Boost Your Digitalization: Continuous Customer Interaction

There is a wonderful “not safe for work” quote that states that assumption is the mother of all eff-ups. Many of the things that went wrong in my life can, when doing root cause analysis, be directly blamed on me having the wrong assumptions about the situation at hand or reality at large. Of course, this is not just true for individuals, but for companies as well. Companies are successful because the people on the inside know something that the people on the outside do not. There is a set of beliefs and associated behaviors that come with every company and that are at the heart of their success. For instance, in automotive companies, the ability to design vehicles based on platforms and to create premium as well as low-end products from the same basis allows for cost effective scaling of production beyond a product-centric approach.

The challenge is, of course, that successful innovations are eagerly copied by competitors and the initial differentiation is commoditized. As a consequence, companies need to continuously innovate in order to maintain their differentiation. Innovation is a highly overloaded term in many ways, but in the end it is concerned with a new idea and an ability to monetize this new idea. At the heart of the ability to monetize is the desirability of the idea in the eyes of the people that would be benefiting from it. The only way to assess desirability is to actually present the offering to customers and users in order to gather feedback.

In my experience, providing access to users and customers for innovation teams in order to gather feedback on new concepts is challenging in most companies and especially so in B2B companies. The reason is that the current customers are the ones paying the bills and are viewed as the ones that we serve with our offerings and associated customer support. This means that everyone interacting with customers because of the existing product portfolio is highly skeptical of providing access to these customers as it may upset the current relationship.

A second reason to limit access to customers is that we do not just want to show new concepts to them, but also measure their behavior as they use the implementation of the concept. And one likely result is that some, but too few, customers love the potential product, resulting in a too small addressable market. Especially if the positive customers are also key customers for legacy products, it becomes quite a challenge to shut things down. This is exacerbated in the cases where we have managed to make customers pay for the new offering as they will easily feel entitled to continued support.?

The above easily leads to a situation where innovations are developed for way too long based on little or no feedback from customers. That causes the cost for each innovation experiment to become very high and as a consequence, we can not afford for innovations to fail as the sunk cost is too high. This exactly the opposite from where we need to be, i.e. testing as many ideas as possible against the lowest cost per experiment

So, the consequence of lack of access to customers is that within the company we all start to act based on our assumptions, rather than based on reality. Difficult as it is, we need mechanisms that allow innovators to gather true customer feedback throughout the process. These mechanisms need to cover at least four phases. First, we need to be able to be around customers and use ethnographic techniques to build empathy with and understanding of the customer. Many companies that I work with limit their customer interactions to the negotiations table during sales and customer support in case things don’t work as they should. This may give suggestions for new product features, but will most certainly not lead to new insights that result in new breakthrough offerings.

Second, innovators need the ability to talk to customers to get verbal feedback on problem hypotheses that were identified as well as on solution approaches that they would like to explore. The challenge is of course that customers, as well as any other humans, have a tendency to exhibit socially desirable behavior. Telling someone that you think their idea is stupid and won’t work is hard for people, so we need to be smart in how we ask the question, but the cheapest way to invalidate an innovation concept is to not build anything at all.

Third, we need to put (very) early stage prototypes in the hands of customers to measure if what they say they will do is really what they do in reality. There are numerous examples of products that failed despite the most promising verbal feedback from customers. The world of fast moving consumer goods (FMCG) is littered with failed products of this category. Hence, we can not rely only on what customers say, but we need mechanisms to measure how people behave.?

Fourth, we need to be able to measure willingness to pay. There are many offerings that customers happily use if there are no associated costs, but that do not deliver sufficient value for customers to pay for it. One of my favorite definitions of innovation defines it as invention + monetization. If you are unable to monetize, you have not innovated. So, confirming that customers are not only using your offering but also are willing to pay for it is critical for successful innovation.?

Concluding, many traditional companies limit access to customers for the majority of their staff. The consequence is that everyone in the company operates based on beliefs and assumptions about the customers rather than facts, which easily causes high investment in innovations that are flawed from the beginning. Instead, companies need continuous interaction with existing and potential customers for verbal feedback, observing behavior and measuring willingness to pay. It’s not innovation if you can’t get paid for it. Remember, assumption is the mother of all eff-ups! Make sure your assumptions are validated!?

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