Chris Lord, a highly inventive and successful entrepreneur, has more than 1,000 patents, two exits in excess of £150m, and investments in multiple fast growth startups. According to him, entrepreneurial instinct beats most ‘consumer insights’.
According to Harvard Business School, an estimated 95% of newly launched products fail. Every year, thousands of products emerge only to quickly become forgotten; such as Google Glass, smokeless cigarettes, and Crystal Pepsi. On a daily basis, similarly unsuccessful products are released without any attention.
According to Chris Lord, however, “Major companies, threatened by new competitors, frequently resort to using consumer insight as the ultimate weapon for product development. This only serves to give those in power a scapegoat for launch failures instead of pointing the finger at themselves. They are likely to label the project as ‘test and learn’ but in reality it is more accurately termed ‘test and burn’.”
Since 2001, Proctor and Gamble (P&G) have been investing around $500m (£417m) a year in consumer insight research. Despite this, their R&D spending as a percentage of sales has decreased over the same period. Despite the company’s success and quality of Fast Moving Consumer Goods (FMCG) products, their expensive research-driven innovation was disrupted in multiple categories by entrepreneurs with no prior FMCG background. Examples include Dollar Shave Club, a part-time improv comedian and full-time advertising guy, Madison Reed, a venture capitalist-turned-hair colour entrepreneur, and Cheeky Panda, a recruitment consultant, all of whom shook up the shaving, hair care and loo roll markets respectively.
“I have seen personally how people mistake consumer insights for invention, and that real innovation can come from elsewhere, such as a company’s acquisition of a disruptive startup,” Lord reflects. “As an example, Unilever’s purchase of Dollar Shave Club for nine figures spurred competitor Procter & Gamble to spend over £1bn on FMCG startups, such as Mielle Organics, This is L, Walker & Company, Bevel and Form, First Aid Beauty, Snowberry, Native Cos and more. With experience innovating more than 1,000 patents and selling the companies behind them to large corporations, I understand that this is the standard. Entrepreneurs bring more original ideas than customer surveys.”
What’s behind such high failure rates for newly launched products?
Surely a major reason for failures can be summed up by this famous Henry Ford quote: “If I asked people what they wanted, they would have said a faster horse.” In other words, despite many companies relying on customers to come up with the answers, obsession with consumer insights can really get in the way of successful innovation.
“In other words, although companies often rely on consumers for new ideas,” Lord explains, “being fixated on customer feedback can be a hindrance to successful innovation.”
“Let us take a walk down memory lane to better explain my point. The life sciences startup I had been a part of was bought out by a large corporate for more than £100 million. Our trendsetting innovation was a large contributing factor to the sale. My esteemed colleague was tasked with carrying on our tradition of innovation in our new location, so she looked to a consumer insight report for ideas to tackle a product development issue in the electronic cigarette industry. Our parent firm likely spent a large sum of money on the report, but I rarely read them. It was almost certain that whatever outcome they came to would be inaccurate and in opposition to the real solution we needed.”
“My colleague declared during a brainstorming session, ‘I ran across an interesting insight report the other day and thought its findings should be shared due to their relevance. The report’s results indicated that customers want a battery with a higher capacity and longer life, which is in opposition to the direction you are taking with this.’ I responded, ‘Ah, yes, those famous consumer insight reports. I’m afraid their conclusions are erroneous and not to be trusted; these reports are not worth reading’.”
Lord’s colleague challenged that, if he hadn’t read it, how could he say that? The entrepreneur then replied confidently, “It’s easy, the conclusion they reached is incorrect. If you trace it back, you’ll find that the answer, the question, and the methodology they used to arrive at the conclusion were all wrong. The correct answer is that the consumer wants a smaller battery that lasts longer, not a bigger battery that lasts longer.”
“Funnily enough, not only did I contradict the insighting,” Lord relates, “but my solution was cheaper and more profitable.”
The customer is often wrong
In essence, customers are not always aware of their true desires. They often don’t contemplate alternative possibilities or break away from the status quo. Rather, they remain within the boundaries of what they know, which results in minor changes as opposed to creative innovation.
Lord says, “It’s not to say that customer insights are useless but they are best utilised when it comes to boosting sales, amending services and making minor changes to products, such as a new aroma for shampoo or a novel flavour of ice cream.”
“The other way I look at things like this is listen to but then decide for yourself. I was once in a meeting with the global marketing director who was listening to my team present a great product idea pipeline. His reaction was to order a multi-country consumer insights study to determine if in fact, the ideas were, indeed, good. In my typical manner, I didn’t beat around the bush, and responded to this by saying, ‘If you don’t know your consumers well enough to know what they like and dislike, and what in fact they would like to see, then you are in the wrong role.’ Or perhaps he was in the right role – for one of our competitors!
In order to come up with something truly ground-breaking, the innovators should be allowed to let their imaginations run wild. It is highly improbable that consumer insights will give rise to an electric car in a world where combustible fuel is abundant or a reusable spacecraft while all others are single-use.
Moving On From Ford
Undoubtedly, apart from Ford’s insistence on developing Model T instead of horse steroids, there are many examples of new products that have overthrown existing players, without insighting. These novel ideas have transformed the world.
“Elon Musk is a shining example of an inventive businessman who has experienced considerable success by going against the grain,” ventures Lord. “He noticed the damaging effects of fossil fuels as well as their waning availability, but instead of simply designing a vehicle that would consume less fuel, he came up with something completely novel, offering the world electric cars as a substitute that we didn’t know we wanted (or needed). Despite having a much smaller range of models, Tesla, Musk’s company, soon surpassed the competition to become the most valuable carmaker by market capitalisation.”
“Much like Musk, I follow the same blueprint when it comes to ideas. This strategy led me to start and sell two companies for more than £150 million, after discovering a very basic form of E-cigarette on an unsuspecting stall in a Chinese trade fair. My business partner and I helped this innovative idea catch fire and despite going against popular thought at the time, subsequently transformed the lives of smokers and the smoking-related diseases they could otherwise have had. It remains the only electronic stop-smoking device to win NHS use approval in the UK.”
Lord firmly believes that important and world-improving innovation is all around us, we just need to ask the right questions and trust the right sources to find it.
“At all costs, avoid being completely customer obsessed as this will almost certainly result in a startup or new product failure,” he says. “Be intuitive, as people do not always know how to articulate their needs. As innovative entrepreneurs, we need to do this for them. Not only that but we should be confident in doing so.”
Chrls Lord was the most prolific UK inventor in 2019/20 with more patents filed in his name than any other individual in the UK, totalling over 800. He’s build two life sciences companies with a combined exit value of $170 million.
