Video 2-1 (4:22): Reiterating Group Project

Now, in your project teams, here is your specific assignment. You identified an opportunity that
you want to work on. I want you to explore that by actually getting to that market. Now, some of
you will not directly easily have access to people in that market so you may need to be creative.

You may need to do some work online or at a distance, but some of you should be able to actually
connect with customers to find out exactly what's the problem, how are they solving it now, and
what, in fact, do customers need that's not being well addressed by current solutions? The
second part of your project assignment is to develop the solution. So I'd like you to actually do
some concept generation work.

Do some brainstorming and we'll -- we've talk about methods in module 3 around the
brainstorming and the solutions. You should be able to apply those. Maybe you can select some
of the most interesting directions to go and explore how feasible is it? And what's the business
model around it? In the end, I'd like you to pick one solution, one concept, and sketch that out in
some way that you can describe it in some depth in your report.

And finally, most importantly, you have to analyze this opportunity and present your analysis on
these three dimensions. Is the need real? Define that. What exactly is the need? For what
market? Second, can we win? How will we win? Your concept, does it have a winning solution?
How does it work? And how does that beat the competition? And if it's real and if you think you
can win, describe the business model.

How is it that we could make a viable, sustainable, profitable business around that? Now, some
of your analyses will answer that -- one of those questions, no, you don't think it's real or we can't
win and you should say so. I actually want your honest assessment, here. And my expectation is,
that not all of the selected opportunities are real, win, and worth it. Some of them yes, some of
them no.

And we want your assessment of it. I'd like you to present your analysis in a report. The report
will be in the format probably of five slides, perhaps in Power Point. So one, describe the
opportunity. Second, is it real? Third, what's our winning solution? Finally, is it worth it and
explain the business model.

And then at the end, I'd like you, in the last slide, to present your recommendation. Should a
team proceed with this opportunity and this concept solution or should we not? You can present
this in -- in five slides and it should be uploaded to our platform. Here's some advice for how to
execute the project in your team. So think of this project as involving three phases. You're
exploring the market. You're developing concepts.
And then you prepare your real, win, worth it analysis. So you should allocate some time for each
of those phases, explicitly. Next, you -- you're going have a hard time getting together as a whole
group to do any of these things.

So use that meeting time really carefully. You should meet together to coordinate and report.
Report what you've done. And then ideally, develop consensus around what we've learned and
what are the next steps? And finally, someone on the team needs to be the project manager.
Make sure that each -- everyone has something to do. Make sure that we have a time to meet
up next. And keep the meetings on track.

And focus on the deliverables that you need to -- to provide for this course. That real, win, worth
it analysis in the report with a recommendation. And that project management work, that's real
work. So make sure someone's allocated to keep the team on track. Now, good luck on your
projects. You've got some great opportunities to work on and I look forward to seeing your
results.

*
Video 2-2 (2:30): Product Development Process

Our second module is about the methods for identification and analysis of customer needs. This
is part of the concept development process which begins the overall product development
process. So first let's take a look at what is that PD, product development process, and how does
it take place over stages in professional practice?

Now what you saw with IDEO, we sort of simplified the process by saying it was three phases. In
practice most businesses and industry use a four or even a six phase process. So here's a typical
or generic one, it starts with a planning phase which really precedes the entire product
development process.

And planning is where, through some strategic analysis based on corporate strategy, perhaps we
make decisions about what is each product development project going to be about? And so we'll
have a map or a portfolio of product development projects to execute. Then each project for
product development enters the product development process.

The first phase of which is what we're talking about here in this course is about concept
development. Concept development, which we'll decompose into discreet steps in a moment, is
about developing a solution concept which we'll then implement through the remainder of the
process.
The implementation usually starts with some high level planning for implementation which we
call system level design. So that's reasoning about how does the product decompose into pieces
and which functions each one executes? And then how do we plan the development of all those
many, many pieces?

Detail design follows that where we're putting in place all the technical details, planning the
production process and system. And then finally, testing and refinement is where we do the final
verification that we meet our customer needs in a winning manner.

Production and operations ramp up follows the product development process that ends what's
sometimes called a four or six phase process.

