Wednesday, October 20, 2010

Innovation Lessons from Electric Cars

What will customers expect from electric vehicles? It is a critical question that automobile companies are debating right now. And the way in which companies answer the question carries important lessons for innovators.

Nissan believes that customers will use electric vehicles primarily for short trips around town, which mirrors most people’s current car usage. The company’s all electric Leaf has relatively limited range and takes eight hours to recharge.

General Motors believes that customers will expect performance that mirrors traditional gasoline-powered cars. Its Volt has a backup engine to power the car when the electricity drains out.

As companies come close to mass-market launches, opinions are flying fast and furious. For example, in a Monday Wall Street Journal article, “Rough Road Ahead for Electric Cars” a Johnson Control representative said that electric cars would make sense for about 3 percent of U.S. drivers. A Honda representative echoed that sentiment noting that customers who find their cars lack the required juice needed to “pick up your kid who is sick” will “come back to the dealership and hand over the keys.”

Of course, the plural of opinion is not fact. History is littered with similarly bold proclamations that ended up being wildly wrong. Many great innovators had serious doubts cast on their ultimately successful ideas.

So what is an innovator’s approach when no one knows for sure what customers will do with an innovation because they haven’t seen it before?

The quickest approach is to look at what customers currently do, or look at historical case studies that bear some similarity to your idea. This may provide a general sense of what might happen, but it shouldn’t be taken too seriously. After all, the whole point of an innovation is to change something in a meaningful enough way to render past patterns meaningless.

A popular approach, of course, is to conduct market research. Executives surely love the veneer of sophistication and safety that comes from large sample surveys, and numbers. Unfortunately, while market research can be helpful, customers are notoriously bad at accurately reporting what they will do with something they haven’t used before. Go back 10 years. What do you think you would have said if someone asked you what you would do with Facebook, Twitter, or even text messages on your mobile phone? Odds are you would struggle to answer the question. Companies that are truly innovating need to use market research with a degree of caution.

The truth is, you’ll know what customers will do with an innovation only once they’ve done it.

Read the rest at Scott’s Havard¬†Business Review¬†blog.

Scott D. Anthony is managing director of Innosight Asia-Pacific.

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