Why is customer-centric innovation so critical for business innovation?


Why is customer-centric innovation so critical for business innovation?

According to PwC’s 2017 Global Innovation 1000 report, total R&D investment by the world’s biggest-spending public companies will reach a record high of $702 billion this year – up 3.2% on last year. But against a backdrop of shortening product lifecycles, the need to get products to market more quickly, and demand for continuous innovation, where should companies focus their R&D spend to ensure they maintain and grow market share, and develop successful products?

Taking a customer-centric approach to innovation

Leading brands with sustained growth have one thing in common - a deep understanding of end-users’ needs, forming strong connections with customers and innovating around their yet-to-be articulated desires. Jerry Gregoire, the former CIO of Dell Computers, captured this transformation when he said “Customer experience is the next competitive battleground”.

Innovation has been a buzz word for quite some time. Now brands are questioning whether their existing value propositions respond appropriately to the dynamic marketplace, and if they truly match their customers’ evolving requirements. This is driving a shift towards focusing R&D efforts on customer-centric innovation. 

Why customer-centric innovation is important to business innovation

At the heart of customer-centric innovation is a rigorous R&D process, which must be underpinned by customer feedback. This can be achieved through customer observation and field studies, analysing data to uncover trends, and gathering direct input into the process – for example with Online Customer Product Forums, or User Conferences.

By forging strong customer connection and understanding, brands can develop better ways of communicating their value propositions and delivering a complete and satisfying end-user experience. Many companies using this approach gain a competitive edge in the market, as well as allocating R&D spend more efficiently to drive more effective innovation.

How to interpret customer feedback through observation and communications

Innovation is all about improvement. And since it drives customer satisfaction, continuous and iterative improvement is critical. Customer feedback is one of the most important sources of incremental innovation for brands today. Listening to customers’ pain points can provide a plethora of insights that can help organisations improve a product’s usability or improve service levels.

For example, US-based financial services firm Merchant Cash & Capital (MCC) gathered customer feedback through online surveys and personal interviews. Loan officers learned that the customer on-boarding process was clunky, with delays impacting end-user satisfaction. In response, MCC engaged technology partners to digitally transform the process, meaning loan applications could be completed with just a few clicks of the mouse, therefore improving the overall customer experience.

Hotel chain Marriott used an ‘open innovation lab’ format, inviting customers to contribute to the design and testing process for bedrooms, public spaces, meeting rooms, and even catering concepts. With various opportunities for customer participation, this quick prototyping method gave Marriot unparalleled instant feedback, which was used to implement innovations quickly in its properties around the world.

The dazzle of digital can often overshadow the benefits of old fashioned, offline customer observation. Samsonite capitalised on this classic approach when it released the innovative ‘Marshmallow’ suitcase range. Launched in June 2014, the ingenious idea was to add the utility of a travel seat to a suitcase, inspired by observing travellers at airports and train stations getting tired while waiting in queues.

Feedback from social media channels is also a good source of honest and timely customer opinion. With careful monitoring and response mechanisms in place, companies and consumers can benefit from an open form of discourse, which can be looped back directly into brand communication initiatives. A web-connected app for smartphones and tablets, which in itself can be regarded as an additional value proposition for a brand, also has the capacity to gather incredibly detailed usage data and trends.

Why crowdsourcing or open innovation can benefit brands

There has been a big surge in efforts to co-innovate with various stakeholders, including customers and suppliers. According to a 2016 report by eYeka, big brands have increased crowdsourcing significantly in the past decade; in 2015 alone, usage increased by over 30%.

Many companies now regularly release product photos on social media platforms, such as Twitter, WordPress, and Pinterest, before the official launch. But a crowdsourcing campaign is as much about obtaining quality, geo-specific content for a brand’s future marketing and insight for communication strategies, as it is about seeking consumer input to inform product design.

Major brands across many industries, including FMCG, are adopting a crowdsourcing strategy to drive innovation. Coca-Cola recently launched an initiative in China, inviting consumers to create short videos that would inspire more people to drink Coke. The company learnt how Chinese consumers associate with the Coca-Cola brand, gathering insights about their preferences and collecting innovative marketing content attuned perfectly to the audience.

Air France KLM decided the road to innovation lay in fostering a team of exclusive customer observers, with a unique Quality Observer programme built around a dedicated website and mobile application. Air France KLM’s Elite members were asked to provide feedback about in-flight service quality, and in exchange for this insight, participants received tangible rewards such as air miles.

A learning cycle and never-ending source of competitive advantage

Taking a customer-led approach to innovation allows brands to achieve more with less, move R&D spend towards incremental innovation, and develop improved value propositions.

This virtuous circle can ultimately lead to radical innovations, which break the market mould and bring huge competitive advantage. Keeping the customer at the heart of innovation keeps innovation at the heart of the business.

Rachit Khare

Rachit Khare

Rachit Khare is the Vice-President of Client Solutions for the Data Analytics Practice at The Smart Cube. Rachit designs data solutions for complex client engagements and develops analytics strategy for retail business leaders. Rachit has been with The Smart Cube for seven years and outside of work is a keen martial arts enthusiast and currently working towards his purple belt in Brazilian Jiu Jitsu.

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