Video 2-3 (2:53): Concept Development

Now the product development process starts with the concept development phase. And the
concept development phase in itself can be split into discrete steps and that allows us to make it
a systematic process. So the first of these steps is the customer needs analysis activity. And we'll
talk about that here in this module.

So that begins with what comes out of the planning process, a mission statement; and then it
ends with a really good list of customer needs which we'll talk about here. Next comes a
specification activity and you'll see in this process, specifications happen at least twice. So at the
beginning we talk about target specs, target specifications are the translation of the customer
needs into measurable terms.

But as you know, customers may ask for a whole lot of things. They may ask for performance that
we cannot deliver at a reasonable cost and price point and so forth. And so until we've done the
concept development, we don't really know what we can deliver. So while we can translate
customer needs into measurable specifications, those are merely targets but not the actual specs
of what we'll promise and ultimately deliver.

Those come later in the process. You see those as a refinement of specifications. We will not talk
about the development of specifications in this course. The next activity is generation of the
product concept itself. That's the fun, creative, innovative part and we'll talk about that in the
third module. Selecting concepts.

We'll talk about that a little bit at the end of the third module, how do we down select. You saw
a little bit of multi-voting, that's only one of many methods for concept selection. Concept testing
is the activity after concept selection where we validate the selected concept to be sure that it
meets customer needs, that we have a winning solution.
Essentially before it gets expensive in the remainder of the development process, we want to
have a validation that we've got the right solution. So that's the concept testing activity. After
final specifications are set, we do some downstream development planning. So this is the overall
concept development process.

This is sometimes called the fuzzy front end. And my point really in this module is it should not
be a fuzzy process. It ought to be a concrete process. In fact, once we split it into discrete steps
and then if we can practice and get good at each one, it's not a fuzzy process at all. It's a reliable
and repeatable process.

Video 2-4 (1:12): Concept Development - Common Activities Across

You see below the process steps there are three activities which take place throughout the
development process. Not really during any one of the above steps. And these include performing
the economic analysis so that's looking at the cash flows and the potential pay back and we'll
look at that very carefully in the last module.

Second, benchmarking which happens really at many times through the process. Early on we look
at competing products to see if this is a reasonable opportunity. You're doing that in the win part
of your assignment.

We'll do benchmarking when we're looking at competing products to understand how they
address customer needs. We do benchmarking when we're looking at specifications and even
when we're developing solutions.

And then finally building and testing models and prototypes happens at many points through the
process. So that we can refine our ideas and figure out which ones work and how they don't work
and how to fix those problems. So these activities take place throughout the development
process.

Video 2-5 (6:37): User Innovation Examples

Now connection with customers is obviously a key aspect of customer needs analysis. And one
type of innovator has a distinct advantage and that's called, and those are the user innovators.
Now users obviously have a good connection with the problem because they themselves
experienced it. Let me show you an example of user innovation.

So these two fellows, Evan and Eric Edwards, when they were young boys they had a, some kind
of severe allergies where they always had to be carrying this product right here, it's called an
EpiPen. It's an epinephrine injector that they would use if they ever had a severe reaction to
something they eat or something in the environment.
And there are millions of people who need to carry this at all time. And the trouble is, well it
doesn't fit in your pocket very well, it's not very, it's not very user friendly from an interface
perspective. Furthermore it always has to be on hand so maybe it gets lost in a backpack,
teachers, babysitters, parents, everybody has to be aware of where is it and how to use it.

And when they grew up they realized that, this never fit very comfortably, they couldn't very
easily carry it. And then they said well why is it I can fit my mobile phone in my pocket and yet
this doesn't fit very well? What they developed then is this one right here. So I've got that right
here. This is the product they developed that's now being sold by Sanofi.

So this is an injector that fits right in the pocket. And furthermore, they said we can bring in some
new technology to make it easier to understand how to use it. In fact many people who use this
for the first time it's in an emergency situation.

So the trainer provides instructions which works like this. This trainer contains no needle or drug.
Okay. I remove. If you are ready to use pull off red safety guard. To inject place black end against
outer thigh then press firmly and hold in place for 5, 4, 3, 2, 1. Injection complete. So. This
trainer may be reused.

Put that up. So that solution that fits in the pocket provides the instructions, that came from their
understanding of the problem, and their dilemma that it was always difficult to have the EpiPen
on hand when they need it and that everybody would know how to use it. Now what I want you
to think about is what is it that allows users as innovators to be so successful?

