Why Companies Must Lead, Not Consumers

8
116 views

Share on LinkedIn

In a recent post my colleague David discusses a critical issue to do with the shift of power between corporations and consumers. As David notes, while consumer empowerment creates an urgent need for companies to understand and serve the needs of their customers better, it doesn’t absolve them of their role as innovators, risk-takers and leaders in the development of new products, services and business models. In fact, as better consumer information squeezes out the differences between brands, the need for corporate innovation has never been greater.



I think some companies have been caught out by this. In their eagerness to be seen to be ‘getting’ social media and the new consumer-control paradigm, they’ve placed too much brand equity into co-creation initiatives that subsequently (but not surprisingly) failed to yield meaningful results. The best example of this is Starbucks. Two years ago to much fanfare (and to offset a bunch of negative publicity at the time) they launched MyStarbucksIdea.com, a site inviting consumers to suggest ways in which Starbucks could improve customer experience.

To date more than 80,000 ideas have been submitted. Impressive. And in a blog post on December 8th last year Starbucks noted that 53 of these ideas (0.066%) have been implemented. Maybe, I guess, this isn’t a bad number.

But (not surprisingly) it didn’t take long for knowledgeable thought-leaders in the blogosphere to begin pulling those numbers apart and reach the conclusion that the vast majority of ideas implemented had either been planned anyway or were recommended by partners or employees, leaving just 6 genuine customer ideas (0.0075%) good enough to make the cut. Not overly impressive.

My point here isn’t to lambast Starbucks for not ‘getting social’ or to suggest that they launched the site and then willfully ignored a bunch of amazing ideas. The opposite in fact. It’s that nobody on the outside, even their most passionate customers, can possibly understand the business of product and service innovation like Starbucks’ own management and employees. It was always a stretch that customers would be able to make a meaningful difference by adding new ideas that were then taken up by the company. In fact it could be argued that it’s a surfeit of ideas that has caused the company its current challenges. Too many stores, too much merchandize, too little focus on the core product and service offering – a great cup of coffee in a comfortable ‘3rd space’.

Social media is an amazing medium through which companies and customers can learn more about each other and engage in meaningful dialogue. And co-creation between companies and their partners will be a powerful way for companies to develop innovative products and services that really make a difference. As John Chambers said: “No matter where you work, most of the smart people work somewhere else’.



But be careful about expecting consumers to drive your business. Consumers expect companies to lead, not follow. If Starbucks couldn’t make it work in the cup-of-coffee business, imagine how difficult others will find it. I don’t know how to design a car. I don’t know what type of technology I’ll carry in my pocket in 3 years time. I don’t know how to make wine. But I do know what I like when I see or taste it. The role of predicting what I’ll like, taking the associated risks of developing and producing amazing products and making or losing gobs of money doing it belongs to corporations. Not me.

8 COMMENTS

  1. Jeremy,

    Clearly companies need to listen to customers and involve them in creating new products and refining offering. It is the only way they will understand what’s on customers minds.

    However, as you point out a customer can appreciate wine without knowing how to make it. You can take this one step further. Henry Ford was credited with sayings that if he asked customers what they wanted, they would have said a faster horse. This illustrate two things. One customer don’t know about possibilites because they lack technical knowledge. Second, when innovative companies take a design thinking approach, they don’t ask customers literal questions, they imagine possibilities and match them to latent needs or desire. The latter comes from observing customers and putting oneself in their shoes.

    John

    John I. Todor, Ph.D.

  2. Hi, Jeremy,

    Too many blog posts and articles praise about customer-driven and co-creation, yours is just so uncommon and on time.

    As you said, if all companies listen to their customers and act accordingly, I can’t see any differentiation as a result in terms of experience delivered to the customers. This is definite not the original intention of most companies: to create more and more homogeneous experiences, and I believe no customer like it as a result.

    As John pointed out, we still have to listen to the customers, but selectively – think back what your company / brand stands for, what is your brand value, what customers treasure you in the first place. I can’t agree more with what you said about Starbucks: Too many stores, too much merchandize, too little focus on the core product and service offering – a great cup of coffee in a comfortable ‘3rd space’. By re-creating Starbucks as the 3rd place, which is something important to the brand AND to the target customers, isn’t it more effective and differentiated than basing the future blindly on just listening to VOC without filtering?

    Jeremy, your argument is against the trend, but it’s sound. Good job!

    Sampson Lee
    Follow Sampson on Twitter

  3. Jeremy

    An interesting post.

    Starbucks’ problems are well known. Its difficulties are not due to paying too much attention to customers, but to paying too much attention to financial analysts. The rather hasty introduction of MyStarbucksIdea is neither the cause of, nor the consequence of Starbucks’ problems.

    Starbucks’ problems illustrate what happens when you fail to create a business that balances the 4Cs; the needs of Customers, with its delivery Capabilities, with how it generates Cashflow, all within a highly Competitive market. Focus too much on generating cashflow at the expense of the other three components, as Starbucks did, and you will suffer. It is not for nothing that I avoid Starbucks in favour of McCafe these days.

