innovation heads

Why customer-driven innovation needs resilience

  • Daniël Pairon, Partner |

One of the main objectives of customer-driven innovation is to disrupt or improve how value propositions are communicated along the entire customer journey to strengthen customer relationships, with the ultimate aim of delivering a significant impact on the profitability of the organization.

As a result, organizations and innovative thinkers – being intrapreneurs or entrepreneurs – focus a lot of time looking for ways to attract and retain their customer’s attention, increase customer satisfaction and experience, and build long-term loyalty.

And it’s easy to understand why, when being perceived as an innovative and exciting brand has become a key competitive advantage in recent years. But customers are also becoming more discerning about messaging versus substance, and it’s not enough just to say that yours is an innovative organization - you also need to show it, to ‘walk the talk’, or risk losing a lot of credibility.

However, in chasing the label of ‘innovative’ organization, a common mistake is thinking that disruptive innovation is the only way to make a real impact and impress customers. In his book, ‘The Innovator’s Dilemma’, the father of disruptive innovation theory, Clayton M. Christensen, distinguishes between an innovation process that is sustainable – helping a company to serve its existing customers better – and an innovation process that is disruptive, which does not necessarily help a company to better serve its customers in the way that they expect, but may result in a new business model (with changed/new products or services) that appeals to a different customer profile, taking the company into different markets or segments. This is also one of the reasons that disruptive innovation is so challenging – if successful, it can be highly rewarding but, in pursuit of disruption, companies can quickly get caught up in deviating from their strategic objectives, and risk alienating their existing customers along the way.

Therefore, it makes sense that customer-driven innovation is often considered to be a more sustainable route for established organizations (corporates as well as (semi) government organizations). It also comes with its challenges, but customer loyalty takes time and resources to build, and that investment can easily be squandered by an organization that doesn’t listen to customers carefully and deliver on its promises.

To achieve this successfully, it’s important to think carefully about the make-up of functions included in the customer-driven innovation process. For starters, the obvious but surprisingly-often overlooked step is to talk to the customer and try to gain a deep understanding of their preferences and pain-points. There are pitfalls in thinking you know what the customer wants or how best to serve them. It seems obvious when written down but it’s amazing how many organizations still try to innovate for the customer, without ever taking into account what their customers’ actual or potential needs are. In an increasingly digital world, a key element of this is how to manage and interpret information which comes from customers themselves.

However, this can lead to some unexpected or counter-intuitive findings, and requires leadership to be comfortable and confident in balancing data-driven insight with their own personal experiences, particularly when the data requires them to question long-held beliefs about their business.

It’s also essential for frontline employees who interact with customers on a daily basis to have an opportunity to provide input and feedback. This includes, but is not limited to, customer service and support teams, account managers, and marketers, all of whom are well-placed to represent the customer in internal discussions about how best to serve them. After all, these are the people who are the most directly in contact with the customer, and are likely to have the most in-depth insight into their expectations.

However, it’s not only these functions that should participate in the innovation process – it’s important that the solutions proposed through ideation are also a good fit for the organization’s strategy and values, which is where strategic and executive-level input is vital to ensure alignment from the c-suite to the service-line.

But there is still some work to be done in ensuring that decision-makers at this level feel that they can rely on the information they are presented with, particularly when it is generated by an algorithm or through intelligent automation. Our 2019 KPMG Global CEO survey found that 71 percent (67 percent in 2018) of CEOs say they have disregarded information-driven insights because they were contrary to their own experience or intuition. It’s also not easy to be open to accepting feedback that your perspectives may need to be revisited in light of new information from customers or employees, and takes a good deal of strength and reflection to hone the reflex to listen rather than waiting for your turn to speak.

Therefore, organizations with a mature innovation culture are good at managing both their front end innovation processes and their back end innovation processes.  Amongst other things, front end innovation deals with intelligent crowdsourcing that uses machine learning to find all relevant information and knowledge to grow ideas, no matter where that information/knowledge resides. This enables you to easily collaborate inside and outside your organization (with other parties, including customers or citizens, for example).  Back end innovation allows you to define your funnel and information/knowledge needs to keep track of all innovation projects and ensure all lessons learned are captured. Analysis tools are available to guarantee a balanced innovation portfolio and a high return on innovation.

One thing is for sure: sticking to the status quo is an anathema to any innovation process and innovation leaders need to have the self-awareness to develop their emotional resilience in order to both challenge and be challenged on their assumptions about customers’ current and future needs, as well as their experiences. By doing so, they greatly increase the likelihood that the ultimate outcome of their innovation process creates a true win-win for both customer and organization.