Disruptive products start with a problem, not a market

It is a common mistake in tech to approach product development from a classical marketing position of identifying a large market opportunity, performing a competitive analysis, surveying buyers to find what they don’t like about the existing product and what they want. Then having R&D develop a product that is slightly better and cheaper than what is already out there. This approach rarely yields disruptive products, or shifts the growth of a market into high gear, and it never creates new markets.

If you trace back the origins of the disruptive products that make tech such an opportunistic business space, invariably you find that buyers were not even considered while the market size, growth, and potential was unknown. Instead of prefacing the value proposition with, “our report says…” it more started with “I think…” The people who developed the initial product were more often trying to solve their own problem rather than those of the customers and it was only figured out later that someone would actually pay for it.

For example, the auto was created by people who didn’t want to harness up horses every morning. The PC was created by people who just wanted a computer of their own. Companies like Apple and Microsoft started by first selling the fruits of their work to their friends. Google was created by people who didn’t want to wait for Yahoo’s army of page finders to find what they were looking for. They were outstripping this and they needed to automate it. When the search was first introduced, consumers were flummoxed. They didn’t know what to search for.

The problem is that this approach is usually too random for anyone but VCs to invest in. It just doesn’t work in big companies who are generally more comfortable with the first approach, which has a proven track record in established markets. Hewlett-Packard was one of the few companies that were ever successful at the ‘solve your own problem’ marketing approach and they don’t even practice it anymore.

But in this approach are the seeds of how to develop disruptive products in established businesses. Better yet, you don’t need to hire Steve Jobs or Sergey Brin. Here are the steps:

1. Identify the customer’s problem
2. Figure out what the value of solving that problem is
3. Establish what needs to be done to solve it with a product
1. Estimate the cost
4. Define the criteria for what constitutes success
1. This becomes the goal
2. This is the common vision for your organization

It is important to only describe success, not prescribe how the organization gets there. The latter is a mistake that leads to a linear, inflexible product development, which fails to institute course corrections when it is clear they are misaligned to the goal.

Let’s look at how this worked for a series of disruptive products over the last couple of decades.

ASML’s astounding run for leadership in lithography:

1. The customer’s problem:
1. Poor Cost of Ownership
2. The value of solving it:
1. You could split the cost reduction
3. What needed to be done with a product:
1. Greater throughput
4. What constituted success
1. Lower CoO

Applied Material’s astounding run for leadership in PVD:

1. The customer’s problem:
1. Yield losses due to breaking vacuum between PVD & CVD
2. The value of solving it:
1. Higher yield is a mainline to higher profits
3. What needed to be done with a product:
1. Integrate the multiple processes onto a single platform
4. What constituted success
1. Deal with different vacuum levels without compromising throughput or reliability

Soitec’s SmartCut and the creation of a viable SOI market:

1. The customer’s problem:
1. Existing SOI technologies were too costly to implement
2. The value of solving it:
1. More performance/Less power = Higher revenues
3. What needed to be done with a product:
1. Find a process more efficient than SIMOX
4. What constituted success
1. Cost adder per processed wafer down to ~10%

Intel’s HiK Dielectric:

1. The customer’s problem:
1. End of scaling would compromise market size and growth of all electronics 
2. The value of solving it:
1. Keeping market growth via introduction of better performing products
3. What needed to be done with a product:
1. Replace oxide gate with a thicker, but effectively thinner material
4. What constituted success
1. Transistors that consumed less power while switching faster than the previous generation

HP’s creation of the SOC test equipment market:

1. The customer’s problem:
1. Too many underutilized yet expensive platforms on their test floor
2. The value of solving it:
1. Tap into benefit of Lower cost of test, Higher ROIC
3. What needed to be done with a product:
1. Move the tester to the pin electronics
4. What constituted success
1. Having fully software configurable pin electronics

I could list many more, but I think you get the idea.