And more importantly, what is, why is it that not all products are developed by users? And when
you think about it, the advantage users have is their own understanding of the problem. The
disadvantage is that they may not have the skills or the resources to solve that problem. And
that's why we need businesses.

And furthermore, they may have an understanding of their problem and not necessarily an
assurance that that problem is, is felt by a broad market of customers. It might, they might be
representative of a large customer base but they might be just a small unique case. And what
businesses can do is they can overcome the barrier to understanding customers by connecting
with customers and then bring to bear all the rest of the resources that are needed to innovate
a successful solution. Now here's an example of a product where understanding the customer's
latent needs is the key to innovation.

This is a flashlight, by Black and Decker and it's called the snake light because of this unique snaky
spine that connects the batteries with the light. Now what this is is a it's solution to allow
customers to aim the light more easily. And you see you could wrap it around your neck and work
hands free. You could mount it on the floor, hang it, anyway you like. This would allow the user
to aim the light more easily.
Now how does Black and Decker come up with this? I would argue that if you asked customers
about their experience with flashlights they would talk to you about the obvious needs. The
brightness of the beam, how long the batteries last, the size, the weight of the light and so forth.
But articulating their need to aim the flashlight might not ever come out in a conversation with
customers. On the other hand, with good thorough observation I'm sure that you would
experience customers having a difficult time aiming the flashlight beam.

So through observation we can identify the latent needs and that's one of the principles of
understanding customer needs and how we identify the real opportunities for innovation. I
would further argue that this particular solution with the spine with the ball and the cables that's
inside here, that allows us to aim the flashlight, well that's a great solution but it's only one of
many solutions.

But I think the real key to this innovation was understanding the customer need. Here's an
example where an innovative solution was developed through understanding unaddressed
customer needs. This is the OXO good grips measuring cup, you see there's this angled surface
here, that's the key innovation.

Now I'll show you how this came about. So if we look at what it takes to pour and measure into
a standard measuring cup such as this one. Let's say I want to pour 4 ounces into here, it's actually
pretty hard to see exactly where 4 ounces is. I might have to get down and see that or maybe I
try to lift it up and see it at the right angle. It can be quite difficult. By observing that problem,
the folks at OXO developed this particular solution.

So as I pour into here I can actually see where the fluid is right at that angled surface and 4 ounces
is, I know exactly where to stop. And so I can see that's right on the 4 without lifting it up.

Video 2-6 (4:09): Customer Needs and Markets

Now to analyze customer needs we need to understand that there are different markets or
segments of customers. Generally we think of the mainstream customers, the big market
segment. This chart now shows how as -- how different markets have different needs. So the
mainstream customers, well, they're mainstream, they're the biggest segment because they have
a common set of needs.

A large group of people with the same needs. And it's natural to look at that market and try to
address those needs, and we should do that. But I'd like to also argue that there are two special
types of customers who have more specific sets of needs, and if we can understand their needs
we can get a real advantage. And these types of customers are called lead users and extreme
users. And I'll describe each of them.
Lead users are customers who experience the need a little bit in advance of the mainstream
market. And the reason they do so is because they use that product or service in their daily lives,
in their business, in their livelihood. Secondly, those lead users, they would benefit from
improvements in the product.

They would benefit because it's a really important part of their life. So they would get extra value
if there's -- if the needs are addressed in a better way. And third, Eric Vonhipple [assumed
spelling] here at MIT did a lot of research around lead users, and what he found is, because they
would benefit from improvements in a product, they're more likely than other customers to have
actually innovated, which is to say that lead users can teach us something about innovations that
are useful to them.

So if we can find those lead users we could not only identify interesting solutions which could be
useful later on, but we can also identify customer needs a little bit sooner. I'll show you an
example of that in just a moment. The second type of special customers are called extreme users.

These are users who utilize the product in a different way because their needs are actually
different. Now they may have special needs that are due to their own special situation. For
example, a customer who's older may have limited strength or dexterity or mobility, and so their
ability to use the product might be different.

Or a customer who maybe has some other special situation, such as they have maybe limited
vision or they -- it's really cold weather and so they have to use gloves or jackets or hats and the
way they can interact with a product is constrained. An example of that an innovation that came
out of that understanding is this product here.

