Lean Innovation Case Study: Bringing a New Product to Market
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Online automotive resource Edmunds.com has a mission to make car buying easy.
They are known as a pioneer in simplifying car buying, founded in 1966 as a paperback newsstand publication evolving into a website that boasts an audience of over 18 million people per month.
One of Edmunds’ core practices is to routinely reach out to car shoppers to better understand their wants and needs.
But while proven to provide trustworthy ratings, reviews, and vehicle data, consumer feedback showed that the #1 unmet Edmunds.com consumer need was to improve the car-buying process.
So, when Edmunds was faced with the unsettling truth that their very mission was in jeopardy because people were still intimidated by the process of buying a car online, they realized that they would have to do something to ease the minds of car shoppers and reduce the friction in their journey to purchase.
This is the story of how Edmunds.com used Lean Innovation practices to make their mission a reality.
Addressing the Challenge
In order to increase transparency and trust, Edmunds went to the drawing board and came up with a novel concept they called Price Promise: a tool that offered visitors instant, locked-in prices that the company’s dealer partners would honor.
Providing a mechanism for dealers to offer ‘no-haggle’ prices for the exact car with the consumer’s desired specifications, would finally give consumers the ability to see what different dealers were willing to offer for the same car, thus eliminating the intimidation potential buyers felt during the research process.
But even though Edmunds has thousands of dealer franchises in their network, how could they possibly integrate dealer pricing? And, even if they could, would the dealerships cooperate?
Making Price Promise a Reality
This type of innovation had not been achieved before; it was a highly ambitious undertaking to aggregate vehicle MSRPs, True Market Value® prices, correlate VINs with real-time inventory, and develop a method of allowing consumers to obtain a guaranteed price in the highly competitive automobile marketplace. Further, dealers would need a way to provide prices for pieces of inventory.
Leadership was uncertain whether the necessary data from dealers existed in digital form, the level of effort involved in building a tool that could make use of this data, and even whether dealerships would use the tool if built.
Given the level of innovation that would be required for such a large undertaking, Edmunds was hesitant to budget the time and resources without better understanding the outcome. Eventually, they determined that Lean Innovation principles would be the best way to tackle this uncertainty.
Their objective was to minimize potentially wasted time and money by taking an iterative learning approach to the project.
Approach to Innovation Transformation
Rather than relying on traditional market research, Edmunds’ approach was to use lean innovation methods to discover — in the marketplace — what needed to be implemented in order to create value for both consumers and the dealerships.
This discovery must go beyond just what’s needed in the product, but also what’s required in other aspects of the business model, including Edmunds’ relationship with their dealer network.
Lean Startup in Action
Their lean startup approach looked like this.
1. Brainstorming and Prioritization
First, the took the time to brainstorm and prioritize assumptions for each step of the value stream from dealers first becoming aware of the solution to being passionate about it.
One critical Edmunds assumption, for example, was that many dealers had the systems in place that would allow them to provision inventory-based pricing in a way that they could actually honor the price.
Since the whole idea was predicated on dealerships being able to deliver that data, Edmunds needed to discover very quickly whether or not that assumption was true.
2. Fulfilling the Price Promise
Next, they needed to understand if getting consumers to a “satisfied” state, in other words, fulfilling the “price promise”, solved the main challenges users were facing in the car buying process. To do this, teams designed and executed experiments to validate or invalidate their riskiest assumptions.
Spending two days working through this process, Edmunds was able to confirm that, in fact, most dealerships did have sophisticated pricing systems in place.
One additional opportunity that was identified was dealerships that had mainframe style inventory management systems that would not allow data to be shared with Edmunds.com. The Edmunds team identified that these dealerships were willing to upgrade their systems to a light inventory management system that the team prototyped rapidly.
3. Evidence and Insights
Business decisions crucial to developing the new pricing tool were based not on opinions, but on evidence gained by quickly and repeatedly testing hypotheses out in the market. Dealers became enthusiastic about implementing the real-time pricing and inventory data after seeing how it could streamline their sales.
Teams used evidence and insights to iterate through the entire value stream, testing Minimum Viable Product, Growth Engine, Sales Conversion, Marketing Funnel and Customer Acquisition.
And for customers that did not have a sophisticated pricing system, Edmunds developed simple tools to provide the customer this capability. This new software system actually created stronger relationships with those dealers than the 80% that already had systems in place.
Initially it appeared that the unsophisticated customers were going to be a problem for the Price Promise program, but they ended up being their highest value dealerships.
Through a series of engagements, the Edmunds team not only gained a comprehensive understanding of the lean innovation process, but also was able to knock out the major uncertainties facing the Price Promise product team.
“For a company of our size, and for the dollars that were at stake in these decisions, using the Lean [Startup] method to get out there immediately with clients, without something baked, throw it against the wall, get their feedback, come back, do it again and do it the 3rd time—doing this over a 90-day period was pretty quick,” said Seth Berkowitz, President of Edmunds.com.
The Lean Innovation principles utilized by Edmunds were not theoretical training exercises. Instead, they were applied to a mission critical project that pushed the boundaries of Edmunds’ relationship with their dealerships.
“What we found,” said Berkowitz, “is that using Moves the Needle’s methods against a concrete business problem accelerates the pace of learning and makes everyone’s involvement a lot more tangible, because it impacts what they’re actually trying to do in their core jobs. Be prepared for really high-energy people who are going to push your teams quickly over the term of the engagement.”
Today, Edmunds is thriving as one of the most unique, trusted, and visited car shopping sites on the internet and their Price Promise tool has been a wild success. But they couldn’t have developed this solution and brought it to market so quickly without being fully committed to their users and their customers, and to the Lean Innovation process.
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For more information on how Edmunds tested new ideas, brought customers on board, rallied internal stakeholders, and radically transformed their future, watch this: