Vodafone: adopting a system for managing new ideas

The Vodafone Group provides a full range of mobile telecommunications services, including voice and data communications. Vodafone has equity interests in 27 countries and partner networks in a further 27 countries with almost all the group's mobile subsidiaries operating principally under the brand name 'Vodafone'. Turnover for year end March 2006 was £29.4 billion.

A big issue for companies like Vodafone in the mobile phone market has been how to differentiate. New, breakthrough products are critical to win in this highly competitive sector. However, the industry has traditionally been technology-led, rather than customer-led. This has meant a pronounced lack of competitive differentiation.

Vodafone had come to realise that its traditional concept testing was not working hard enough. While hundreds of product concepts were tested, there was no standardised testing, no benchmarks and no way to compare one concept with another.

To overcome this, the Vodafone Global Insights team developed the Differentiation Potential System (DPS). This was an end-to-end system designed to put customer insight at the heart of product development. It was a complete business process to ensure that the voice of the customer was integrated into the way products were developed and priorities set.

By the end of 2005, the system was providing Vodafone with the common currency by which teams could measure the success of their product ideas. In addition, highly detailed diagnostics meant that further development on every individual product could be based on understanding customers. Even more significantly, it changed the way the company does business by having a profound affect on the way it perceives and reacts to customer needs.

SETTING THE SCENE: RETHINKING THE NEW PRODUCT PROCESS

Sustainable differentiation has been a huge challenge in the highly competitive mobile telecoms market. All mobile operators have already been offering their customers a wealth of different products and services: voice, text, picture messaging, video calling, games, mobile internet and so on. For the customer, the options can be bewildering. Price/value promotions have played their part, but can't ultimately deliver sustainable differentiation. The market is awash with a huge array of different tariff options, bundles and offers. While these might be effective for a short period, offers can easily be replicated by competition (and often are).

The Importance of 'Breakthrough' Products

Vodafone has been keenly aware that 'breakthrough' product concepts are critical to maintain its position as the market-leading mobile operator across the globe. Customers' expectations in the mobile market move very fast, so it is critical to have a pipeline of new ideas and new products ready to deliver against their needs. And, within Vodafone, there has been no lack of new product ideas. At any one time, there can be upwards of 50 different products at various stages of development.

The question for the company was: how could it be sure it was putting development resources behind the best ideas with the greatest potential? It was critical to ensure that these important decisions were informed by the best information possible about what customers really wanted and what they would really use.

However, different methods of testing were making comparisons impossible. Each was using different metrics and methodologies. There was no way to make objective comparisons of one product idea vs another.

The lack of a historical database also meant ideas being reworked for no reason. With no way to track what ideas had been tested in the past, and how they performed, the organisation was wasting resources on unnecessary rework. And changing business objectives mean that there could be no single consistent measure of 'success'. As the organisation's focus shifted (for example from 'acquisition' to 'revenue per user' to 'brand'), so did the measures of success.

Getting Results

To overcome this, Vodafone's Global Insight team set its sights on bringing all concept development research together into one system to promote consistency, simplicity and actionable results. Working in conjunction with strategic marketing consultancy Oxford Strategic Marketing and market research company Research International, a comprehensive global diagnostic tool and process was developed.

There were four key objectives of what was named the Differentiation Potential System (DPS).

• Provide one top-level measure of customer appeal for products and services at all stages of development by introducing a consistent, comparable 'currency' by which all products and concepts could be measured.
• Provide diagnostics on every product concept – driven by customer insight – to help optimise the development process. This called for communicating customer insight in a way that was digestible for development teams, enabling them to apply what they learned to the products they created.
• Provide a way to reduce the complexity of many ideas researched with many customers in many markets, both in terms of the testing process to manage this, and the way in which results were reported.
• Make it easier to put the right resources against the best ideas and product concepts for the right reasons. Consistency in one common measurement approach, used across the globe, was critical to make this happen.

