Most business leaders would agree that customer feedback is invaluable. Good feedback tells you what you’re doing well; bad feedback tells you where you can improve. So it stands to reason that learning more about your customers and their needs can help you build a better solution to meet those needs.
That’s the idea behind “Customer-Led Innovation.” Here are four reasons it just might be the key to your next big idea.
Open Source Your Innovation
93% of enterprise executives in a recent Accenture survey said that innovation is critical to their business, but only 34% said they had a well-defined strategy in place to drive it. At its most basic level, this is the challenge that customer-led innovation helps solve: if you’re unsure what to build next, ask your customers.
That’s what the LEGO Group did. Since the early 2000s, LEGO has gathered feedback and ideas from its customers through a variety of channels, including live events like BrickFest, interactions with fans at retail stores, and on its website. The company has also solicited ideas directly from fans through its LEGO Ideas program: A selection process reviews the most popular fan ideas and selects the best among them to develop new sets.
This is just one example of how companies can “open source” their ideas to spark innovation: reaching out to customer affinity groups, online communities and media hubs, live events and webinars—even in person meetings—can all provide insight about your customers’ needs.
Balance Disruption and Risk
When people think about innovation, they often think in terms of something that is revolutionary or disruptive. But there’s a problem with revolutions: they’re risky. If your customers are risk averse, that disruptive new product you’re building for them simply may not resonate.
This challenge is one reason customer-driven innovation is so powerful. “Being customer-driven allows us to innovate solutions for industries that are notoriously risk-averse,” says John Kanoski, CEO of Springfield, Illinois-based Legal Files. “Law firms don’t adopt technology just because it’s the latest and greatest. They only take that risk of adoption when the benefits to their business are clear.”
One charge that sometimes is leveled against customer-driven innovation is that it can stifle innovation, but Kanoski says, “By working closely with our customers, we’ve been able to support their technology adoption and help move the industry forward with solutions that enhance how they do business. We’ve introduced tools like automated workflows and processes that save time and money on document assembly, organizational tools that reduce time spent searching for and retrieving documents, and tools that serve multiple purposes, reducing their overall IT footprint.”
Says Kanoski,”Customers tell us what their problems are, but it’s our innovation that helps to solve them.”
Take a Deep Dive Into Complex Problems
Customer-led, or customer-driven, innovation, isn’t just for brands like LEGO whose customers face simple problems like what toy to buy next. It also works with customers who face challenges far more complex and difficult to solve. After all, without a complete understanding of what customers need, it’s nearly impossible to deliver solutions that fulfill them.
Steven Burns, FAIA, Chief Creative Officer of BQE Software says this is the approach his firm takes. In order to gain a more complete understanding of the problems their users face, the company works closely with them through active customer communities, live events, focus groups, and recruitment from the industries it serves. “BQE came into being when our founders started building software to solve pain-points in their own business,” said Steve. “We’ve continued looking to users to tell us about the problems they’re facing—they’ve become an integral part of our development team.”
According to Steve, there’s an important difference between customer driven innovation and simply giving customers what they ask for. It’s asking the right questions. “Don’t ask the customer how to solve their problem. Instead, ask them what the problem is,” notes Steve.
“When we were developing BQE Core, customers told us they wanted to save time by entering time sheets from a mobile application,” recounts Steve. “Rather than just providing the exact solution they asked for, we took it a step further by thinking about how to more comprehensively address this issue of convenience. We ended up with an app that, in addition to letting the users enter their time on mobile, uses geocoding to track their location and the duration they were there for. Users don’t have to remember where they were or interrupt billable time in order to log their time. That customer input was the basis of innovation that not only met the needs our customers identified, but exceeded them.”
Better Ideas and Higher Revenue
An oft-cited survey by Eric Von Hippel, a management researcher at MIT found that of 1,193 successful product innovations across nine industries, 737 of them—or 60%—came from lead users of the products. Customer-led innovation is also profitable. Another study by Von Hippel found that customer-led innovations at 3M generated $146 million in revenue over the five year period studied. Internally generated innovations, on the other hand, generated just $18 million.
These findings support the idea that nobody knows your customers better than they know themselves. Market research may tell you about market size, challenges and opportunities, but it can’t tell you what life is like on a day to day basis for your clients. By reaching out to customers to learn more about their business and the problems they face, you can deliver innovation that delivers better results at lower risk, and with more profit.