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How your customers could be killing your chemical or material innovation

By SpecialChem on May 26th, 2020

Customers are the lifeblood of a company. Creating strong relationships is vital to build a long-term symbiosis and create sustainable business.

But equally important is Smart Innovation. This powerful growth catalyst is also indispensable for the survival and competitiveness of a chemical company.

However, the trend for successful launches of new specialty chemicals and materials has been anemic.

Most innovators and business developers are killing their darlings before they even reach the manufacturing phase. Worse, the small percentage that does survive often do not see the light for more than five years.

The reason?

Accepting biased customer feedback as a trustworthy indicator of the market's true needs.

Picking favorite customers: a distorted bias yields distorted results

Picking favorite customers

The success of a product launch is anchored on solid data points, not opinions or assumptions. But where does this data come from today? Your default relationships — Customers.

Many companies face this scenario: your company’s R&D works night and day, creating a new chemical product — for example, a new dispersing agent for zero VOC coatings. A significant amount of blood, sweat, and tears by both R&D and marketing departments, along with financial resources, are poured into its development.

You develop the prototype and eagerly test it with your current customers, but they are all but underwhelmed with your brainchild.

Does that mean your product is not up to the standard?

Possibly.

But it is even more likely that the participants in your market validation experiments were not an accurate representation of your target marketa distorted sample will always yield distorted results.

Selection bias is a common blunder chemical companies make during the product validation process. Picking existing favorites from your customer base for prototype testing gives you a hyper-narrow view of market demand.

In fact, the data gathered from this segment is not representative of your true market. Information derived from this data is then erroneously extrapolated to make inferences about larger populations mimicking your actual customer base.

This gives rise to a product launch bedded on tainted data, which brings in dream-crushing results.

Hyper-pleasing that one big fish

Hyper-pleasing that one big fish

In many industries, including the chemical sector, it is common that a few players make up 60% to 80% of the market volumes. These are the heavy-weights everyone wants to have as a customer.

Studying these big-customers’ needs and creating a solution is great— but, more often than not, the development and testing cycles are very long at these large companies. One of the reasons for this is risk.

As the product inventor, you might think about how you wish your big customer would just take one look at your product and its amazing benefits, and they would buy now.

Even if your product offers substantial benefits, a case of failure will slap them with harsh repercussions that are greater than the benefits your product supposedly provides. Therefore, they will never risk jeopardizing their reputation, business and relationships and may certainly be unwilling to lead the way.

Consequently, some testing processes, especially at key players, can last for years. Extended testing is necessary for those companies with limited flexibility, and it is these same targets that are the most lucrative.

But these should not be your primary launch target, or sole launch market, because they are difficult and slow to penetrate. You should keep your options open to other segments and companies that would value your chemical product. This way, you are not putting all your hopes and dreams into one basket.

Response bias due to your customers’ false optimism

Response bias due to your customers’ false optimism

When a chemical company finds the perfect customer, sparks fly on both sides. The customer gets a reliable supplier of chemical for their products, and the supplier gets a loyal customer for years to come. No one wants to create trouble when both parties are in a mutually beneficial relationship.

So, when a chemical company dabbles into seeking prototype feedback from its existing customer base, they are likely to get favorable responses singing praises of their invention.

Testing your new resin prototype with an automotive company — who has been your loyal customer for five years and for whom you’ve been one of the main chemical suppliers of raw materials — may not render the most honest answers because there are strings attached on both sides.

They have an incentive for telling you what you want to hear as they value you as a reliable business partner.

Your customer would not want to jeopardize a perfect relationship with honest — plausibly poor — feedback.

A stockpile of important things left unsaid

A stockpile of important things left unsaid

Testing a chemical prototype with your existing customers is also like a defective pendulum — regardless of which way it swings, it never yields the desired outcome.

On one side, as mentioned above, you get sugar-coated, half-truths driven from a need to protect the business interest. On the other side, there is the problem of shallow feedback.

There are two main reasons for shallow feedback: the first could signal poor prototype testing questions, which can be fixed relatively easily; the second reason is the relationship cadence.

Even if they are your existing customers, it is likely that the relationship does not have the depth to which you can ask them to explain their responses and spend time asking follow-up questions.