CREATING A NEW SYSTEM FOR MEASUREMENT

First, a new and harmonised way of measuring product concept performance was developed: the 'DPI Score'. This combined a number of key product concept performance metrics into a single number. To measure these metrics properly, a great deal of preliminary research and analysis was conducted by Research International to identify the 'killer questions' that had the greatest correlation with actual product performance and overall appeal.

The score effectively creates the common, consistent criteria that enable the swift comparison of any product concept with any other. This is critical in addressing the first objective for the new system: to establish one common currency by which all product concepts can be measured.

However, a single score was not enough. Vodafone worked with OxfordSM to design a 'performance profile' which would be delivered for every concept. A good score is not a necessity, but an indicator of 'a worthy concept'. The performance profile measures every concept tested against the most important key performance indicators (KPIs) for Vodafone's business.

The full mix of metrics helps establish what role (if any) a product could play in the portfolio. Few (if any) products can deliver great results against every KPI. Different products need to play different roles in the portfolio. Some will help drive frequency of usage, others will help drive brand preference, and so on.

BUILDING A BUSINESS PROCESS AROUND RESEARCH

The new system is not just about smart customer research: it is an end-to-end system, designed from the start to have a maximum impact on the business. A top-line overview of the different elements of the DPS process designed by Vodafone and OxfordSM would consist of:

• idea generation
• prepare and prioritise stimulus
• fieldwork
• analysis
• action planning.

Management sponsorship and training for each stage ensures that the system is being embedded into the organisation. That means that insights generated by research will now be at the heart of how products are developed and prioritised.

Centralising the process provides a 'hub' for all development teams and eliminates the need for different testing on different products in different markets. The cycle is run four times a year. There is always an opportunity for any development team in Vodafone to submit their ideas, and get detailed results back in just a few weeks.

Better still, the system allows them to see the results for their own ideas in context with 45–50 other concepts run during the same wave of fieldwork, and also compared to the results for every concept ever run through the system (already over 130 by the end of 2005).

ANCHORING IDEAS IN CUSTOMER NEEDS

A structured approach to concept creation ensures that every new idea is anchored in customer needs. The new approach thus breaks down concepts into their constituent elements – need, benefit, features etc. (the 'raw material' for each concept). There are clear guidelines for what goes into each part. The approach enforces rigorous, customer-focused thinking.

Extensive training has established capability across the organisation, enabling non-marketing staff to regularly submit the elements of a well-structured concept. The company could not simply rely on a few marketing-savvy individuals adept in concept-writing. It 'demystified the art' and trained development teams, so they no longer need to go through the marketing department or an agency. An online concept-submission system has reinforced the discipline. Users fill in all the key elements of a good concept, with online hints and tips available to build on the training. Every submission is crafted into a well-articulated product concept in customer language. An independent copywriter ensures consistency in quality, style and use of language.

FIELDWORK ON AN INTERNATIONAL SCALE

In every wave of research, Research International managed concept testing with over 20,000 customers across four countries. This mix of countries means that a sufficient range of different customer needs are collected to help predict likely reactions in most markets.

Every product concept is tested with every customer segment in every market, enabling Vodafone to see if its product targeting is right. In any wave of research, each of the 45–50 concepts will be seen by around 1200 customers. Every concept can be tested with a significant sample of each of Vodafone's strategic customer segments in every market. The company can thus immediately see the relative potential of any idea across segments and across markets.

Doing fieldwork online makes sure the process is fast and flexible, with research turned around in just three weeks. Customers are recruited from online panels, while Vodafone can also recruit 'on the fly' during fieldwork and react to unexpected shifts in customer mix.

The research questionnaire is very focused. Every question is chosen to deliver against specific preplanned analysis. Even though the company has collected very comprehensive data on every concept, the questionnaire takes just 20 minutes to complete. Within this time, the company can capture information on the customer's profile, their usage of technology, and the critical KPIs of concept performance.

Because the research is totally consistent, it enables comparisons across all products, all segments and all markets. This is critical if the system is to establish a common currency and benchmarks to underpin the building of a massive database of results with both qualitative and quantitative data.

