What is the role of the Board in driving organisational innovation?
Robynne Berg explains why customer satisfaction is not an indicator of customer-centricity
A colleague recently came to me with a perplexing problem. He had just completed an innovation workshop with a global financial services firm in Europe. They contacted him to say the sessions were deemed very successful. They were keen to continue with the engagement if he could help them with one small request: could he please make the innovation planning tools simpler.
After a brief discussion about whether we could assist with a simpler tool we came to a realisation. The innovation strategy tools engaged for the workshops were simple. Very simple. The problem was not the tools. The problem was the thinking and discussions that take place in planning groups when applying the tools.
The client wasn’t asking for a simpler tool: he was asking for tool that meant he and his team didn’t have to think!
Unfortunately planning tools do not think for themselves. Innovation planning tools are designed specifically to facilitate different conversations that lead to new insights and new ideas. These conversations – especially in the early stages – can feel messy and ambiguous. That’s the idea. The innovation process requires messy ambiguity and a bit of personal and team squirming. Persist and you uncover the ah-huh insights and breakthrough ideas. Persist often enough and you will build an innovative mindset, skills and culture.
Innovation is primarily the result of different thinking. It requires that you not only think but also think differently. The one great tool that can think for you is your brain. Unfortunately innovation planning tools are not effective otherwise.
Innovation planning tools are fantastic in helping you and your team innovate: just don’t expect them to think for you.
Last week I attended a digital innovation conference. It brought together a series of thought leaders, digital agencies, successful companies and start-ups. It was a fantastic event with one exception: an oft-flouted phrase that really disturbed me.
A couple of presenters spoke in impassioned tones about ‘loving your customer’ – stomping home the message with ‘Love your customer’ emblazoned on slides above their heads. As one agency head said: “You gotta love your customer and ask them what they want”. I grimaced.
I felt myself catapulted back to the memory of a blind date in my youth. The young man once snagging a first date couldn’t help but profess his love there and then over the phone: before he had even met me. Needless to say I was a little shocked and should have stopped it there. But given I’d already committed I went on the date. Over a couple of exhaustingly long hours the young lad waxed lyrical about his achievements and personal qualities whilst he fawned over me and groped for approval. Needless to say it was the only, albeit numbingly memorable, date. I was insulted and infuriated.
Why? Because I knew this kid didn’t ‘love’ me, or even ‘like’ me. His protestations of interest had absolutely nothing to do with me. It was all about him. He was seeking approval and hoping that by intimating love, I might take note, invest in him and give him what he wanted (an unquenchable desire for attention). Without realising it he was screaming with insincerity and inauthenticity. I was left insulted and angry. He was left alone.
And it’s just the same for business. You simply cannot just decide to love your customer and then try to prove your love and expect results. Great relationships (romantic and economic) do not start with loving someone. They start with knowing someone.
Seek not to love your customer. Seek to know your customer.
It is only once you truly know your customer that a meaningful and profitable relationship can ensue. So how do you get to know your customer? As with most relationships there are a series of incremental steps that lead to love. And it starts with being open and listening… deeply.
Here’s five simple steps to knowing your customer:
Step One – Ask them about a their interests
It’s the first step to getting to know anyone. Take some time to learn a little about your customer: his/her likes and dislikes. What are his/her interests and tastes? Can you see some synergy between their interests and what you have to offer?
Step Two – Get to know them better
Once you’ve established some shared interests, get to know them better. What drives your customer? What thoughts and feelings drive their decisions? What’s important to them? Who's important to them? Why do they make the decisions they do?
Step Three – Listen to know them deeply
Learn to listen deeply. Seek to understand and listen without putting your view of the world in front of them too quickly. As you listen - without judgment - seek to understand them beyond just what they say: look for the hidden, unsaid messages that can reveal their true selves. Deep observation can reveal needs, concerns and pain points that the customer themselves can’t always articulate. These unstated and unmet needs are what feed value creation. It is here that innovation is born.
Step Four – Nurture the relationship over time
Invest in value creation. If you really want to delight your customer, invite them to work with you in the spirit of co-creation. Together you might create something truly unique, that your competitors have never thought of and that many others will also appreciate. This is finally where we see love start to grow. Together you and your customer can create something that is truly valuable.
Step Six – Honour the relationship
No relationship will last unless it’s constantly valued and nurtured. Once the commitment between you is established, keep close and connected. Stay present with your customer and continue to listen closely. As time goes by do new needs or expectations arise? Has your customer grown and changed over time? But even the greatest of loves will die without constant and authentic nurturing. It is with constancy and consistency in listening and nurturing the relationship that a truly lasting relationship evolves. This is love.
So instead deciding you want to love your customer, decide instead that you want to know them, listen to them, nurture them. Change your mantra from “Love thy customer” to “Know thy customer” and watch as your relationship blossoms and evolves.
If you’re a decision-maker in your organisation my guess is that you’re already looking to your mid horizon and observing the approaching wave of change and disruption headed your way.
Digital disruption is reshaping our economy and workforce and shifting the boundaries of competition. It is increasing the rate of societal change. And it’s changing the way we do business. Deloitte estimates that 65% of Australia’s economy will feel the impacts of digital disruption by 2017*.
So it’s not news to anyone that the only way to respond to digital disruption is to adapt and innovate.
And that said I think many of us are missing the central point in the innovation debate. Because we’ve erroneously made innovation synonymous with technology. The innovation discussion has been almost entirely subsumed by references to digital communications, digital platforms, big data and social media.
As a result we’ve lost sight of a greater truth; that technology is changing us as people, as consumers and as a society.
While technology is fundamentally important to our businesses and should be a key focus of strategy and operations, we also need to look beyond it.
