Article Summary: Using Customer Due Diligence to Chart a Winning Innovation Roadmap | Axial

Anthony Bahr Strategex | October 31, 2017

I have summarized the key points from the article below.  To read the entire article, click the link at the bottom of my summary - Eric Gall.

• Customer due diligence should be done prior to closing a deal.
• Many customer due diligence programs are cursory checks with no added value. 
• It’s a missed opportunity to engage with customers and derive insights for post-close growth.
• A well-designed customer due diligence program should:
• Be based on Voice of the Customer (VOC).
• Include quantitative and qualitative customer feedback. 
• Feedback can help mitigate risk and accelerate value creation post-close.
• A VOC-based customer due diligence program is scalable and customizable. 
• You can determine the strength and stability of customer relationships.
• You can address a variety of deal-specific objectives on the buy- or sell-side.

Case Study

• A PEG was looking to acquire a global manufacturer of specialized chemistry solutions. The acquisition target was investing in the R&D for new products. 
• Customers were not expressing strong interest in new offerings. 
• This led to poor ROI on the  R&D investment and compressed margins.
• The seller suspected customers were not innovating leading to limited demand for a broader portfolio of products.
• If true, the PEG would have confidence to reduce R&D investment post-close. 
• If false, VOC would provide alternative explanations and present opportunities to evolve the company’s new product development approach.
• Strategex partnered with the PEG and developed a VOC program to:

1. Improve market share by measuring and identifying opportunities to improve customer loyalty.
2. Boost customer satisfaction by uncovering opportunities to enhance the customer experience.
3. Reinforce competitive advantages and shore up weaknesses by benchmarking against key purchase criteria.
4. Determine if an ongoing innovation program was worthwhile by validating or invalidating the hypothesis.
5. Develop an approach to innovation more likely to succeed by securing a robust understanding of each customers’ internal innovation efforts, outlook for the category, and unmet needs.

The Approach

• Strategex conducted 49 customer interviews across 34 top accounts. 
• All interviews were conducted by phone and lasted about 45 minutes.
• Interviewers used a discussion guide prepared with the PEG.
• Transcripts were provided to the client after the interviews. 
• The data was aggregated, coded and synthesized. 
• The management report outlined key themes and recommendations. 
• The report also included analysis of the data and customer commentary across a variety of segments.

The Results

In respect to the innovation question, the  revealed that:

1. The hypothesis was false. Customers thought they were being innovative. 16 of 34 accounts considered themselves to be highly innovative.
2. The approach to innovation was out of touch with customer needs.  Customers little interest in new products was because they were not relevant to their needs.
3. There was no shortage of innovation opportunities. Customers identified over 200 potential innovation opportunities.

• Armed with these insights, the PEG:
• Closed the deal;
• Increased the R&D budget; and
• Implemented joint innovation programs with key accounts. 
• This led to the development of new products that were highly relevant and in high demand.
• The deal ended up being highly successful. 
• The customer due diligence provided the management team with a launch pad for value creation. It also bridged the innovation gap between the portfolio company and its most valuable customers.

Article LINK

For additional information regarding Florida business sales, acquisitions and valuations, please contact Eric J. Gall, CBI, CM&AP at Eric@EdisonAvenue.com or 239.738.6227. Also, visit our Edison Avenue website at www.EdisonAvenue.com. To search for Florida Businesses for Sale: CLICK HERE