REPORTING BACK

Vodafone worked with OxfordSM to develop a suite of bespoke reporting tools which allow immediate comparison of every concept with every other. This has revolutionised the company's approach to portfolio planning, allowing Vodafone to answer a range of important questions such as:

• which will drive high penetration of usage?
• which will encourage highest frequency of usage?
• which concepts are most likely to drive revenue?
• which will encourage switching or loyalty?
• how does each compare with class bench marks?

Further diagnostic tools have been designed to provide a detailed understanding of strengths, weakness and opportunity areas for each individual concept. The product development teams are now better informed than ever because they can answer questions such as:

• which customer segments does this concept appeal to?
• what's driving the appeal?
• when and how might they use this product?
• what impact might it have on Vodafone's business?

Within six months, the system was fully established as the single consistent global approach for testing new product concepts and was helping Vodafone move from a technology-led to a customerled organisation. By the end of 2005, the system had already built up such value and credibility among the insight, product and proposition teams, that the company found that people throughout the business were keen to submit even more ideas than there were research slots. That led the company to review ways to improve the capacity and flexibility of the system.

TRANSFORMING THE BUSINESS

Within a relatively short time the company had become far more decisive about putting resources behind the best ideas and killing off the worst. Six key initiatives were halted or de-prioritised as a direct result of the system's output. Again, this was a very tangible measure, demonstrating that the results had gained real 'currency' in the organisation. Senior managers were genuinely using the system to guide them in some of their biggest decisions.

For example, the features of the 'Vodafone Simply' handset (one of the best-selling in the market) were changed based on the system's output. Even for a product which had already hit the market, the powerful diagnostic results were crucial in defining 'release 2'.

All decisions on which products to include in the product roadmap now always incorporate the system as a critical input. It is used not only to help prioritise resources for one concept vs. another, but also to check that each individual product concept is genuinely delivering against a real customer need.

It has also revitalised the focus on customers' core need for communication. The mobile market continues to be drawn by the excitement of products delivering entertainment through mobiles. But the system has provided a great reality check, and is helping Vodafone renew its efforts to look again at what customers really want their mobile to do: help them to communicate better.

BECOMING MUCH MORE EFFICIENT

The efficiency of the system has also meant that more concepts are being tested more rigorously than could ever have been achieved in the past. Centralising the concept testing process for the globe has delivered huge economies of scale as well. Funds and resources are no longer being wasted on ad hoc testing.

In addition, the system has been used to help build business models and inform financial planning. The system's range of metrics on potential penetration, usage and revenue from new products is proving invaluable to teams that need to estimate the business potential of new product ideas.

Furthermore, it is becoming a key input in understanding customer trends. Comparing the results over time allows the company to see how customers' needs from their mobile are changing. This is an important input for the innovation and idea-generation process.

By the beginning of 2006, even Vodafone's local market operating companies were seeking to apply the approach. There is enormous potential for the system to spread its wings further, and for the techniques established at a global level to be used at a local level, especially for testing local variations of product concepts, or market-specific initiatives.

The company is confident that putting customer insight at the heart of new product development will result in a step change in the usage and adoption of Vodafone's future products because the products which are being developed as a result of this comprehensive approach are better grounded in real customer needs than anything ever done in the past.

EXTENDING THE TOOLKIT

Beyond the bespoke tools mentioned in this article, there are also a range of different analytic and reporting resources available to meet the needs of different internal stakeholders. These include the following.

1. Standard global reports for the whole business. Quarterly reports, published by the Vodafone Group Insight Team, summarise results from the latest wave of research, with comparisons against all historical benchmarks. They are based on a standard set of customer breaks and include commentary and interpretation of the data.
2. Online analyser for specific queries. This is a flexible system to create a user's own customised charts, with search results for any concept past and present. It also contains plot results for any customer group in any country.
3. Interactive Excel database for detailed analysis. This encompasses every data point for every concept by market and by customer segment. It is available for detailed analysis and understanding of what lies beneath the published results.
4. Action planning tools to help development teams. These deliver all key data on one concept in a form that highlights key issues and opportunities, along with a structured approach for planning how to develop the idea further.

This article featured in Market Leader, Autumn 2007.