The Innovation Paradox – Kano or why “marketing spoils everything”

I was watching an entertaining short video recently from Gary Vaynerchuk where he talks about a time when “free shipping” was viewed as a huge bonus. Now he says, due to the fact that it has been used extensively as a marketing tool, most people wouldn’t buy anything online unless it includes free shipping! 

In the video, Gary laments that “marketing ruins everything”.

This is a perfect example of the “Kano effect”. If you aren’t already familiar with it, the Kano model (developed by Japanese professor Noriaki Kano) is a theory of product development and customer satisfaction.

In simplistic terms, the Kano model proposes that there are three different kinds of “customer needs” a product can satisfy, and additionally he suggests five kinds of “customer preferences”.

Customer Needs

1.    Basic Needs:  These are basic attributes such as good packaging, excellent operation and a good price/quality ratio. These are required to attract customers.

2.    Performance Needs: These are additional features which may be optional and which help to retain customers. 

3.    Excitement Needs: As the name implies, these are things which excite the customer. Going beyond the expected, customers will queue for a product and pay a price premium if it is exciting enough (as those long queues for new iPhones have repeatedly shown). Meeting excitement needs enables a company to excel in its market.

Customer Preferences 

In addition to customer needs, Kano believes that customer preferences can be divided into five categories:

1.   Attractive quality: extras which a customer doesn’t expect, but when offered create additional customer satisfaction. For example, I recently bought some batteries which featured and inbuilt charge monitor – I didn’t expect that feature, but it was a nice surprise which will motivate me to re-purchase the same brand again in future.

2.   One-dimensional quality: extras which can increase customer satisfaction, but which can also “backfire”. For example, some chocolate companies and soft-drink companies have been accused of using “increased size” promotions as a way to hide price increases – the price remains higher, but the size reduces again. These kinds of “marketing tricks” can result customers feeling misled.

3.   Must-be quality: requirements which are expected. If not fulfilled, customers will not be satisfied with the product.

4.   Indifferent quality: features which are not of inherent value/interest to customers. 

5.   Reverse quality: these are features which have an undesirable effect and create customer dissatisfaction. Often this relates to complicated or expensive features which customers may not want or which may even irritate them. The famous “Microsoft paper-clip” assistant is a good example of a complicated feature which annoyed and frustrated many users who struggled to turn it off. Similarly, Apple’s removal of a basic headphone jack from its phones (and ports from its laptops) has annoyed some customers.

What does this tell us?

The Kano model helps to explain two commonly seen phenomenon.

1.    Existing product features become less valuable over time

2.    Some new features don’t actually add value

We expect a milk carton to keep the milk contained and not to leak. Adding radioactive shielding to a milk carton probably isn’t going to increase the price you can charge customers for it or make it more popular (well, except perhaps in certain extreme cases).

We can see this same trend in the development of digital cameras. Initially a hugely exciting new product, they have become embedded in smart phones to the degree that we simply expect it. Services like Instagram and Snapchat are built on the idea that nearly everyone has a phone in their pocket, which is capable of taking high quality photographs which can be edited and uploaded nearly instantly on a mobile device.

We call this “dematerialization” (the camera has become part of another device) and “democratization” (services are built on the assumption that people will have one).

From a product development perspective, this has significant implications.

Firstly, a product or service needs to continue to evolve and add new “features” to remain interesting. Secondly, it isn’t enough simply to add features – they need to be valuable (and preferably exciting) to customers.

If you have any responsibility for product development (for example, if you are a Product Owner), I would like to suggest two tools which you might like to investigate further to help you address this challenge.

Pirate Canvas

The Pirate Canvas is a key part of the XSCALE Product Management (XPM) practices. It is based on McClure’s “Pirate Metrics” for the customer lifecycle (acquisition, activation, retention, referral, return – also known as “AARRR”), as well as Adzic's Impact Mapping and Goldratt's Theory of Constraints.

To create a Pirate Canvas, you consider all the various participants in a market (customers, providers, suppliers) and you ask the simple question, “what sucks” for each of these participants. 

Using Impact Mapping you then identify the constraints involved in changing market behavior. It focuses collaboration on the answers to 4 simple questions:

• Why do we want to change market behaviour - as a throughput based Goal?
• Who are the market segments ("Actors") whose behaviour must change to do that?
• How do we need their behaviour to change to maximise Impact on our Goal?
• What about the Deliverable will cause each Actor to change this way?

The point of Impact Mapping is to identify Deliverable features to cause the desired Impact.

You can find a more detailed description of Pirate Canvas with specific examples of its use, here.

Four Lenses of Innovation

The Four Lenses of Innovation is part of a comprehensive suite of innovation practices developed by Inpirium, a leader in the field of innovation.

The “4 Lenses” are the four key business perspectives that will enable you to discover groundbreaking opportunities for innovation and growth.

The 4 Lenses

The “4 Lenses” tool provides a fascinating and inherently “agile” way of thinking about organizational innovation. I already introduced you to the “Pirate Canvas” tool from the XSCALE set of practices, however the “4 Lenses” provides an expansion in the breadth of the thought process as well as bringing a well-structured process for its execution.

The heart of the approach is considering a particular business, product or service from four different perspectives, each of which is termed a “lense”.

1.    Challenging Orthodoxies

Questioning deeply-held dogmas and common assumptions within your company and industry.

This “Lense” is the closest to the XSCALE Pirate Canvas. Where we asked “What Sucks?” about a product or service, the Understanding Needs Lense encourages you to ask questions like, ”Why is this business so absurd?” and “What could we do more of?”.

This kind of questioning can lead to significant breakthroughs in thinking about your business model and what you could do differently to differentiate your product or services, or even define a new kind of market entirely!

2.             Harnessing Trends

Spotting unnoticed trends and discontinuities which could substantially change the rules of the game.

Being able to spot the next “wave” in your industry positions you to better ride it to greater business success. Digitalisation, AI, cloud computing, social media, globalisation, democratisation … what changes can you leverage to add value to your customers and use to create your next product or service?

3.             Leveraging Resources

Thinking of the firm as a Portfolio of skills and assets, not just as a provider of specific products or services.

In the tradition of the Renaissance innovators, the Leveraging Resources Lense encourages thinking about the skills and assets that an organisation has, which can be recombined or stretched into new opportunities.

4.             Understanding Needs

Learning to live inside the customer’s skin, identifying unmet or unvoiced needs and trying to address them.

How can you make the world a better place? What existing issues or frustrations could you help to alleviate? The best way to gain new customers is to give them something they need or want, even if they don’t yet know it themselves!

An Agile approach to Innovation

The Four Lenses of Innovation fits seamlessly with the XSCALE practices for agile organization and makes a nice complement to the Pirate Canvas and other practices which constitute part of the XSCALE Product Management (XPM) knowledge area. I would certainly encourage you to do your own research and find out how this tool mightd be of value to your own organisation.

Keep on Innovating!

In product development, as with most things in life, change is the only constant. I wish you every success in your innovation journey.

Please feel free to contact me if you would like any further information on any of the practices mentioned in this article.

Be Agile and Keep Innovating :)

Chris Young

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