    As John suggests, the days when companies can simply dictate what the brand will be to customers are long gone. Brands today are build together with customers through balancing the 4Cs to deliver a superior customer experience, one value co-creating touchpoint at a time. As P&G’s former CEO AG Lafley famously pleaded to a conference of his peers a few years ago, it’s time to “let go” of brands . Perhaps that is why P&G expects to source over 35% of its new products from outside the company this year.

    Sadly, not every company understands this yet. All the better for companies like P&G who do.

    Graham Hill
    Customer-centric Innovator
    Follow me on Twitter

    Interested in Customer Driven Innovation? Join the Customer Driven Innovation groups on LinkedIn or Facebook to learn more.

  4. @ John: exactly! Great point well expressed. I especially like the Henry Ford quote. I’ll be making use of that one 🙂

    @Sampson: I believe companies MUST listen to their customers in order to serve them effectively. Deep and meaningful customer insights will drive both better service and iterative product improvement – both things absolutely critical to business success. Please take a look at an earlier post I wrote on this very subject
    http://understandandserve.com/2010/01/22/were-in-the-happiness-business/#more-154

    @Graham: Thanks so much for the comment – which I completely agree with BTW, hence my company’s name – Understand & Serve!

    My point is that companies are rewarded for successful innovation and structured to take the risks necessary to deliver them. Consumers are not. Their power lies in their ability to choose the companies that provide the products and services that best meet their needs and reject the ones that don’t. Because of that power, companies better have a deeper understanding of the needs, views and context of their customers than ever before if they want to be successful.

    Apple (as always) offers a great example of a company that is totally in tune with its customer base. But innovation at Apple isn’t co-created with consumers. Apple takes its deep customer and cultural insights and leverages them to design highly innovative products that customers didn’t even know they need until they can’t live without them. That’s rather different from the approach Starbucks took with MSI (although it is closer to what made the company enormously successful in the first place).

  5. Hi Jeremy

    Part of my work is as a Partner in an innovation consultancy. Talking with fellow inovators a while back, one of them mentioned that the iPod actually came from a customer idea, not from the fertile mind of Steve Jobs. This is all to common. In fact, Eric von Hippel’s research suggests that over 80% of successful new ideas originate with customers in one way or another.

    Apple is a company that I love (because of their intuitive products) but hate (because of their overweening arrogance). Putting my feelings to one side, Apple has done the whole electronics industry a huge favour by reminding it that products designed by clueless engineers are no longer acceptable in the market.

    The thing that worries me most is what will happen when Steve Jobs steps down from the helm. Will Apple revert to its previous position of almost irrelevance again? Will we be reduced to buying laptops with Microsoft operating systems inside? Or mobile phones with Symbian?

    Graham Hill
    Customer-centric Innovator
    Follow me on Twitter

    Interested in Customer Driven Innovation? Join the Customer Driven Innovation groups on LinkedIn or Facebook to learn more.

  6. @ Graham: I hear you – the succession plan at Apple is definitely a cause for concern (for Apple stockholders especially). Maybe SJ is concocting some tech-bending life extender deep in the bowels of Apple HQ. I’d certainly be interested in buying one of those!

  7. Hi, Jeremy,

    Thank you for your reply.

    You are so right on “I believe companies MUST listen to their customers in order to serve them effectively. Deep and meaningful customer insights will drive both better service and iterative product improvement – both things absolutely critical to business success.”

    On a separate note, I like very much the name “Understand & Serve”. It’s so condense and meaningful to include the essence of successful customer experience. I take the liberty to expand into Understand, ‘SELECT’, then Serve at my recent blog reply to Dick Lee.

    Sampson Lee
    Follow Sampson on Twitter

  8. Sampson

    Thanks so much for your comment here – much appreciated. I read Dick Lee’s post and all the comments associated. Your post about IKEA was right on – I mean genius. And it really got me thinking.

    The most successful companies find a way to balance yin and yang (if you’ll pardon the analogy). By which I mean on the one hand they need to be red-blooded, aggressive, full of ‘animal spirits’. This element is driven by the profit motive and drives innovation, disruptive product development and a relentless desire to stay different and ahead of the pack.

    On the other hand the same company perceives (increasingly) the need to provide excellent service (btw – service isn’t something that only happens when something goes wrong with the product – it’s the totality of the way the product is brought to market), listen to its customers and ensure that their needs are catered for, efficiently, with a smile.

    Both elements are critical. Sadly a lot of what I see, hear and read is trying to tilt companies out of balance – too much towards the service part of the paradigm. As you say, if all companies in a sector only listened to customers and acted on what they say they need they’d all end up exactly the same. To a large extent of course that’s exactly what’s been happening over the past 20 years.

    The companies that stand apart. The ones that are truly DIFFERENT are the ones that are in balance. They stand for something. They’re mission-driven. AND they care about great customer experience. I wrote about it here:http://understandandserve.com/2010/01/15/why-some-companies-keep-winning/

    I love the idea of Understand, Select and Serve. It’s making me question the name of my business 🙂

LEAVE A REPLY

Please enter your comment!
Please enter your name here