Needs-Based Innovation Reigns

Companies should adopt an innovation process based on customer needs rather than coming up with "big" ideas and then testing them out. Pro or con?

Pro: Innovation Is a Predictable Process

After working on the IBM (IBM) engineering team for the failed PCjr, I realized there must be a better way to guarantee a product or service’s success at launch. What I have found during the past 20 years of study and research is that most companies lack a disciplined, predictable business process for listening to customer needs and turning them into true innovation.

Where most companies fail is in their thinking that innovation starts with an idea, when the reality is that only one in 14 million ideas is right the first time. Companies go through numerous product concept iterations to try and get it right, and the success rate using this approach is less than 20% and requires way too much time. Take Dyson, for example. The company went through 5,000 iterations for a vacuum before it was brought to market as you see it today. Imagine what Dyson could have accomplished if its innovation team had known on the first version of the product what it did on the 5,000th.

Just as doctors need to know the symptoms of their patients before they can make a diagnosis, companies need to know the needs of their customers before they can develop the right solution. Fortunately, there is a way for companies to know what those customer needs are before they develop the idea—resulting in success rates upwards of 80%.

In this era of economic turmoil, the risks are even bigger. Companies can no longer rely on randomly generating ideas in hopes of finding the next big idea. Instead, companies should start with a clear understanding of the needs they are trying to fill; then they can develop the right, innovative solution to meet the customers’ needs.

Con: Determining the Right Value Matters More

Starting with the customer’s need sounds like a smart idea, but who defines the need? The voice of the customer can be dangerously flawed and the voice of the internal engineer with the next big idea can be even more errant. That’s why innovators need to come up with ideas first, then assess the net value impact they will have on the customer’s business and life.

What is needed is an accurate process to measure the true value of the big idea in order to see if it can demonstrate enough value to be the right idea. We need to consider where the new product or service fits within a value network. We need to think beyond the value chain. Think of the iPhone and iPad innovations: What are all the points of value, and who is really affected and to what level? The members of the value network include Apple (AAPL), AT&T (T), application developers, business subjects of the apps, and the media. Steve Jobs envisioned a broader value network for open innovation, one where his platforms would coalesce the best energies of hundreds of thousands of developers and customers seeking new experiences. He knew the real key to turning the big idea into the right idea was to create value across the broader network.

It’s more than recognizing a customer need. The big idea, and ultimately the right idea, will recognize the network of needs and begin by assessing the value impact it can, and hopefully will, have on all members of the value network and the ultimate customers.

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Reader Comments

Uncle B

Time to change the basic mandate of incorporation to include some civil responsibilities. Remember the 1973 Ford Pinto follies, where it was cheaper and therefore in shareholder's interest to pay off insurance claims for the fire-ball Pinto deaths than to change the model, hence even more fireball Pintos were sold even after the truth was well known to insiders at Ford--willful corporate manslaughter. Toyota has recently proven that history, in the U.S. at least, repeats itself. They even have documented "Books of Knowledge" to prove it. Yet American legislation woefully lacks teeth, and instead supports the current corporate model even to sorrowful civil ends. "The more things change, the more they are the same," said one French philosopher--could this corporatism be the disease, the cancer of republics, the sad end to democracies? After all, Google, torrent, the movie, "Who Stole The Electric Car." Watch this movie carefully to see how corporatism works on America, and think of all the ways to improve America and corporatism without jumping all the way to a socialist extreme. Regulation and regulators can be bought off, manipulated, but changing the basic mandate of incorporation--changing the basic form cannot. Monsanto and others will fight for their very lives against this notion of civil codes included in the laws of incorporation, and shareholders will be up in arms but the nation and its prosperity and our basic quality of life will improve immensely, and without the ghosts of Lenin and Marx to contend with. P.S. Canadian universal health care works just fine for the Canadian mentality. Perhaps not so for the American personality?

The Walker

When Henry Ford was asked if he asked potential customers what they wanted, he said no, because if he had they would have said they want faster horses.

Innovators instinctively envision opportunities and possibilities. Hard to train, but not hard to cultivate if you or the company leaders are themselves original thinkers. Often these are the worse folks to manage, but when given freedom and incentive they flourish.

Ridx

Did someone let in the trolls?

Sergei Dovgodko

Needs-based innovation is good for incremental advances.