So this is another product from OXO with the Good Grips brand, and Sam Farber [assumed
spelling], when he invented this product he was observing his wife who has arthritis, so limited
dexterity in her hands, he was observing her using a vegetable peeler.

And he noticed, and she articulated, that she had pain in her hands because she couldn't grip
very well the product. So he created a grip that allowed her to more easily use the peeler. So by
studying that extreme user we identify not only how to solve their problem, but in many cases
the extreme users solution might also benefit the mainstream market.

And so Good Grips has been a very successful line of kitchen gadgets, largely because they've
focused on the user interface. And even though we're not all extreme users, we could all benefit
from a more comfortable hand grip.

Video 2-7 (2:28): Lead User Example - Utility Light Study

An example of a lead user innovation is this utility light. It's a -- utility light is used by a mechanic
or a carpenter or a plumber, maybe in a garage or another kind of work environment to give light.
It's sometimes called a droplight because we can hang it. Now this is a typical utility light and it
doesn't work well enough. I'm going to show you what one lead user had done. So it's one user
who uses the light all the time, and by interviewing and visiting this lead user you can see some
of the innovations.

Now you look careful and you'll see there's several changes, alterations, this customer has made
to the product to suit his or her needs better. For one thing, you see there's a wire around the
gathered cable, and that serves as a hook to hang it and to gather the whole cord. Second, you
see the cage around the light is now a plastic cage. The plastic cage allows it to bounce when it
drops and it doesn't transmit as much vibration to the bulb. Third, you see that that plastic cage
has no reflector on the back and that allows 360 degree lighting.

What -- by talking to this customer what we found is that the customer was frustrated that the
light, he would aim it and it would always bend or it would always twist around because there's
some torsion in that cable and it would rotate the light and it couldn't aim it very effectively. And
finally you see that he changed the bulb from its standard incandescent bulb to a compact
fluorescent bulb which is less susceptible to vibration when it is dropped or knocked around.
Now the key thing is that these are little innovations and maybe they're not great solutions,
maybe we can come up with better solutions. We'll hold onto those solutions for the concept
generation stage, but at this point we can identify there are needs. Needs to carry the light. Needs
to hang the light. Needs to have 360 degree lighting and so forth. And those are needs that are
real and not addressed by the existing product.

Video 2-8 (6:34): How Many Customers Do You Need to Talk To?

One of the questions that always comes up in analysis of customer needs is how many customers
do we need to interact with in order to identify all the needs? And a very interesting study was
done here at MIT by my colleagues, John Hauser and Abbie Griffin here in our Marketing Group.

And what they did is they did a study of this one pretty simple product, picnic coolers, the kind
you might take with a picnic to the park or maybe take with lunch to work, and they identified all
the needs and how is it that we can -- and how many customers do we need to speak with in
order to get there. And so what this chart shows on the vertical axis is what fraction of the needs
have been identified.

And the horizontal axis is how many customers have we spoken with. And you see there are two
curves. The top curve is focus groups, the bottom curve is the one-on-one interviews. Let's look
at the interviews first. So by interacting with one customer for one hour in an interview you see
that we've -- and that we've identified about 1/3 of the needs. And with two customers, about
1/2, three customers about 2/3, and so on.
And by the time you've spoken with eight to 10 customers you've pretty much learned all you're
going to learn. That is you've identified all the needs for that product in that market. The second
curve shows focus groups. And what you see is that in one two hour focus group, which is maybe
a group of five to six people, typically, interacting for two hours with a trained moderator talking
about the product, they identified about half the needs, 50%. That's just about as much
information as you get from two one hour interviews.

Which is to say that two hours interacting with customers, whether it's two interviews or one
two hour focus group, you learn about the same information. And you see, by the time you've
spoken with let's say three focus groups you've learned about as much as five or six customers
individually, which takes about the same amount of time.

And given that focus groups are rather difficult and expensive to set up, special set up, special
trained moderator, special recording equipment and so forth, it's actually become pretty
common practice now to just do a large number of one-on-one interviews, which also has the
advantage that we can usually make better direct observations because we get out into many
more use environments.

