Harnessing Your Customers to Drive Innovation

Daryl Choy wrote an interesting post on There’s No Such Thing as an Experience. The post created an interesting comment thread around how far you should or should not harness customers to drive innovation. On the one hand there are those who argue with conviction that once you know what customers need, experts should drive innovation. This approach is based upon the idea that only experts know what is possible and what is practicable. They don’t of course know what customers might eventually buy. On the other hand, there are those who argue with equal conviction that customers should be harnessed through, for example lead-user innovation or open innovation, to drive innovation. This approach is based upon the idea that given enough customers or other experts, most workable innovations can be identified.

Nobody seriously argues that we should create new products that don’t meet customers’ needs (let’s stick with needs and put wants, expectations, etc. to one side). Unfortunately, that hasn’t stopped countless companies from doing exactly that. And then wondering why customers didn’t buy. The Ford Edsel is perhaps the classic example. When introduced with a marketing fanfare in 1958, it was met by a stunned silence from customers. The vehicle missed customers’ needs – functional, emotional and social – by a mile and was a huge flop. The Ford Edsel reputedly led to Ford writing off US$400 million. In 1958 money!. And the Ford Edsel isn’t an isolated case. Even innovation icons like Apple had flops like the Newton.

The foundation of success in innovation is thoroughly understanding customers’ needs. Customers are well able to describe their needs if appropriate market research tools are used. Perhaps the most practical way to do this is to ask customers what jobs they are trying to do and the outcomes they desire from doing the jobs. Supplemented with enthnographic research such as first-hand observation of customers doing jobs, this approach quickly provides a thorough understanding of customers needs. The jobs & desired outcomes approach, originally developed by Tony Ulwick of Strategyn, has been widely publicised by Harvard Business School professor Clayton Christensen in his many articles and books.

Once you have a thorough understanding of customers needs through jobs and desired outcomes, you can use any gaps between how important an individual outcome is and how well customers are satisfied with it to identify the best innovation opportunities. The innovation sweet-spot is related groups of important outcomes that are currently unmet. But there are also other innovation opportunities such as groups of outcomes that are currently over-served. These are targets for the disruptive innovation that Clayton Christensen identified.

Jobs also provide the foundation for identifying how best to go to market. There are a number of ways to do this by looking at whether core or additional jobs should be improved, whether existing or new platforms to do the jobs should be developed and whether the current or a new person should carry out the job. For example, the Apple iPod improved all the additional jobs associated with the core job of listening to music on the go: jobs like selecting music, obtaining the selected music, storing it on a music player, backing-up stored music. Previously these were all separate, complex and difficult to integrate. By providing a new platform customers to do all these jobs themselves, the iPod started a revolution in the downloadable music industry. A revolution that rapidly swept by the music industry, leaving it struggling with an inadequate market response and a large legal bill.

The challenge comes when trying to create new product ideas, in developing them into workable new product prototypes and to in launching them on the market. Customers are not traditionally good at ideation – they don’t know what is theoretically possible to do with technology and they don’t know what the company can actually deliver either. As a result, many companies use a diverse mix of internal and external experts to come up with new ideas and to turn them into workable new products. Experience on hundreds of innovation projects suggests that the new product success rate can go from the 20% associated with traditional black-box new product development to as much as 80% or more when basing ideation on a thorough understanding of customers’ needs. But that still leaves a final unknown; whether customers will actually buy and use the new products that have been developed.

This is where approaches like lead-user innovation pioneered by Eric von Hippel – where advanced users are provided with a toolkit to develop their own solutions – are potentially useful. The company sets the boundaries through the toolkit, but users experimenting through the toolkit identify the solutions that really work for them. Legendary innovator 3M’s experience with lead-user innovation suggest that lead users can produce better products, that are easier to manufacture and that are more successful in the market than traditional black-box products. By constructing toolkits explicitly to force lead users to explore the innovation space already identified through understanding customers needs and identifying the best innovation opportunities, the success of lead-user innovation could be improved further.

The same thinking applies to open-innovation pioneered by Hank Chesbrough. Rather than produce a toolkit for users to experiment with, open-innovation companies set out problems for teams of customers and other experts to solve in any way they see fit. Even P&G, despite having almost 10,000 research staff, has found that harnessing its customers through its Connect & Develop programme for suppliers, and its Tremor and Vocalpoint programmes for customers has had a big impact on the number and success of new products it takes to market. By using the huge customer-base enrolled in Tremors and Vocalpoint, P&G can gather a thorough understanding of customers’ needs and identify the best innovation opportunities. But by using these insights to explicitly define of the innovation opportunities it wants customers and other experts to find a solution to, the success of open-innovation could also be improved further.

Understanding customers’ needs through jobs and desired outcomes is the foundation of success in innovation. That applies equally whether new products arise through internal company development, through lead-user innovation, or through open-innovation.

So ask yourself the big questions. “Do you really understand your customers’ needs?” and “Do you know where the best innovation opportunities are?”. If you don’t, then you had better take a long hard look at your new product development pipeline. You don’t want to be in the group with the 80% new product failure rate, do you?

Do you know of any companies that really understand their customers’ needs and that use them to drive successful Innovation? Write a comment and let us know.

Graham Hill
Customer-driven Innovator
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Further Reading:

Daryl Choy, There’s No Such Thing as an Experience

Time Magazine, The 50 Worst Cars of All Time: 1958 Edsel

Tony Ulwick, Outcome-driven Innovation

Clayton Christensen, What Customers Want from Your Products

Apple, iPod & iTunes

Wikipedia, Disruptive Technology

Eric von Hippel, Democratizing Innovation

Hank Chesbrough, Open Innovation Blog

P&G, Connect & Develop

P&G, Tremor

P&G, Vocalpoint.