Companies that have led their markets for years or decades sometimes get complacent and think they know what the market needs better than customers do. With that kind of attitude, they will eventually lose touch with true customer needs and allow others to sweep in to displace them. Even well-run companies can suffer from this affliction. The question is whether they will recognize it in time to do something about it.
When I joined Hewlett-Packard Company as an engineer fresh out of college, I discovered HP was proud of the fact they did market research using a method known as the “next bench syndrome.” As Dave Packard explained in his book, The HP Way (Harper Business, 1995), when R&D engineers wanted to know what new products to develop, rather than talking to real customers they would walk across the room and talk to the engineer sitting at the next bench. Whatever that engineer needed would probably appeal to paying customers.
During its first decades of existence, that was an effective strategy. HP manufactured test equipment for electronic design engineers, so the needs of the HP engineer sitting at that next bench were remarkably similar to those of paying customers. Even when HP made its first foray into the computer market, that strategy worked. The wildly successful handheld calculator product line launched in 1972 was designed to replace an engineer’s slide rule.
As HP grew its computer and printer business, it began serving large markets where the needs of a typical customer didn’t closely match those of the HP engineer sitting at the next bench. That put the company at a disadvantage. HP R&D engineers were used to talking to each other, not to marketing, about ideas for new products. In the divisions where I worked, R&D treated marketing as a second-class citizen whose job was to sell the products R&D developed, not to conduct market research that would help R&D know what products to invent. This meant market research was not a skill those marketing departments had developed.
Even when HP entered the desktop computer market in the 1970s, they continued with the “next bench” strategy. Their first computers were targeted at electronic design engineers who wanted to automate their test setups. Although those computers sold to other customers, it wasn’t because they were ideal solutions but because at the time, the industry was in its infancy and there was nothing better available.
That changed in 1981 when IBM introduced the first DOS-based desktop computer. It was the product that moved the personal computer industry out from the domain of a few early adopters and into that of mainstream customers. Soon, a range of secondary manufacturers were producing IBM-PC compatible clones, although the degree of compatibility varied widely by manufacturer.
HP claimed its first DOS-based personal computer, the HP-150, was better than IBM’s because it was the first to have a rudimentary touchscreen. But it had one major problem: it could not run standard versions of many of the most popular software programs of the day—spreadsheets like Lotus 1-2-3 and word processors like WordStar. HP’s product development was still led by R&D engineers driven by technology rather than marketing engineers attuned to customer needs.
To its credit, HP recognized the need to rectify the problem. Product lines in the computer and printer businesses eventually developed robust processes for market research and product portfolio management, which is one reason today’s HP is the world’s largest manufacturer of inkjet and laser printers and the second largest manufacturer of personal computers.
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