The customer is always right. This adage generally applies to the sales and marketing end of a business, but it is valid for innovation as well. A company doesn’t innovate in a vacuum. For a successful innovation strategy, any organization needs to keep an eye on what the competition is doing. Equally important is to be alert to what the customers need. In this article, learn how to get customer-based innovation right.
Regardless of the industry you operate in, customers now have more choices than ever before. Emerging startups with more innovative products and new business models are coming up across the world. Your customers will not necessarily transition to all of these new offerings. Customer-based innovation allows you to determine which trends matter to your customers.
Principles of Customer-based Innovation
The scope of customer-based innovation varies by the scope of an industry and the nature of a business. However, there are a few common guiding principles:
Build a Customer-centric Culture
It is difficult for companies to focus on consumer-centric innovation (CCI). One reason is that the consumers don’t always know what’s best for them. There are multiple examples of innovative businesses creating products that customers didn’t know they needed. However, customers are central to the existence of businesses of all sizes and kinds. Being able to retain existing customers and attract new ones is the single most important metric for any company.
This is why businesses need to integrate their product development with value creation for their customers. Further, as representatives of the company, frontline employees must be at the center of the CCI process.
Focus on Usability over Technology
Software companies understand that having the most advanced technology stack doesn’t guarantee market leadership. They spend considerable resources on improving the usability of their apps. This tendency, unfortunately, isn’t as pervasive in other industries, especially B2B companies. Your product may be an engineering marvel but it needs to be usable for a wide range of your customers for it to be successful.
Companies can improve the usability of their products by incorporating insights from customers during their product development. Startups are now coming up with creative ways to obtain better customer data. For instance, automotive sensor startups collect anonymized vehicular data that allow auto manufacturers to develop better vehicles.
Address Unmet Needs
Unmet needs often present opportunities for disruptive innovation. By definition, these are needs that are not met by any player in the market. Any company that serves an unmet need stands to gain the first-competitor advantage. However, customer surveys alone are not sufficient to spot unmet needs.
Companies that invest in a customer-based innovation approach, on the contrary, are better equipped to better identify unmet needs. By matching customers’ pain points with emerging technologies, it allows companies to develop better products and services.
Focus on Potential Customers too
For companies, the bulk of the income often comes from few customers. This is particularly true for service-based companies where a handful of recurring clients bring a large fraction of the revenue. However, this myopic approach can hurt companies in the long run. Companies need to listen to other customers as well as potential customers. Incorporating their feedback can make a company’s services attractive to them without massive research and development (R&D) expenditure.
Failing to do so, companies risk missing out on disruptions that are attracting these underserved customers. Another way this happens is when companies focus on local customers, thereby missing out on disruptions elsewhere. While it used to be cost-prohibitive earlier, data-driven trend intelligence allows companies to monitor emerging trends globally. This enables companies to not just target customers in new markets but offer something new to existing customers.
Benefits of Customer-based Innovation
Wharton professor Peter Fader said that customer-centricity is a “strategy that aligns a company’s development and delivery of its products and services with the current and future needs of a select set of customers in order to maximize their long-term financial value to the firm.”
While creating long-term value is the ultimate goal of customer-centric innovation, here are five benefits of customer-centric innovation that come before the goal:
1. Better Understanding of Customer Journey
While products often have many features, customers often use some more often than others. Sometimes, consumers even use the products in ways that are different from how the manufacturer intended. A customer-centric approach measures how customers interact with a company’s products or services. This guides the development of new features and products, thus strengthening a company’s advantage in the market.
2. Increase in Customer Satisfaction and Retention
As a consequence of a better understanding of customer journeys, CCI allows companies to serve customers better. It also centers the customers at all stages from design and sales to implementing feedback for developing new products. For example, many software-based companies now routinely keep their users in their loop about new feature releases and yearly innovation goals. This total customer experience improves customer satisfaction and retention as well as expands the customer base.
3. Improvement in Operational Efficiency
Not as obvious as the last two benefits, but customer-based innovation improves the operational efficiency of a company as well. By responding to changing customer preferences, companies that engage in CCI are quick to adopt new business models and technologies. This creates a competitive advantage for them. Data-driven startup scouting or technology scouting can both identify new solutions to your customer’s pain points.
4. Identification of New Growth Opportunities
When you leverage customer-based innovation to identify new solutions, it leads to new growth opportunities as well. For example, let’s say your customers face a challenge that you cannot solve with existing technologies. Your competitors will continue to improve the products and services for solvable challenges. However, with a customer-centric approach, you are equipped to innovate in unsolvable challenges, thereby creating new markets.
5. Increase in Value Proposition
When there are multiple companies serving a market, the value proposition is often the crucial differentiator. Customer intelligence provides deep insights into what matters for your customers, allowing you to focus on what improves your value proposition. It is often coupled with competitor intelligence which allows you to learn which features of your rivals’ products your existing and potential customers like. CCI enables companies to increase value by both offering those features at lower rates as well as adding new features.
Leverage Innovation Intelligence for Customer-centric Innovation
Leveraging innovation intelligence allows you to find startups and technologies that meet your customer-centric objectives. Depending on your innovation goals, we at StartUs Insights offer a range of services enabled by the StartUs Insights Discovery Platform covering over 2,5 million startups & scaleups globally. Some of our services that help you achieve your open innovation goals include:
- Trend Scouting: Identify emerging and latent trends and developments that will impact your competitiveness
- Technology Scouting: Reveal emerging technologies that match your innovation goals
- Startup Scouting: Discover over 2,5 million startups & scaleups globally, scouting the right partners & saving you weeks of desk research
Innovation intelligence identifies emerging startups and technologies that allow your company to adopt customer-based innovation.
To discover how you can leverage open innovation to create value for your customers, get in touch today!