For conceiving radical innovations, designers must remove themselves from customers and their needs. They should use intuition and personal insight into cultural change as well as technological advances to come up with radically new concepts. Innovators' personal talents play the decisive role in this context.

Innovationist

I have to agree with Jeff and especially in these times. When the economy forces everyone to be very tight with their dollars, companies become more tactically focused and thereby their vision of innovation becomes tactical. This does not lead to company growth and quite frequently can result in company stagnation.

Why do we think that companies (the clients) would know how to get themselves out of the struggles they have when they are the ones who put themselves there? Many times this is true of the vendor (us) as well because we have helped to support these efforts.

Companies need to have innovation teams that are not connected to the tactical arms of the organization. They need to be kept separate to avoid the natural osmosis that draws people into the needs to whom they report.

Our process involves several kill gates that are presented to the executive group as well as a leading council. We focus our innovation filter on the goals of the organization for current and new market strategies.

However, it still all comes down to how willing is the organization to change. Innovation is not just about products, it is about business models, infrastructure, culture, etc. With out the protection of the top executives this group will die out due to strangulation.

Innovation teams are very hard to manage because of their energy and goals of changing things. If you support and encourage this process thereby transferring energy into the team then as -The Walker- has stated, "they flourish" and the company benefits.

Scott Burleson

Innovation without an understanding of customer needs?

Surely you've heard the Roger Miller song, "You Can't Rollerskate in a Buffalo Herd."

You can expect similar results from either of those approaches.

If you are executing an innovation process without an understanding of customer needs, you are really just creating a bunch of science projects. Oh, sure, they can be fun to do. They can be interesting. But nobody is going to purchase something just because the company thought it was fun to build. Have you had someone show you four hours worth of family video detailing their vacation to Michigan? I'm sure they enjoyed creating it, but I'm doubting that you asked for a copy to watch later on your own.

In the innovation space, this is a real problem. Universities all across this country are buried in intellectual property that has no utility. Companies spend billions going down technological rabbit trails with no returns in investment.

What is the problem here?

The problem here is that many are executing innovation with the intention of profit-creation without understanding that this is fundamentally a problem-solving exercise. To solve a problem...., any problem..., you must first define that problem.

To quote Charles Kettering (former head of research at GM, inventor of freon, the electrical starting motor, and holder of 140 patents), "A problem well-stated is half-solved."

Question: How do we define the problem for customers for the purposes of innovation?
Answer: Customer needs define the problem.

More to the point, customer needs become the criteria that are used to judge a particular idea's worthiness.

OK now, I'd like to respond to a few specifics of the dialogue above:

Mr. Thull:
Your argument is all about creation of value, yet you provide no definition of value. I respectfully submit that value is defined by customers, and therefore, by their needs. Your statement about iPad, AT&T, etc. describes the network externalities which enable customer needs to be satisfied to a higher degree. However these factors are separate from the customer needs themselves. My personal customer needs for my iPhone include communication and entertainment. I do not have a need for Apple to be integrated with AT&T. I also do not have a need for the application developer system that was created. In fact, if Apple becomes too in love with its products and solutions rather than customer needs, then it will be displaced as well. Think Blockbuster.

Mr. Walker:
Your comment about Henry Ford's quote shows that you are confusing customer needs with currently available solutions. If Mr. Ford asked customers what they needed, and if he had expertise in acquiring data from customers, the customers could have easily told him that they would like to travel from point A to point B in comfort, safely, and as fast as possible. With this input, he could have provided a better solution, such as an automobile.

Mr. Dovgodko:
You are also confusing customer needs with solutions. Please read my clarification about Henry Ford's quotation.

Mr. Innovationist:
You make good points. Wall Street encourages behavior which is not good for a company's long term growth. Peter Drucker was writing about this in the 1980s and it is more true than ever today. SVA-type performance measurements will destroy a company slowly. You say that you "agree with Jeff," but based on the rest of your comments, I am hopeful that I have convinced you otherwise.

Attempting to innovate without customer needs provides no direction, no idea of what problem is to be solved, and no criteria by which to judge any idea that is presented--no matter how creative, useful, or interesting.

So, you can't innovate without customer needs any more than you can rollerskate in a buffalo herd, but at least "you can be happy if you've a mind to."

