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Sprint’s Dan Hesse on Why Consumers Still Don’t Dictate Product Development

In this session from Techonomy 2011 in Tuscon, Ariz., Dan Hesse, CEO of Sprint Nextel Corporation, argues that even though consumers now play a big roll in improving customer service via social networks, they still don’t dictate new product development. Techonomy’s David Kirkpatrick moderated the session.

Hesse: The old product development cycle that we learned about in business school, where you have introduction, growth, maturity and decline, it just gets scrunched. You don’t really have to do as much market research and test marketing. You can do it almost nationally very quickly and you get feedback almost immediately, whether the movie should go straight to DVD or whatever it is. You’re going to get that very, very quickly. We’ve used it. We think that as a consumer company it’s great because it provides us so much more information about what customers like or don’t like. I personally don’t think that customers play a larger role in any way in terms of product development and innovation.

Kirkpatrick: Than they used to?

Hesse: Than they used to. I don’t believe that. But, and there are lots of companies that pride themselves in taking practically no input and are very successful—

Kirkpatrick: Like?

Hesse: Like Apple.

Kirkpatrick: That’s not lots of companies, but go ahead.

Hesse: But there are others as well that will introduce something, and I think the axiom is “Customers don’t know what they want, but if you put it in front of them they know what they like or what they don’t like very quickly.” That’s really the beauty of social media. When I arrived at Sprint almost four years ago the brand was declining. We had lots of issues with our customers. Customers weren’t very happy. We were able basically to harness the data that we were getting, so we went to reason codes—why were they calling us, why were they contacting us online, what were their pain points—and organized the company around just those numbers and said if customers were calling in because calls were dropping, if customers were calling in because they didn’t understand the bill, if customers were contacting us because of the retail experience, I took those numbers every week and the head of network or the head of marketing or the head of billing or what have you owned that number to get it down. I will sound our horn a little bit, but we were last in customer satisfaction in the industry.

Kirkpatrick: When was that?

Hesse: We were actually last in 2007, 2008 and 2009. In 2010 we moved out of the cellar, and this past year we were in the number one spot according to the American Customer Satisfaction Index, as well as J.D. Power. We won three J.D. Power awards last quarter.

Kirkpatrick: That’s quite a rapid turnaround.

Hesse: Thank you. The ACSI, which, as a lot of people know, is the University of Michigan study, which is the largest CSAT study, not only did we move from last to first, but in the last three years we are the most improved US company in all 47 industries that they look at. And it is this humongous amount of information and data that comes from customers—

Kirkpatrick: That’s what enabled it to happen. You just paid really close attention to the data, and yet you’re still saying that product development isn’t any different that it was before.  I don’t get that.

Hesse: Not really, because of the innovation level—so, for example, I just got back from a week in Asia, visiting all my potential suppliers and, quite frankly, most customers can’t even envision what’s possible.  By the way, by taking the kinds of information, the kinds of feedback on let’s say this generation of device—I won’t say that completely.  You do know, for example, that you really want your next phone to have longer battery life.  That’s a pain point.

Kirkpatrick: You don’t have any choice about that.

Hesse: Yes. Customers are making it very clear that they don’t like the battery to die during the day, especially with all the things they’re doing on the device, and the screen’s getting larger. They want a larger screen, which means it’s going to suck more battery, yet they want the battery to last longer. So you have to work on technologies and capabilities that enable both. So I won’t say that there’s no input into the development cycle, but there’s not that much market research, really. You like to surprise customers and, again, I use Apple as probably the best example of a company where when they announce a new product there’s literally a queue around the block. It reminds me—I used to go to Russia back before the Iron Curtain came down and you’d be on a bus and you’d see this huge line.

Kirkpatrick: It was to buy underwear, yeah.

Hesse: Or bread. But I’d ask the Russian guide, “What are they in line for?” and they’d say, “Well, they don’t know. They just know there’s something there.” They don’t know, but people would just get in the queue. And in an Apple Store they don’t even know what the new device is, but they know it’s from Apple and they get in line.

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