Meaningful, deep feedback is a critical prerequisite to growth. Feedback in which potential customers say, “Everything looks great”, or “It’s got great durability” does not enrich and cannot help you refine your product to meet the actual market needs.

You must be able to ask confidently:

  • Can you think of another polyamide that does X and Z?
  • What is the performance under UV light?
  • What problem does this product solve for you?
  • What challenge does it tackle, or should be if not?
  • Was there anything that surprised you while using it?
  • What is difficult or strange while using this compound?
  • Have you encountered this difficulty with other products that are similar to this?
  • How quick and easy is this to use?
  • Did using this take you longer to complete a task than normal?
  • What would you change about this product?

Being able to follow up with your partners with such questions will help you zero-in on the current performance of your prototype, and contribute to identify key areas that need to be improved to make a better solution for your customers’ needs immediately.

Your existing relationship with your customers may influence you not to ask further questions.

You are familiar with their personality traits and temperament. Knowing this information can influence your approach to asking them questions along with gauging how far you feel comfortable pushing them to get meaningful responses — especially when a purchasing dynamic is at stake.

You only have eyes for your prototype

You only have eyes for your prototype

It is easy to dance away in bliss with your wonderful creation. After all, it is chemicals that give the world wings and things. Is it not? You realize the endless potential your product holds, so how can the market, and really all markets, not fall in love with it as you have?

This conundrum has been behind the failure of more than 50% of product launches.

Mismatched value proposition and market needs will always lead to devastating results.

You might think of your product as a utopian panacea — the end-all, be-all solution to all problems — but in reality, it may only solve one or two customer requirements.

Being hyper-focused on your invention and having illusions of grandeur about its potential can put you in an optimal spot where you see a mirage market with insane demand.

You might not realize until it is too late that the demand you see is a mirage — a dangerous exaggeration that causes you to overinvest in a market that will bear little fruit.

Bio-based plasticizers are the perfect example of this bitter failure. After years of relentless pursuit of success, suppliers had no choice but to face the facts. Blinded by the love for their creation, they falsely believed that growing concerns for the environment would lead to a strong demand for eco-friendly PVC floorings. All they had to do was to insert the last missing piece — their beloved product —to complete the puzzle.

It would have worked if flooring manufacturers — and therefore the end-consumers — would not have to pay 3 or 4 times the price of their raw material.

No matter how green this solution was, the value proposition was hopelessly out of balance and disconnected with the market reality.

By not underestimating the power of segmentation, and by not treating your product as the ultimate solution, you will be able to match your prototype with the narrow markets where there really is a demand.

The unexplored markets may hold the most potential

The unexplored markets may hold the most potential

Testing prototypes exclusively with current customers, whether it is due to convenience or necessity, limits your potential to discover opportunities in new market segments that might be hungry for a product like yours.

If you don’t get feedback from consumers in other avenues, you might be leaving substantial profits on the table for your competitors to grab.

Besides, your prototype might be better suited for these other markets instead of for your current customers, who might want you to make changes, which extends the development phase even more.

Limiting the prototype testing to just one segment — to which your current customers belong — may cause you to underestimate the true market potential for your product.

Knowledge is power

Knowledge is power

But let’s not beat around the bush, the only key to unlock this true market potential is knowledge.

Over the last 10 years at SpecialChem, we have been helping chemical suppliers to stay ahead of this race for knowledge. Our market insight projects have confirmed the existence of 2 success factors for innovation:

  • Developing your ability to reach non-customers and unfamiliar markets to learn beyond your existing network the mandatory passage to access unbiased insights and gain commercial certainty.

  • Identifying and engaging with partnersespecially choosing the right profiles over the big profits — which is essential to confront your prototype with the technical reality and ensure that it meets the market needs effectively.

This preliminary groundwork is vital to uncover the mines in your innovation path and lead to a safe and successful product launch — or avoid futile investments to infuse a dead-end prototype for years.

Behind every successful sticky innovation —the kind that takes off with a life of its own — is a heap of market insight that only comes with a well-thought-out market investigation. From validating demand and its performance in real-life conditions, your chemical innovation needs the power of solid market insights that go beyond the faces of your current customers and accurately mirrors your true market potential.

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