8/14/2019 POV: How can testing be configured for ideas rather than the other way around? How can we achieve the proof a

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SequoiaPartners

2010 Sequoia Partners. All Rights Reserved.

Background

Pure Insight asked Sequoia Partners to share expert knowledge to address thefollowing question:

How can testing be configured for ideas rather than the other way around? How canwe achieve the proof another way?

Our Response

Sequoias experience has demonstrated identifying opportunities and validating ideasboth play a major and interconnected role in determining the most successful path fornew products. Each has its unique challenges that require a paradigm shift in three

fundamental innovation practices to ensure companies are making the best businessdecisions:

1. Become the eyes of consumers over an extended period of time, instead of onlythe voice of consumers at one point in time.2. Demonstrate needs and ideas to consumers, rather than discuss them.3. Adopt a more rigorous process in the front end, rather than accept inefficiencies inthe middle and back end.

Opportunity Identification

Challenge: Existing methods miss real growth opportunities.

Business decisions are made with incomplete information about consumer decisions.Nearly all consumer knowledge is based on interviews, whether it be throughethnographies or surveys. These methods do not paint a complete picture ofconsumer decisions as they collect a fraction everyday behavior. Academic researchhas shown that up to 95% of all behavior and thoughts are either forgotten,misremembered, or simply unrealized.

Through extended observation of product usage events via cameras, coupled with anon-going dialogue about motivations and rationalizations, companies can identify real

behaviors and understand the systems and processes consumers develop tomanage their everyday lives. Through careful analysis of these events, companiescan also identify the illusive gap between perception and reality and create productsthat make consumers lives better.

Extended observation allows for analysis of individual usage situations, the mostdescriptive and accurate way to understand consumer decisions. Situations are multi-dimensional events that encompass the who, what, where, when, and why of productusage. Most importantly, situations capture environmental drivers of consumer choice

8/14/2019 POV: How can testing be configured for ideas rather than the other way around? How can we achieve the proof a

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2010 Sequoia Partners. All Rights Reserved.

(or context) as well as consumers unarticulated needs vital information thattraditional methods miss.

Simply identifying consumer needs for a situation is not enough to support a majorinvestment in any opportunity. Companies need the certainty that discoveredopportunities are not an artifact of qualitative interpretation or sample composition.They need rigorous and objective quantification to inform investment decisions.

Quantifying observational usage event data cannot be completed using commonstatistical tools. A mixture of anthropological tagging, neural network pattern analysisand original multivariate analysis must be used to provide structure and extractmeaning from observations.

Finally, videos and language collected during this work delivers two benefits: videoevidence of opportunities for the organizations sell-in process; and videos andconsumer language that can be used to develop positionings associated with needsfor the identified opportunities.

Validation of Ideas

Challenge: Discussing ideas with consumers may yield the wrong path.

Traditional methods of concept validation, a written positioning and picture of theproduct, requires consumers to be aware of the unmet needs products are trying to

solve. If another product has already educated consumers about the need, or theidea is a line extension of an existing product, the traditional concept board isacceptable. The challenge arises when companies are solving for an unarticulatedneed or a new to the worldproduct.

Consumers will never think they need a new product if they do not recognize theneed. The best way to test these ideas is through visualization of unknownbehavioral patterns that represent the needs the new product is solving. By showingconsumers a video reel of behavioral patterns as stimuli for the problem, they have aframework to think about patterns of their own behavior and can better judge whetherthey would adopt the product into their everyday routines.

Finally, closed-ended scale questions, such as purchase intent and liking, as well asstandardized attributes do not provide a full picture of intent to try and potentialrepeat usage. Blending open-ended discussions with closed ended questions andapplying the same analytical tools used for opportunity identification will provide realmeaning of the scales through actual consumer language. Combining this approachwith the observational approach used to identify opportunities can be used forvalidation of prototypes in a home use environment.