Today, putting customers at the heart of innovation is a no-brainer for most business managers. However, should the innovation process involve all customers or only specific segments? In this article we explore the hurdles of these initiatives and propose a method to select the most relevant customers with whom to innovate.
Customer-Centricity is Not an Obvious First Choice
Few people dare disagree with the “customer-centric innovation” imperative which has become a dogma in virtually all sectors and markets, B2B and B2C, large and small companies, old ones and start-ups. But it was not always so and for a good part of modern history since the industrial revolution “technology-centric innovation”—using technology to make something new that customers are “sure” to desire—was widely recognized as the normal way of moving forward.
In the B2B space it is only relatively recently, with the emergence of a more sophisticated marketing approach, that some leading companies have switched both their culture and process—the latter being somewhat the easier—to nurture their innovation programs (product features and functionalities, customer and user experience…) from a new source. The “Digitally-powered Customer-centricity in the Industrial Gas Sector: The Air Liquide-Airgas Merger” case study co-authored by David Dubois, INSEAD Associate Professor of Marketing, with Jean-Michel Moslonka, the CEO of AGALIO, shows how the global industrial gas company is powering growth by developing capabilities to nurture its customer relationships after merging with Airgas, a B2SmallB player.1 Another example is Intel, a company whose DNA is clearly based on technology, which began in 2015 to transform its B2B customers’ experience resulting in “a streamlined consistent end-to-end customer experience and increased revenue.”2
But if customer-centricity is for a number of B2B companies akin to a cultural revolution, are B2C businesses not consumer/customer-centric by definition? Take a minute to reflect on your experience with traditional banks and insurance companies, just to quote two areas that have been disrupted by digital customer-centric innovation, and you will realize that it is not the case. And what about G2C (Government-to-Citizen): do we all feel that the service of the citizen has systematically been their prime focus—even in democracies?
Contrary to accepted wisdom, customer (client, consumer, citizen) centricity does not always come naturally to organizations!
The #1 Hurdle to Putting Customers at the Center of the Debate: People
Q: If putting customers at the top of companies’ to-do lists seems so obvious, why is it not happening systematically?
A: Because it is difficult!
A lot of excellent papers have been written on the topic, including the blog post written by Martin Roll, Distinguished Fellow at INSEAD “Building a Customer-Centric Mindset.” As Martin says “…the thinking originates with people and ends with people…” And that’s why it is so difficult.
The human being is the most sophisticated, complex and obscure object ever created. And it is much more challenging to deal with this weird thing than with photons or protons. Not to underplay Einstein’s theory of relativity, but understanding the needs and wants of each and every different human being is far more complicated. Risk is the consequence of this challenge, and the natural human behavior is to avoid risk, or at least to try and minimize it.
Therefore, the main reason for which customer-centricity may not always be the first choice for organizations is that it apparently poses a major threat to the, nevertheless challenging but easier, techno-centric approach. But that’s not the end of the story…
The Other #1 Hurdle to Putting Customers at the Center of the Debate: Customers
As said earlier, few people disagree today with the “customer-centric innovation” imperative. However there remains the daunting question: which customers?
Ask any business leaders, and there are nine chances out of ten that the immediate answer will be: “Ours, of course.” But then, and I have observed this a number of times, comes a hesitation, an after-thought: “In fact, I’m not so sure…”
Indeed, customers come in various sizes, colors, shapes and flavors: past / current / future, high / low profitability, positive / negative growth, small / big, early adopters / late followers, congenial / disagreeable… And this leads to a wealth of questions: Why would you develop a deep co-innovation program with a group of customers that you don’t intend to serve in the future? How attractive is it to collaborate with second- or third-tier customers? How much sense is there engaging with customers who squeeze your prices to the extreme? Should the focus be on domestic or international ones? What about getting your competitors’ customers on the radar?
Uncertainty, and therefore risk, is the consequence of this challenge.
The Power of Asking WHY? Before WHO?
One pragmatic way to answer the above questions in a systematic and repeatable manner is to start figuring out what is leading the company / business entity to put a stronger focus on getting customers involved in the innovation process. It can be caused by an unexpected decrease in market share or gross margin, lesser performance on the NPS front, nagging signals from within the organization, the arrival of a new investor, etc. These triggers are multiple and none should be ignored.
