Most business gurus would tell you that the key to successful innovation lies in listening to your customers and doing what they want. Respond to customer needs, and your business will grow. But research tells us otherwise: The correct answer is B. Innovating successfully means creating things that customers haven't even imagined.
Got that? Read it again. Innovation strategies focused on serving customers are losers. To win big, you must find the courage to be a true leader. You must anticipate the future. In fact, a 2004 study by John Narver and Douglas MacLachlan, professors at the University of Washington, and professor Stanley Slater of Colorado State University, found that managers who agreed with statements such as "We help our customers anticipate developments in their markets" and "We innovate even at the risk of making our own products obsolete" were 10 times more likely to be successful than those who said "We are more customer-focused than our competitors" and "Our business exists primarily to serve customers."
That same study, which queried 312 product managers, also found that relying on the insights of your customers isn't the way to innovate. A strategy based on "customer focus" actually made companies' new products less unique. Customers, after all, tend to ask for evolutionary changes such as lower costs, performance gains, and simplification. They don't know what revolutionary changes are possible.
The auto industry provides a great example. Manufacturers of carburetors listened to customers and gave them what they wanted: incremental changes such as better performance and lower prices. But when fuel injection came along, carburetors quickly disappeared from U.S. automobiles.
Worse, trying to come at innovation through customer satisfaction often puts pressure on a company's profits. "Customers' expressed needs and benefits can be known readily by all competitors," says Narver. "That situation typically leads to competitors offering the same benefits to a given set of customers, then having to engage in aggressive price competition in the attempt to create superior value for those customers."
So how do you innovate?
-- Start by asking the right questions: How can we help customers anticipate developments in their markets? How can we discover additional needs of which our customers are unaware? What could we do that would make our own products obsolete?
-- Stop asking current customers for ideas. They have their heads down in their own work, and they don't necessarily know what's possible. Once you have a 'big idea,' it's perfectly O.K. to ask customers about it. After all, you don't want to find out that all your customers hate your brilliant innovation. But to find that idea, try spending time with customers who never buy your category. Look into the future for your industry. What would you do if you were starting your business all over again?
-- Exceed customers' expressed needs. If you best their expectations, you will no longer need to offer price discounts to create a perception of value.
-- Anticipate the future. Challenge yourself and your staff to create three "future-focused scenarios." What would customers want in each case? Translate your thoughts into writing and step back to assess the probability of each scenario. Then take action. Doug Hall is the author of the Jump Start Your Business Brain book series. He's also founder and CEO of the Eureka! Ranch