Customer Innovation: Customer-centric Strategy for Enduring Growth

In the past, having a disciplined innovation pipeline based on solid R&D was enough to make you an innovation master. Today, this is just the Olympic minimum - and it does not deliver the same success anymore. In Customer Innovation Marion Debruyne of Vlerick Business School details how a new set of organizations have discovered a new formula.

CASE STUDY: KLM LOOK AT CUSTOMER PAIN-POINTS AND COLLABORATE TO CREATE A CUSTOMER SOLUTION

Take for example the latest project KLM is working on. If you book a flight with KLM any day soon, you may be presented with an interactive luggage tag. This tag will allow you to seamlessly get through check-in and baggage-check, bypassing the lines of other passengers trying to get through the terminal. And at arrival, it will allow you to trace your luggage quickly. This example of high technology will make your life easier as a traveller, shaving time off the exasperating experience that modern travel is. It will make sure that your luggage never gets lost, reduce the administrative flow, and make personal communication possible with you while you are in transit before boarding the flight.

Why does an airline like KLM bother to introduce smart gadgets to their travellers? To begin with, it is all too aware of the aggravations and struggles of flying today. Its online frequent flier communities allow it to tap into customer segments on an ongoing basis. And it realizes that the overall customer experience does not start when boarding the plane, but is already going on at the airport. Creating an easy seamless airport check-in process does not only shave off time for the passenger, it also reduces the likelihood of errors. Being an airline, KLM does not possess the necessary skills to make the interactive luggage tag reality: its core business is in operating aircraft. But start-up company Fast Track Company did have the skills to make it happen. KLM initiated a partnership, and together a workable solution was prototyped.

Customer-centricity and business innovation - not so strange bedfellows

Being customer-centric and being innovative is often presented as two opposite ends of the spectrum. Customer Innovation shows how this is a false dichotomy. With examples from companies including Disney, Coca-Cola, LEGO, Eurex, Netflix, KLM, Carglass, Komatsu, Callebaut and more she shows how these organizations have combined customer-centricity with innovative power. Rather than being driven by what they’re good at, they start with the market and design their strategy around it, enabling them to be ahead of the curve in discovering new market opportunities.

Customer Innovation will show you how you can do it too through a new model comprised of three building blocks - or lenses - that describe the processes that organizations that excel at customer innovation engage in and master:

The Core Processes of Customer Innovation

1. CONNECT - Start with the customer experience

First, organizations that innovate around the customer constantly connect with the market to anticipate the changes they will be confronted with. They scan the environment to pick up signals of emerging and unfulfilled customer needs. They are in constant touch with their customers, listen to them, involve them, and engage with them to understand their overall customer experience and unmet needs. They are triggered to understand the pain points of their customers but they do not become the slave of their customer base. Often there is a fear that listening intently to customers might result in inordinate attention being paid to current markets so the company fails to see emerging markets. Outside-in organizations prevent this from happening by having a wide lens for viewing the entire potential market including new or previously unaddressed segments.

2. CONVERT - Balance incremental innovation with disruptive innovation

Second, organizations that innovate around the customer see innovation as the only avenue for long-term survival. Every day they innovate and convert customer insights into actionable change because they believe this is the only route to stay ahead of competition, but mostly because, in order to serve customers better, you have to constantly question whether today’s offerings will meet tomorrow’s demands. Customer innovation requires companies to continuously rethink whether old recipes still apply. Innovation is triggered by their constant exposure to new market information and ever changing customer demands. They do not limit themselves to incremental adaptations, however: equally important is the search for disruptive change. Often this leads to new business models.

3. COLLABORATE - Co-creation for product innovation

Third, these organizations collaborate with others where their own capabilities fall short. In doing so, they develop the ecosystem required to build and deliver the solutions their customers need. Instead of relying on their own R&D, they stand on the shoulders of suppliers and partners to reach further. They understand that you must work together in order to transform a good idea into a market success. They orchestrate the activities of an array of partners so that their joint efforts enable new products and solutions for customers. They cleverly exploit their own strengths so they can play a valuable role in the ecosystem they build.