The second angle to the WHY? question is to figure out what is the purpose, the expected outcome, how success will be measured and when. And this leads directly back to the company’s strategy. To put it simply, either the intent is to better execute on the current strategy, or it is to implement a strategic change. In both cases, the company’s strategy is the Polar star, the guiding light. It is a matter of strategic coherence, and from there answering the questions about which customers to work with become much easier to answer.
The choice of the different past / current / future customer segments with whom the company elects to collaborate is directly driven by the coherence with the strategic intent. In taking this approach, business leaders have a simple and effective process to keep tabs on where and how the efforts are spent. There is nevertheless a major dependency: the strategy needs to be clear and fully understood by all those involved in the process. Experience shows that this customer-centric innovation program can turn out to be the moment of truth for the company’s strategy. So better take care of it before even thinking of starting any initiative, otherwise the consequences could be dramatic for the business.
The Consequence of Not Betting on the Right Horse(s)
Despite all the best intentions and a carefully laid-out process, deploying a co-innovation program with the wrong customer can lead to undue conclusions and inappropriate decisions. Examples of such mishaps are surprisingly numerous across a number of industries:
- By exclusively focusing on existing customers, the company failed to identify a disruption occurring in the industry that would ultimately lead to the disappearance of former blue chips.
- In only talking with domestic clients, another one missed a shift in demand that had begun in less regulated overseas market but had not yet reached the firm’s home base.
- In another case, a prominent supplier chose not to work with the smaller accounts and oversaw their more agile buying procedures that opened the way for new competitors to insert themselves discreetly into the market.
- Etc., etc.
A Practical Framework to Select Relevant Customers for Co-Innovation
One of the most effective way to organize the selection of those with whom the company wishes to work with is to build a customized orientation map – as in the sample shown below.
The strategic alternatives to be considered include:
- Are the outcomes expected to have a short-term impact or serve as a mid-term investment for new business?
- Is the purpose to retain current business or to grow it with those existing customers?
- Or is it to go and acquire “net new” business, should it be with existing customers or new ones (a.k.a. net-net-new)?
- Should the priority be to focus on early adopters of new products and services, or to work with the bulk of followers?
- Is the intent to increase the company’s brand equity through a highly visible initiative or to discreetly gain customer insight in stealth mode?
- Can we afford to try and work with a given group customers at any expense, or does our limited budget force us to restrict our reach?
- Do we want to do it sooner or later?
Of course, any combination of the above and more options are possible, including not choosing only one alternative and to operate with a combination of intentions in parallel or sequence. It is however essential to make these choices in a deterministic and conscious way, ensuring a reasonable degree of transparency with the teams involved in developing the program. And finally, all these choices need to be systematically evaluated in terms of business performance and in the light of the circumstances.
Innovating with Customers: Some Practical Tips
Besides this methodology, there are some simple steps to be taken to avoid some of the most frequent potholes:
- It is a top-down process; not only does it require executive endorsement but it absolutely needs personal leadership involvement to overcome the operational hurdles, handle the tougher customers, welcome potentially disturbing data.
- It is not a back-office task, performed sitting in front of a computer screen. Like any marketing-related activity, it needs some real-life personal experience of what the selected customers say, do and think.
- Starting with the easy part, i.e. talking to existing customers to tune the program, will avoid potentially costly traps.
- Digital tools must be readily available to manage and exploit the structured and unstructured data that is collected.
- The program cannot be delegated to the sales people, who have other priorities. It is a cross-organizational collective initiative that will widely benefit from the diversity of the people involved in it, their different perspectives and expertise.
The Key to Becoming a Successful Customer-Centric Organization is…
…to choose with whom to collaborate based on the goal you are pursuing.
With that in mind and the relevant tools and methods to develop a customer-centric culture, these initiatives are tremendous sources of both incremental and disruptive innovations that serve both customers and suppliers.
About the Author
Patrick Giry-Deloison is an operational consultant, business coach and professor of marketing. His goal is to “transform great ideas into great business.” He is also a business angel and a keen horse rider. Connect with him on LinkedIn and follow him @pgirydel.
Email: [email protected]