Steve Jobs, the founder of Apple, pretty famously is quoted as having said, "Customers don't
know what they want." And the conclusion from that usually is, so, therefore, doesn't do market
research. In fact, that's not quite true.

Here I'll describe in the interview that was done for INC Magazine by George Gendrun [assumed
spelling] and he interviewed Steve Jobs to talk about what kinds of interaction with customers
and with technology it takes to innovate their products. And so he was asked, "Where do great
products come from?"

And what Steve Jobs said is, "I think really great products come from melding two points of view,
the technology point ant he customer point of view, you need both. You can't just ask customers
what they want and then try to give it to them. By the time you get it built, they'll want something
different.

"So you see, we talk to customers, but we also have to do something else. He was then asked,
"You mean the technology is simply changing too fast?" He said, "Yeah, and customers can't
anticipate what the technology can do. They won't ask for things that they think are impossible.
But the technology may be ahead of them. If you happen to mention something, they'll say, of
course I'll take that.

Do you mean I can really have that, too? So it's logical to ask customers what they want and to
give it to them, but they rarely end up getting what they want that way. He was then asked,
"Well, is it equally dangerous to focus too much on the technology?" And Jobs said, "Oh, sure,
you can get into just as much trouble by going into the technology lab and asking engineers what
can you do for us today.
That rarely leads to a product that customers want or one they're very proud of building when
you get done." And his final point, "You need to merge these two points of view and you have to
do it in an interactive way, over a period of time. And that doesn't mean a week, it takes a long
time to pull out of customers what they want and it takes a long time to pull out of the technology
what they can really give."

So what you see from Apple and from the Steve Jobs interview, it's really a combination of the
market pull and the technology push. They're not really doing one or the other, they're doing
both and they're doing them in a really integrated way.

How about products that don't yet exist? Is it possible to understand the customer needs when
the product or service does not even exist at all? So here's an example of a service that really
doesn't exist, consumer space flight. And yet there are a few companies out there who are selling
this, and how could they sell if they don't have an offering to meet customer needs?
Virgin Galactic, for example, knows exactly what the customer needs are, and this is what they
are. Customers want to experience zero gravity. They think that would be fun, to be up there in
space and have no gravity. And even though this service will provide maybe only nine minutes of
zero G, they think that would be a great experience. Second, customers want to enjoy views of
earth and space.

They actually think it would be great to have that photo of the big blue ball, the earth, on their
iPhone and they want that for themselves. And finally, they want to have fun, they want to return
safely. The point is, these needs exist, the solution has not yet been experienced by any customer.
But it's not that hard to understand the needs for that service by talking to customers and
interacting with them about this potential great new service.

Video 2-9 (4:52): Latent Needs

So, we've already talked a little bit about latent needs. I'd like to be more explicit about exactly
what they are and how to identify them. Latent needs are hidden. Hidden needs that customers
may not be aware of. And since they're not aware of them, they're not easily going to express
them.

It's very hard to understand latent needs by simply talking to customers and have them reveal
what those needs are. Instead, latent needs are more likely to be identified through observation.
The special thing about latent needs is that since they're hidden, they're not only hidden from us
but also from our competitors.

So, they're generally not being addressed because nobody knows about them. Nobody has
articulated exactly what the needs are. But if we do address them, we can often exceed
customer's expectations and give them something that everybody loves. So, here's a great
example from Apple. They patented the MagSafe power connector and as you may know, this is
a really easy connection.

Customers have been tripping on wires to computers ever since, in particular ever since laptop
computers. And Apple noticed that and identified a way to solve that problem with the magnets,
also the connector that can flip around in any direction. It's easy to attach and most importantly,
it's very easy to disconnect.

And that makes a safer connection that's it's also very, very easy to use. And every other
computer manufacturer wishes they had that solution but of course, Apple patented it. The
patent is expired pretty soon, however. As I said, latent needs are unlikely to be articulated by
customers and we're more likely to identify them through observation. So, here's an example of
a study of door locks.

Now if you talk to customers about doorknobs and locks and handles and keys, they'll talk about
maybe how easy it is the twist the knob and how the keys fit in their pocket and things like that.
But if you make some observations, see if you can identify the latent need. So, here are two
photographs of customers opening doors.

And if you are observing door locks, it wouldn't take too long before you find a customer whose
hands are full and is struggling with the keys and whatever they're holding and opening the door.
So now the need of course is a door that's easy to open even though your hands are full.

