchise and found a single fly. Two weeks later, the franchise was shut down.

The founder of Mrs. Fields Cookies once tossed out over $500 worth of cookies and temporarily closed a store because its samples were not up to standard.

Colonel Sanders, the founder of Kentucky Fried Chicken, once took his proprietary cooking ware (the only way to properly prepare his chicken) out of a franchise and destroyed them on the spot because the business was not operating up to his standards.

Add Value to Your Products

It is value that makes a business transaction worthwhile for both your customers and your business, and creating that value is the primary function of your business operations.

From your perspective, value is anything that you add to your products and services that increase their usefulness beyond your costs. This will not translate into sales, however, unless your customers value it as well. From your customers' perspective, value is anything that you add to your products and services that increase their perceived usefulness beyond their cost. I used the word “perceived,” because no matter how valuable your products and services are, they are worthless unless that value is in direct response to your customers' needs, and your customers are aware of it.

Value doesn't necessarily mean inexpensive of course, although it could. For your customers, getting value means getting more than they pay for, which is really about having their needs met. So value is relative to your customers' needs.

In other words, when you build something useful, make something more readily available, improve the usefulness of something, or generally fulfill the needs of your customers in any capacity, you are adding value. Do this on a consistent basis and it is easy to see the massive potential for growth this creates. Your primary goal concerning your products and services must be to add value to them whenever possible and practical, so the question becomes, “how do you make this happen?”

Making this happen is the purpose of Research and Development. A well-developed R&D system will provide your business with a continuous stream of opportunities for adding value. The most direct way to add value is by offering new or improved products and services to your customers. You can do this by…

  1. Adding new products — You don't necessarily need to invent all of your new products. Someone else may have a great new product that fits your needs.

  2. Adding new features — What new features would make your products more useful to your customers? Making a product available in more colours is a simple example.

  3. Improving the functionality of existing products and features — How else could you improve your existing products? More legroom in an automobile would be an example.

Consider your customers' needs, as you did in Marketing, and then look for new and innovative ways to better meet those needs.

Raise the bar on quality once, however, and you must never lower it back down. Once your customers experience an improvement from your business, they will begin to expect it. Anything less after that can shake your customers' confidence in you. This shouldn't be a problem though, if you take the time to properly prepare. Make improvements to your business through rock solid systems, and they will stick like glue.

“It is the service we are not obliged to give that people value the most.”

- James C. Penney

Update Your Product Line

Adjusting the size and complexity of your offerings can represent another opportunity for adding value. Do you offer enough variety in your products and services, or do you offer too many choices? Unfortunately, there is no universal answer to this question. As usual, it depends on your circumstance, but there are some questions you can ask that will guide you in making your decision.

Expand your product line

As you know, your customers are looking to your company to have their needs and wants satisfied. If they have needs (or potential needs) that cannot be met by simply improving your existing products or services, consider expanding the number of products or services that you offer.

Sometimes it may even be appropriate to offer products or services that are less profitable in order to add value to your company as a whole. For example, some department stores offer a low-cost family portrait service. The service makes little in the way of profit, but it draws prospects into the store where they often make additional purchases.

Your Marketing Strategy will play a part here as well. If your customers appreciate your business for its broad selection of products or services, for example, you'll probably want to improve your product selection on an ongoing basis.

Simplify your product line

One of the big reasons to consider simplifying your product line is cost. Economies of scale dictate that it is less costly to produce larger quantities of a few different products than it is to produce smaller quantities of a variety of products. Fewer product categories allow you to take advantage of volume discounts when purchasing, reduce equipment costs and reduce labour costs.

Another reason for simplifying your product line is the elimination of redundancy. If you have products or services that overlap for no specific reason, one or more of them may be unnecessary.While people typically like to have options, sometimes you can give them too many choices. In a stationery store, for example, customers probably don't need, or even want, to choose between two different brands of paper clips.

One final reason for simplifying your product line is to avoid spreading your business too thin. If the products or services you offer are pulling your company in more than one direction, you should re-evaluate their relationships to your Operational Strategy. Too broad a focus here can weaken your position in the minds of your customers and erode the leadership abilities of your corporate strategy.

Expanding your product or service offerings does not necessarily need to impact your production activities. More and more businesses are choosing to expand their product lines through outsourcing. Of course a great deal of time and care must go into choosing your venders. Your reputation is everything when it comes to your customer relationships. Your customers will hold you, not your vender, accountable for any quality or delivery problems they experience.

Improve Your Packaging

Your products are not the only place you can directly add value for your customers. Value can be added through “packaging” as well. The approach is similar to that of product and service development, but the focus is on its presentation to your customers. There are two basic considerations when evaluating your packaging; housing and bundling.

Housing — This refers to the physical container your products are sold in. In this case, value may be added though less expensive containers, more informative labelling, see through containers that show off the product, recycled containers, and so forth.

Bundling — This refers to the combination of products you offer, together as one sale. For example, bulk sales and multi-packs are ways one might offer their customers greater purchasing flexibility, enhancing the value of their products in the process. If your competitor offers the same product as you, perhaps you could offer it for sale along with a handy accessory or a complementary product such as batteries with a flashlight.

It's a little less obvious, but the same concept can be used with service businesses as well. For example, you could charge by the hour, by the job, or even a combination of the two. You could offer some component of your service as a free introductory service, or you could bundle services such as a “21 point inspection” at a garage.

The concept of adding value through packaging is often overlooked, but really, the possibilities are limited only by your imagination. Don't feel restricted by what everyone else in your industry does. Be creative. Packaging can be a simple way to further differentiate your business from the competition.

The owner of a successful hardware store found himself in the position of having to compete with a brand new Wal-Mart being built in his neighbourhood. Knowing that a head-to-head competition on price would be futile, and not wanting to close his business, the owner came up with a strategy. First, he hired undercover shoppers to keep him up to date on the contents and prices of the Wal-Mart hardware products. Then, he adjusted his purchasing in response to this information. Instead of competing on price, he offered products that were not available at Wal-Mart. For example, if Wal-Mart offered one brand of light bulbs in packages of two, he offered a different brand of light bulbs in packages of four. This strategy made it more difficult for customers to comparison shop, freeing him to focus on what he did best. That is, offer superior customer service through knowledgeable salespeople.

“I think a lot of American managers get fascinated with horizontal integration. It's like the really great hamburger joint that adds a dining room, starts serving steak, and winds up going out of business. Doing too many things isn't always a good idea, no matter how much better you think you can do than someone else.”

- Dan Ciampa