Understanding the customer is not enough

    Michel van Hove
    customer focus

    Placing the customer at the center

    In recent years many companies have put emphasis on understanding the needs of their customers and consumers. We see companies invest in developing customer insight as the primary source of inspiration for innovation, and adopt techniques like Design Thinking that takes a customer centric approach to identifying problems and designing innovative solutions. But will this customer focus be enough for companies to achieve the innovation performance they are looking for? Are there other ingredients we can add to the mix that drives an even higher innovation performance?

    Identifying deeper needs

    We are great advocates of customer insight in general as well as the specific principles behind Design Thinking and practice it in our engagements with clients. We use insight about customers’ unarticulated, unmet needs to define new business opportunities, developing breakthrough strategies and management innovation.

    In developing these insights asking your customer what they want will provide valuable clues, but could also lead us to focus on incremental improvements as illustrated by the famous Henry Ford quote;

    “If I had asked my customers what they wanted they would have said a faster horse.”, Henry Ford

    To understand our customer, we need to reach beyond the obvious and continue to probe why consumers behave the way they do, identify deeper motivations that drive their decisions. Asking questions about the context around what the customer wants will reveal the real problem the customer is trying to solve and expands the range of options you may be able to offer them.

    “Customers don’t want to buy a quarter inch drill, they want a quarter inch hole”, Theodore Levitt

    The way we see it there are three general categories of customer insights we can identify:

    • Unarticulated – the customer accepts the current situation and/or works around it
    • Underappreciated – the industry hasn’t seen the problem as important (yet)
    • Underleveraged – we can create a much better solution through our superior capabilities

    Understanding your customers is very important and it will lead to new ideas. But it isn’t enough to stimulate truly innovative ideas.

    Where do great ideas come from?

    Where do great ideas come from? How do we conceive and identify ideas that are starting points for the development of attractive business concepts? Is it simply serendipity, an illuminating moment or the result of very creative individuals?

    where do ideas come fromIn Steve Johnson’s book “where do good ideas come from” he tells of the British Coffeehouses and how they became a fertile ground for new ideas and innovation in the late 17th century. The visitors that frequented these coffeehouses shared their opinions, insights and ideas with one another.

    The key to his story is that ideas were the result of “diversity of input” because the visitors all had different backgrounds, expertise and experiences to share with one another.

    How entrepreneurs see the world

    There are plenty of examples that demonstrate how ideas are stimulated by combining a variety of insights including a deeper understanding of the customer or consumer problem. Entrepreneurs and innovators have an ability to ‘connect the dots’ by observing the external world around them. They combine trends, examples from other industries, insight into what matters most to customers and are not afraid to question and challenge what’s commonly accepted. This behavior becomes apparent when we study how successful businesses were once started.

    Netflix

    NetflixReed Hastings, the founder of Netflix was frustrated about the late fees he had to pay when he returned a DVD he had rented. But he only came up with the idea for Netflix when he visited his local gym and got the inspiration to apply their subscription model (visit as often as you want for a flat monthly fee) to the video rental business. He combined a customer insight (frustration) with an analogy, the gym subscription model.

     

     

    Tesla

    Would only the understanding of customer needs have led Marc Tarpenning and Martin Eberhard to come up with the idea for the Tesla roadster? Three key insights were the basis for their idea to start their electric car company

    1. Battery technology doubled in performance roughly every 10 years and delivered that performance at a quarter of the cost
    2. Car companies outsource much of their design and manufacturing to focus on sales, marketing and financing and thereby created a whole network of suppliers that new entrants could tap into
    3. While an electric car may be an environmentally responsible choice it still needs to look good and offer a great driving experience in order to appeal to a broader audience

    Tesla

    Martin Eberhard, Founder Tesla Motors

    It meant that driving performance would increase and become more affordable as battery technology improved and that you could start a car company without having to own all the manufacturing capabilities.

    TESLA also challenges strong conventions of the auto industry. They decided to sell direct instead of relying on a dealer network. Because of the founders’ origin in Silicon Valley they naturally leveraged Information Technology to continuously upgrade and change the car’s performance through over-the-air software updates instead of making hardware changes.

    In both examples the customer takes center stage but the idea is formed when different types of insights are combined. This intrinsic skill that innovators and entrepreneurs share is a strong contributor to the success of many new and innovative businesses. At Strategos we believe it is possible for people in organizations to adopt similar behaviors and develop compelling and inspiring insights through a process we call Discovery.

    Discovery – developing insights that stimulate strategy and innovation

    Essentially every engagement we have with clients will start with “Discovery” in some shape or form. Discovery will produce inspiration and insight that act as a platform from which we can conceive innovation in product, service, business model and strategy. We approach discovery from two very important perspectives and help teams develop their insights through a set of ‘lenses’.

    Understanding the world around you

    • Customers/consumers – identifying the deeper needs that drive their behaviors
    • Discontinuities – uncovering how combinations of trends lead to “discontinuities” or dramatic changes that can impact our industry
    • Analogies – we apply existing knowledge from other industries to our business context and situation to generate new ideas.
    • Industry mapping – visualization of the dimensions of competition from direct and indirect competitors uncover potential blind spots and alternative ways to compete
    • Technology attributes – understanding the attributes or jobs a technology can address and explore how these can be applied in our context or in ways that generate new or improved solutions.

    Identifying your strengths and vulnerabilities

    • Orthodoxies – businesses are ruled and guided by deeply held conventions or beliefs about their products, markets, or industries. These beliefs can become self-imposed boundaries, “defining the rules of the game” that could blind us to emerging business opportunities.
    • Core Competencies[1] – identifying the unique capabilities of your company, i.e. what you know how to do better than anyone, provides a platform for differentiation, leverage and opportunity development.

    Developing a proprietary view

    Entrepreneurs and innovators develop their proprietary views and so should you. Innovation is not simply acting on publicly available information from reports, experts or research agencies. This would lead to ‘convergence’ or similarities in products, business models and strategies. Of course, we can get information from such sources, but to inspire something unique we need to synthesise this information into proprietary insight, i.e. our own views and conclusions.

    Investing in developing this foundational knowledge helps you in many other ways as well. It provides the facts and data to support the case for investing in specific ideas, especially if these ideas are ‘new to the world’. The insights also help you to identify risks and uncertainties that drive a learning agenda for small experiments.

    Driving innovation performance

    Understanding the customer is key but to drive a higher level of innovation performance in your company a broader set of insights is needed.

    Discovery is a thoughtful process of divergence and convergence, exploration  and investigation. Synthesis of this knowledge will lead to compelling insights which we can use as inspiration and stimulation to innovate and strategize successfully.

    Carl Hamilton & Michel van Hove

    [1] Competing for the Future, Gary Hamel and C.K. Prahalad, 1996