One of the biggest mistakes companies make in product development is in not understanding this principle. You see it all the time, with marketing professionals foolishly referring to their product as a solution, when there is no problem that it comes close to solving. When they fail, the cliché used is often, “it was a solution in search of a market.” But this misses mark. Obviously the developers must have thought that, what may have been a great idea, was targeted at a known market. However, products really fail they are a solution to a problem that doesn’t exist.1
Now this concept — that problems are markets and solutions are products — goes hand-in-hand with the four essential things to all product purchase decisions: wants, needs, features, and benefits. This is because the high-value problems, as Gary Dickerson calls them, are the problems that B2B customers need to solve to improve profitability. Bob Graham was the first to talk about the four, where needs were separated from wants by the benefits they brought to the customer. Gary took it a step further by focusing in on the value of the problems that needed to be solved. The beauty of Gary’s easy to understand zinger, “high-value problems,” is that it is easy to teach and build business processes around.
For business, this still needs to be balanced with an understanding of wants and needs. For example, while hyper-sports cars like Lamborghinis solve high-value problems for their owners … they are not needed — just wanted. In the case of business, high-value problems are needed because they directly affect profits in a positive way.
You can see this back at KLA, when the concept of yield management was developed. Controlling and improving yield is a very high-value problem. But before these tools and techniques were developed, yield was pretty much managed by process engineers, who at the time were metaphorically closer to sommeliers, using more intuition than science. Because it was reactive, not proactive, huge amounts of unrealized value was being thrown in the scrap heap with bad wafers. Gary applied this same concept after he went to Varian, realizing that their dual-magnet ribbon-beam implanters solved significant yield and variability problems. Improving yield means more sellable good die. Lowering variability at the transistor level means more devices sort out in the high-performance/low-power bins that bring higher ASPs with no cost adder. Varian had been so focused on its feud with Axcelis that it seemed to miss this critical point, as both were selling implanters and their features, not solutions. When he went there, people said it was a terrible career move … that implanters were mature commodities and nothing could be done. Yet finding these high-value problems engineered a massive market share shift in favor of Varian.
Edwards rose to dominance in the vacuum pump industry because they realized that the high-value problem that customer’s needed to solve was the need for consistent, reliable, and clean vacuum. Up until that point, the players had largely sold pumps as commodities, where price and donut-marketing were the primary sales tools. Shifting Edwards’ organizational mindset from the selling of pumps to the need for consistent, reliable, and clean vacuum opened up completely new horizons of greater value to capture.
1 Not to be mistaken with me-too products that will invariably succeed, but only marginally because they are solving the problem after someone else did.