And there are a lot of ways to solve that using electronics and identification, things like that. So,
the latent need is it's hard to open the doors when our hands are full. Sometimes customers have
the knowledge. They know about the need but they might not be able to articulate it. Or you
might be able to observe it based on something that they've actually done and solved. So for
example, this Tetra Pak with the milk.

You'll see if you observe very carefully you'll see that there the customer has made a hole in the
corner of the carton opposite the pour spout. And as you know, that's to allow the product to
pour more smoothly. Now, you wonder why is it that Tetra Pak hasn't solved that problem?
Millions of customers have faced that problem.

Some of them have even solved it. I don't think it would be very hard for Tetra Pak to know that
customers are making this really poor solution to this problem. In fact, I would bet that Tetra Pak
could solve this with a redesigned pour spout. An example of observing and then solving that
customer need comes from a project by Continuum, a design firm here in Boston. They were
working for Procter & Gamble, a consumer products company, on the category of home cleaning
products.

And they made the observation that there are a lot of filthy brooms out there. In fact, it's hard to
clean the broom. And based on that observation, they developed a solution that's become a
billion-dollar product category. They developed the Swiffer, which is sold by Procter & Gamble
and what it is is it's a mop they can be used with these removable disposable wipes. So the wipes
are of course sold and customers would use many boxes of these.

That gives Procter & Gamble not only a durable good but also a disposable which is a second
revenue stream that they love. And this has become a huge seller for Procter & Gamble.
Customers really love it. But it all came from that one observation. It's hard to clean the broom
and we can make cleaning the broom easier and develop a great new product.

Video 2-10 (9:11): Customer Needs Analysis - Process Steps

The process for understanding customer needs has five steps. You start with defining the scope.
That usually comes from the mission statement that came from the planning phase. I'll show you
an example of a mission statement in a moment. Then the key part is gathering information. So,
that's the go and see step.

Through interviews, focus groups and observation, we do some kind of what's called, what's
sometimes called an ethnographic study to understand the different types of customers and
what are their needs. We then take the raw data and interpret it. I'll teach you a technique for
writing needs statements and organizing them into a useful list.

That's usually a hierarchical list. And most importantly, to identify the unaddressed and the latent
needs. Next, we might quantify the importance of these. Some needs to be addressed are more
important than others. Honestly, I think usually that should wait until later. Because most of the
needs are not involved in trade-offs.

And while we could painstakingly go about identifying the relative importance of every need, it's
usually not a good use of your time. And instead, we wait until we've developed solutions,
identify that some needs are in trade-offs with each other and that's where we will go and
identify the relative importance of those specific needs. And we might do that later on. And then
finally the end of the process, as all good processes should have, is a reflection and a feedback or
improvement step.

So, we look at how did we do? Did it work well? If we had to do this again, would we do it
differently? And so that would be the end of the process. To illustrate this process, let's look at
an example in some detail. Let's take the example of the Nest learning thermostat. So, as you
know, this is an innovative product that addresses customer needs of controlling the heat and
air-conditioning in our home in an innovative way.
We'll start with the mission statement. So, the mission statement is just a way to formalize what's
the goal of the project and how will we go about it? So, you see a few elements of the mission
statement here. The product description, programmable thermostat for residential use. That
doesn't specify a specific solution, the learning thermostat with the web interface.

That's a solution that came out of understand the needs and developing innovative ways to
address them. The benefit proposition is this is a simple to use, attractive thermostat which saves
energy. Usually a mission statement includes business goals. They're usually formulated in terms
of maybe a time, a cost and an equality goal.

And you see those here. We always identify what is the primary market. In this case, residential
consumers. So, it works in a residence and a consumer can install it themselves. A secondary
market might be in heating ventilation air conditioning contractors. Who would install these in
customer's homes. Nest decided that if they could address the market where customers do it
themselves and make it really easy, it would be a much, much bigger market. And then finally,
there are usually some assumptions that are listed.

So, in this case, we're assuming that this is a direct replacement for an existing thermostat. That's
an assumption. They didn't have to make that assumption. They decided that that would be the
way to have the biggest market that they wanted to address. And that it would be compatible
with almost everybody's home systems. And finally, the last thing that stakeholders, as we know,
were to talk to customers and there are many types of customers. Users, retailers, sales force
and so on.