Howard Wallace

A technique I've used for over 30 years and now offer as a consulting service is a blend of the two approaches. I help engineers and product managers conceive innovative ideas by connecting them with people who have exceptional insights into what is unsatisfactory with the offering be addressed. Those exceptional insights are the result of extensive efforts by them to do "what's next" with another product, system or service that utilizes the offering being addressed as a building block. A combination of established methodologies in library science, investigative research and executive search, while not typically employed, are used to find and source exceptional users in practical and affordable ways.

Barry Bayus

Both approaches can succeed (there are many examples that can be cited). But all successful (as well as unsuccessful) new produts are "solutions to problems." A company can start with understanding the problem (i.e., consumer needs) and then develop appropriate solutions (innovation pull). Another company might develop the next big idea (usually involving a technology solution) and then attempt to identify the key problems this new product solves better than existing alternatives (innovation push). In either approach, consumer needs must be properly matched with the new product solution for it to have any chance of being successful. Which approach to follow (pull or push) will depend on a company's innovation strategy and core competencies. You can either attempt to understand consumer needs now or later, but no matter which approach is used you really can't escape consumer needs.

Zachary Lyons

I would portend that you must navigate the "customer needs space" before you dive into the "solution space." If you don't, then it is analogous to heading out in your car without mapping out a route to your desired destination. You'll go somewhere, but is that where you need and want to go?

Of course, simply understanding customer needs is not sufficient to innovate. Since innovation is the process of addressing unmet customer needs, you must still develop a solution that helps customers get the job done better than their current solution. This often requires marrying what is now just possible with a thorough understanding of what it is customers are trying to get done. If you are a profit-seeking company, then I would add the criteria that the solution must be economically viable, else why pursue it.

Having individuals in your organization who have exceptional insight and are gifted at conceiving new concepts is great. Just have them focus that talent on addressing unmet customer needs and you’re organization will be well ahead of the game.

Frank

Innovation might be good before, but now it has been a way for companies to tactically tempt people to shell out there money. I mean yes, it can help you in a short term but what about the long term? I mean an I-Pad is great, but what does it solve really besides reading a book and surfing the net? A simple laptop can do that.

The point is innovation must be focused on solving long-term problems, not finding ways to profit from the public; we have a lot of problems already. So I agree with the con side, that we have to focus on the value of the product that solves people's problems. We can innovate anytime. Innovation on products is just time-consuming and more financial waste for companies.

Bob Lewis

Having read the two lead-in points of view and all of the comments, what strikes me most is that false dichotomies are alive and well and living in this conversation.

There isn't a single disagreement in everything I read that isn't best resolved by asking the question, "To what situations does this apply and to which is it a bad fit?"

Tommy D. Kreitz

This is a sticky question, but ultimately I would have to fall on the Pro side. Invention always comes from need, whether it be Thomas Edison wishing a dark room was bright or Henry Ford wanting a way for everyone to scoot around quickly and easily. To come up with the “next big thing,” first you have to see what people are missing. If you can invent something that people, once they own it, will never understand how they lived without it, like an iPod, you have yourself a billion-dollar patent (like an iPod). But without knowing what problems customers are facing, like the need for a quick and easy way to listen to their music digitally, stored in a handheld device and downloaded from their computers, you will never come up with that amazing child of creativity and science.

Consumers do not know what they need. If they did, they would all be inventors themselves, but instead they sit around and wait for the innovators to fix their problems for them, unable to help themselves. Engineers can always make things bigger or smaller or stronger or faster, but upgrades only go so far, and at a point you will have to study the common man to create the rarest of products: the shiny and new. And should you manage to market that beautiful creation of yours, those common people you created it for will be the first in line to spend their money and pick it up.

Dr. Sohan Jindal

Necessaity is the mother of invention. A man under stress discovers the best and is the best innovator. The problem of leaking crude oil well may be bothering many scientists, but a solution will come when B. P. or the U.S. government opens its closed doors to the world of scientists residing in unknown corners in the world.

Ernesto2732

Sure, innovation comes from simple observations about what and how people are doing things and what can be done in a different and useful way for those people. If the new way is not useful, the innovation failed. I recommend reading FAST (Function Analysis Systems Technique) by Charles W. Bytheway, because it is a technique that allows one to view the complex as simple.

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