Increase the value your offerings deliver to customers.
Innovation is a hot topic on the national agenda. President Barack Obama has a Strategy for American Innovation, companies hire chief innovation officers, universities promote innovation programs and books on innovation are best sellers. Everyone wants to be just like Apple or Google.
Based on what we read and hear, innovation requires massive investments of resources and brainpower—plus a complete rethinking of our educational system and economic structure. Innovation also seems to result from a lucky stroke of genius or from factors beyond our control, such as having a really smart corporate research and development (R&D) team.
So it is understandable to think you can’t influence innovation. However, based on my work with a large number of innovative (and not so innovative) companies, product professionals must play a leading role for innovation efforts to be successful. In reality, I rarely meet companies that don’t have really smart R&D people. And left alone without product-management guidance, these bright people will come up with clever innovations—but there is no guarantee that customers will buy them.There are a number of approaches to innovation that product professionals often use:
Those approaches do occasionally succeed, but Booz, Allen and Hamilton research has shown that companies that innovate based on understanding customer needs financially outperform the others.
I refer to this needs-based approach as value-focused innovation, and it is built on answering this question:
How can my company deliver more value to the right customers?
Remember that innovation doesn’t always have to result in a revolutionary new product or technology to be successful. A valuable innovation delivers an improved customer experience as a result of a better way of doing things.
Value-focused innovation may necessitate that you and your organization rethink how you develop new products and services. At Baron Strategic Partners, we have identified 10 Areas of Innovation Mastery (AIMs) that are required for value-focused innovation. The AIMs touch on all aspects of innovation, including establishing a culture of innovation, managing your innovation portfolio and developing the innovation.
This article focuses on the AIM most companies stumble on: identifying your customers’ known and unknown needs.
In theory, it should be easy to talk to customers and find out what they need. Unfortunately, customers can’t always articulate it and might not even know that they have a problem or concern. Additionally, many people lack the skills, expertise and experience to uncover customer needs. They take the wrong approaches, ask the wrong questions and doom the innovation effort just as it is getting started.
As Henry Ford is quoted as saying, “If I asked my customers what they wanted, they would have said a faster horse.” It is often beyond the capability of customers to articulate the need for or to conceptualize breakthrough innovations.
As Brian Bernstein, director of product management for Philips Lighting, pointed out during a recent conversation, the wrong questions can also get you into trouble. For example, he said, if you ask a customer if they want a new feature, service or product, the customer can easily say yes. You then go off and develop that feature, only to find out that the customer wanted it, but wasn’t actually willing to pay for it. There is a better way.
Opportunities to add value to the lives of customers can be uncovered by determining what is suboptimal in their lives. The key is to always seek to understand their world and identify points of frustration. This is very different than asking them what they want.
Observe, listen and ask the right questions of the right customers.
When UnitedHealthcare (an operating division of one of the largest health carriers in the United States) wanted to improve the customer experience, employees spent time in the homes of customers observing and asking questions. While the vast majority of members had a seamless experience, the company wanted to understand the experience that seriously ill members had when dealing with insurance. UnitedHealthcare wanted not only to observe the specific actions these people took, but identify how it impacted their lives.
Ryan Armbruster, vice president of innovation competency, reported that his team would leave the homes of these seriously ill patients with a greater sense of empathy. Not only were their eyes opened to the insurance-related issues their sickest members sometimes faced, but the observers were impacted emotionally. Armbruster recalls going into the home of a terminally ill young woman whose mother was taking care of her. Stacks of medical records, reports and insurance papers took over the kitchen to such an extent that the mother lamented that there was no space to bake cookies for her dying daughter.
As a result of these and other emotional moments, UnitedHealthcare recognized that this situation cried out for a solution. It created its innovative Sherpa program, which assigns personal advocates to seriously ill patients. Now the Sherpa program successfully fields more than 2,000 inquiries for assistance per week and is continuing to grow.
Empathy is the ability to see the world through someone else’s eyes. For UnitedHealthcare, empathy for its sickest patients led to an important innovation. You do not get the depth of these insights or an understanding of someone’s emotional pain from a survey. The key is to capture your customers’ stories about their challenges and address those frustrations.
Jeff Salzenstein is a former top-ranked tennis professional and NCAA tennis champion. A bright guy with an economics degree from Stanford University, he spent his playing career studying ways to improve his game. He constantly questioned the conventional wisdom about the game and how it was taught. After retiring from professional tennis, Salzenstein became one of the first online tennis coaches. And, not surprisingly, he is now considered one of the more innovative coaches in the sport. As proof of his teaching expertise, he even improved my game.
Neil Baron is an internationally recognized authority on selling and marketing innovative products, services and solutions sold to risk-averse customers. He has served in a variety of senior marketing and management roles at companies such as IBM, Digital Equipment Corporation, Sybase, Art Technology Group, Brooks Automation and ATMI. He is passionate about involving customers throughout the go-to-market process. In 2009, he started Baron Strategic Partners, a consulting firm focused on helping organizations launch groundbreaking productsand services and reenergize older ones. Contact Neil at firstname.lastname@example.org or through www.baronstrategic.com.