And so by listing them explicitly, it reminds us that we need to go and understand the needs of
each of those types of stakeholders. In the mission statement, we list assumptions. These are
often developed in a strategic analysis. That we make some assumptions that the team should
respect. So, for example, they decided this should be a replacement for an existing thermostat.
That's an assumption that we've made.

And it's an assumption that allows us to have the largest possible market. And therefore it has to
be compatible with most existing heating and cooling systems and their wiring interface. And
finally, the stakeholders. We list explicitly there are many different types of stakeholders,
different types of customers and this reminds us to go and talk to the users, the retailers, the
sales, the legal and so on, as we do our needs analysis.

Now here's the list of customer needs for the Nest thermostat. You see this is a list. But I'd like
to emphasize a few important points. It's an organized list. You see, it's grouped into primary and
secondary needs. The primary needs are the bold headings. And there are eight of them. And if I
read just those bold headings, you'd get a good understanding of the whole picture, what does
this thermostat got to do? The primary needs are the thermostat is easy to install. The thermostat
lasts a long time.
The thermostat is easy to use. Controls are precise. The thermostat is smart. Personal. It's a good
investment. It's reliable. Those things at the highest level, that's what we've got to address. Now
under each of these primary needs is a list of secondary needs and that gives us the details of
what each one means. So for example, the biggest category, the thermostat is easy to use, it's
got about 10 or 12 points.

The thermostat user interaction is easy to understand. The thermostat is easy to learn to use and
so on. So, if we want to understand exactly what does it mean, easy to use? Well, it means these
10 things. And each of those was understood, was identified by speaking with different customers
and observing what happens as they use existing thermostats and some of the frustrations that
they had with them.

So, we group the needs in the primary and secondary needs and that grouping is usually done by
the team. They talk about different needs. We put them together into these lists. Sometimes we
have the right, the title of our primary, highest level need. Sometimes that comes directly out of
customer interactions.

Now, the next part, the latent needs, you see we've identified those, and they can be done in
different ways. You can put in bold or underline or green text if you'd like. Here are there are
exclamation marks at the beginning of have each one. And you'll see there are several needs
which were identified as latent. That as existing products do not address these and nobody really
understood them before.

So, for example, the thermostat automatically responds to occupancy. That's a latent need. Of
course we'd like it to automatically keep us warm when we're there and maybe save energy when
we're not there. So, if we can find ways to solve any of these latent needs, really, we might have
a great innovative solution. Ideally we'd address them all. You don't know if you can address
them all until you've done the concept generation work. And now you also see a few importance
ratings. At this point, maybe we don't know enough to know where we should focus attention
on which needs are more important than others.

But at some point, we will want to know that if there are trade-offs. For example, there may
never be a trade-off with, well, let's say the surface finish of the thermostat versus the quality of
its heating system control. I don't see how those would trade-off. I can set the surface finish and
make the working mechanisms entirely independently.

So, I don't need to know whether one is more important than the other. I can just decide can I
deliver a solution to that need. On the other hand, there might well be a trade-off between, say,
how well it controls the heating system under situations where we're not home and another
need such as it's easy to control using a smart phone interface. So, maybe I've got a solution that
it trades off the satisfaction of those two needs.

In that case, I might want to know. Should I sacrifice this and deliver more of that? Or the other
way around? And we'll usually identify those importance ratings later in the process. So, this is
what we're looking for. A complete list of customer needs that's organized in a useful way, that
also calls out for us what is most important, the latent needs. What we'll see next is exactly how
do we write these need statements.

Video 2-11 (4:59): Guidelines for Writing Need Statements

Creating a list of customer needs might seem really difficult based on that example but in fact
there's a technique involved that makes it pretty straightforward and the technique involves
these five guidelines. I'll explain each one, the first which is really the most important one is called
what, not how and what that means is that customers will often tell you a solution, how to solve
a problem.

But what we want to capture here in the needs statement is what the problem is, not how to
solve it. In fact, if they give you a great solution you should hold onto that, save it for the concept
generation phase next. But for now we want to write down what exactly the problem is, so in the
Nest example a customer says, voice of the customer might be, I would like my iPhone to adjust
my thermostat.

