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Can customer analytics drive innovation?

July 9, 2008

Innovations fall into two camps. Some come about by accident or breakthrough thinking. They raise the bar by offering something completely new – consider airplanes, the Internet, plastic, or microwave ovens.

Other innovations spring from the need to solve a problem: how to make something more efficient or faster, healthier or more ergonomic. Think refrigerators, sewing machines, and windshield wipers.

True game-changing innovations are rare. But demand-led innovations offer many opportunities for companies willing to explore solutions.

Harvard Business Review takes this idea a step further. Organizations should investigate what specific "job" the customer is trying to do, and use that information to find the next big product or service.

"When companies understand that customers hire products, services, software, and ideas to get jobs done, they can dissect those jobs to discover the innovative opportunities that are the key to growth."¹

Cocreating with customers

Read our interview with Don Tapscott

Cocreation – in which companies collaborate with multiple partners and customers – is gaining ground in a growing global marketplace.

Bringing customers into the R&D fold can bring big payoffs for business. Procter & Gamble, writes Don Tapscott, now generates 35 percent of its new products through a "connect and develop" strategy that sees it licensing its 27,000 patents to outsiders.²

The McKinsey Quarterly also cites some examples of successful companies that have collaborated with consumers:

LEGO invited customers to suggest new models and rewarded those whose ideas were marketable. On the business-to-business front, SugarCRM works with clients to customize the company's CRM software for specific industries.

"What will drive its adoption by an increasing number of companies is the growing competitive need to uncover many more good ideas for products and to make better and faster use of those ideas," writes HBR.³

A systematic inquiry

Determining what customers want is the key. But HBR says few companies go deep enough to find the answers.

In many cases, the "innovation journey" is "little more than hopeful wandering through customer interviews." This kind of unsystematic inquiry "rarely uncovers the best ideas or an exhaustive set of opportunities for growth."

Instead, companies should use a "job mapping" approach, by which they deconstruct a task the customer wants done into a series of process steps.

"Within each of these discrete process steps lie multiple innovation opportunities for making the job simpler, easier, or faster."

Some examples: moving physical goods across town, preparing a tooth for dental work, collating and binding a document, placing an order, updating an operating system.

HBR cites Apple's successful breakthrough into the mp3 market.

Instead of focusing on listening to music, the company "reconsidered the job of music management, enabling customers to acquire, organize, listen to, and share music."⁴

How to create value

The next step is finding and nurturing the idea. After gaining an understanding of the job, companies should focus on drawbacks or hurdles the customer is trying to overcome or address.

HBR suggests a number of questions to unravel value creation opportunities. Among them:

• Can the job be executed in a more efficient sequence?
• Do some customers struggle more with it than others?
• How might trends affect the way the job is executed in the future?
• Where else might customers execute this job?

Some customer processes are complex: global shipping, supply chain management, manufacturing, and health care services, to name a few. But the same principles can be applied to simpler tasks such as going to the bank or picking up items at the store.

Automated checkout services at grocery stores, for example, help to reduce lineup frustration and get people in and out the door sooner.

Customer analytics aids discovery

While customer value creation differs across industries and markets, the shared goal is finding innovative product or service ideas. And the common ground is the need for information.

Companies require a lot of customer data to aid the discovery process. Even call center information is valuable. Customer complaints, for one, can help reveal underlying challenges: what's in the way of the customer getting something done.

With dimensional analysis and reporting, organizations can leverage this customer information in systematic ways to understand consumer tasks – and uncover opportunities for innovation.

Summary

"When the [customer's] job is the focal point of value creation, companies not only can improve their existing offerings but also can target new, or ‘blue ocean,' market space," says HBR.

Demand-led innovation comes down to two basic questions. What is the customer trying to do? How can you help them do it easier or faster?

Customer analytics can help answer the first question. And that goes a long way to resolving the second.

In the end, understanding your customer's challenge or problem can help you find innovative solutions: the next wave of products or services that will help make their lives better and your own organization more successful.

Sources

¹ Lance Bettencourt and Anthony Ulwick, The Customer-Centered Innovation Map, Harvard Business Review, May 2008.

² Don Tapscott and Anthony D. Williams, Wikinomics: How Mass Collaboration Changes Everything, Penguin, 2008.

³ Jacques Bughin, Michael Chui, and Brad Johnson, The Next Step to Open Innovation, The McKinsey Quarterly, June 2008.

⁴ Bettencourt and Ulwick, ibid.