Well, the right way to capture that needs statement is the thermostat can be controlled remotely
without requiring a special device. The wrong way to do it is to say a specific solution, the
thermostat is accompanied by a downloadable iPhone app. And so what we want to do is to
capture faithfully what it is the problem is they want to solve without necessarily restricting
ourselves to a solution. So that's the most important principle, what, not how. The others just
help us create a list that's in a consistent format.

So for example the next one, specificity, the customer says I have different heating and cooling
systems, so that's what they say. Now what do we want to write down, we write a thermostat
can control separate heating and cooling systems, it solves their problem.

Instead of something that's maybe less specific, we write the thermostat is versatile, well that's
true we want it to be versatile but in fact that's not specific enough, the customer told us
something about their special situation, we want to capture that. Next, try to phrase the needs
statements as something that's a positive not negative.

So we're going to write a sentence, try to put it in the positive. So for example the customer says
I get tired of standing in front of my thermostat to program it. So what we write is the thermostat
can be programed from a comfortable position, that's a positive statement, instead of saying
something negative.

The thermostat does not require me to stand in front of it, that would just -- and there's nothing
wrong with that really except if we have a lot of statements and some are yes and some are no
it's a little bit harder to read the whole list and understand it easily. So we try to phrase them all
in a consistent way.

Next write the needs statements as an attribute of the product itself, not describing something
about the home or the users, describe the product. So for example the customer says, I have to
manually override the program if I'm home when I shouldn't be. So what we write is the
thermostat automatically responds to an occupant's presence. It's an attribute of the product.
Instead of writing an occupant's presence triggers the thermostat to adjust and so forth. So that
would be not an attribute of the product that would be talking about the user.

And then finally and this may seem really picky but we say avoid words like must and should.
Because, and this depends on where in the globe you learned English and so forth but must in
some cases sounds more important than should, and actually other places in the world should is
considered more important than must.

And so really to eliminate that confusion, although we don't really know which is more important
than others, we just leave those words out. And the sentences work beautifully without them.
So the customer says I'm worried about how secure my thermostat would be if it were accessible
online, we simply write the thermostat controls are secure from unauthorized access.

Instead of writing the thermostat must be secure from unauthorized access. You see if I had
written must or should that sounds one is more important than another but in fact we just leave
those words out. And if we need to identify the importance we'll do that later on. So these are
the five guidelines and if you can write all the needs statements using these guidelines you get a
really good useful and consistent list as I described with the Nest thermostat example.

Video 2-12 (2:38): Team Assignment 1 Setup

You should now be in project teams for this course. And the first thing you've got to do is to
decide which of the top opportunities to focus on. So, we have the results of the down selection
of our opportunity tournament that you participated in online.

We've identified the top few of those and your team should select one of those top ideas to work
on for this course. So, that can be a discussion among everyone in your team. You can do some
voting however you'd like to do it. But you've got to identify one of those top opportunities that
you'd like to work on for the duration of your course project.

Now, once you've done that, the first step that you work on in your project team is to write down
a mission statement. This might just be a few sentences about what opportunity we're addressing
and what innovation we're trying to create. I don't expect that mission statement that you'll write
it down just right the first time.
You might write it down, let it sit for a week or two and then revisit it. And maybe you'll change
it based on something that you learned over the next few weeks. Next, I want you to do the needs
analysis. So, to do this you've got to do some field work. You've got to connect with customers
wherever they may be.

Hopefully you have some direct access to them or maybe you have some online or indirect way
to connect with customers. But you've got to do some observation. You got to make some direct
inquiries, have some conversations and most importantly, try to identify the customer needs and
the latent or unaddressed needs.

And the final part of this assignment is to write that down. So, use the guidelines that we've
discussed in this module and write down some carefully formulated needs statements. I don't
expect that you'll have a list of a hundred as you might have in professional practice if you were
doing this project for real.

But for the purpose of this class, you should certainly write down several, maybe 5 or 10 and pay
special attention to are there one or two or three of them that are either latent needs that are,
have not been understood in the past until you've done this work or they're unaddressed needs.

They're understood that they're not being well addressed by existing products. And if you can
identify some latent or unaddressed needs, those could be the very beginning of a really
important innovation.

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