Because technology is not the innovation; rather it is the driver and enabler of innovation.
What we need to be more cognisant of is how digital technology is changing us; who we are, what we care about, what we value.
Over recent years the increased access to information has given consumers more choice and more power. Today’s customers – business and consumer - have an expectation we will tailor our products and services to their specific needs. Because communications are instantaneous they expect us to respond to them in real time (via the communications channel they choose).
And the convergence of digital and social is creating opportunities for companies and customers to create and participate in shared communities of interest. Increasingly we see customers not just commenting on products, services and experience but also reaching out seeking to participate in communities around products or ideas they care about.
This is exactly what we should be tapping into: the changing expectationsand needs of customers, and their willingness to communicate and share their ideas.
Innovation begins not with technology but with the creation of innovative customer value. And the creation of customer value is dependent on a deep insight into customers and their changing needs and expectations. It is the result of deep immersion into customers and their world.
Those insights can lead to the creation of new and innovative value; value that may well be enabled and facilitated by the wonders of technology.
Technology should be considered from two key perspectives:
- Firstly, how is technology changing our customers and broader customer markets, both now and into the future? How will it shape what customers value, what customers need and how they behave?
- Secondly, how can technology help us to deliver exceptional customer value both now and into the future? How can we apply technology to know customers better, communicate with them more meaningfully, and create products, services and experiences that provide exceptional customer value? How can technology help us extend into new markets spaces and capture new demand?
Alone, technology is just innovation without value. Start with the customer and technology creates innovation that is valued – the only type of innovation that succeeds.
*Deloitte Digital Whitepaper ‘Short Fuse, Big Bang’ and ‘Harnessing the Bang’.Click here
In my engagement with CEO groups and leadership teams I’ve found there to be few CEOs for whom innovation is not a priority. Yet despite business smarts, good intentions and a committed team behind them, leaders often find themselves wrestling to find and execute the right ideas for growth.
Many leaders speak of placing enormous pressure upon both themselves and their teams as they pursue an innovation agenda. Many share a story of relentlessly pursuing innovation only to find the strategic conversations becoming bogged down and the ideas becoming increasingly complex. Subsequently teams feel overwhelmed by the task and the process breaks down. Disheartened teams turn their focus back to operations – where organisational knowledge and competence historically lies.
So why is innovation so hard? And why do so many committed leaders and teams find themselves running out of steam and abandoning their innovation efforts?.
One day, whilst discussing this problem with a client I noticed as he talked about his team’s innovation agenda he directed his gestures and eyes to the far corner of the room – as if pointing to a far horizon. It finally dawned on us – perhaps the reason innovation was so difficult was because we were focusing on far horizons: too far away from our business.
I think we too often speak of innovation in abstract terms believing that innovation is about searching for completely new ideas. As a result a team may come to perceive innovation as an Odyssean journey to far distant shores.
I have come to learn that far from being located on distant shores, innovative ideas and great discoveries – the ones that transform your business and create growth – are generally right in front of you.
Reframe what you know
Innovation is sparked not by new knowledge but by reframing what you already know. Often there is little need – at least initially - to go in search of new data. Instead innovation is about observing with open eyes and mind what is currently going on in your business, your industry, for your customers and the world at large and then reframing that data to gain new insights.
Reframing is not unlike a stereogram, where you look directly at a picture and shift your focus until the 3D picture is revealed. The picture itself doesn’t change, but what you see within it does.
So how do you reframe? You do so by looking beyond the assumptions and biases about your business, your customers and the industry in which you compete. We unaware of our assumptions and biases because they are firmly grounded in past experience and adopted as fact. As such identifying your personal and corporate assumptions requires practice and focus. I think this is where innovation frameworks and tools can prove valuable. Frameworks and tools won’t of themselves create innovation; but they will guide strategic conversations helping you and your team to look beyond your shared assumptions to see new pictures in the ‘data’.
Using tools to reframe
A really effective and simple innovation tool that I often use (and that you can easily do yourself) is to ask teams to list all their assumptions about an aspect of your business (eg: a specific product or service that you offer). List all the assumptions you can think of: the product/service features; how it’s priced; channels to market, etc.
Now, it’s not quite as easy as it seems because our deepest assumptions can be hard to detect. For example hotel owners will often not realise that a key assumption they hold is that a hotel requires a building (Airbnb has successfully debunked that assumption).
I’ve found that once teams develop a skill for detecting their assumptions, they can then move on to reframing their products and business models by eliminating, scaling or re-imagining those assumptions. I’ve been amazed to see where teams can land after they’ve worked on a simple tool like this for an hour.
So next time you or your team find that the innovation process is getting too hard, my suggestion is to gather the team and start by listing all the beliefs and assumptions you have about your business, your industry and your customers. And then start a reframing process to see if new insights and ideas come to the surface. Stick with long enough and they are sure to do so.
Innovation, as you will find is not that far away. In fact it’s right here in front of you. You don’t need to go anywhere. Just get your thoughts together, along with paper, markers, post-it notes and a few willing colleagues and you’re set.
And leave the Odyssean journey to Ulysses
In a business environment that is asking managers to constantly adapt to new technologies, new competition and changing customer expectations, a customer-centric culture has become paramount. Managers must learn how to develop a customer-centric mindset, culture and strategic positioning if they are to grow their businesses (and indeed their careers).
One of the challenges to building customer-centricity is the tendency to fall back on traditional ways of doing business. I’ve seen some organisations design operational and customer service models based around their traditional processes and then overlay customer experience like a checklist that is then ticked off. It’s understandable, because it’s the way they’ve traditionally looked to creating customer processes.
But if you want to create a customer-centric organisation you need tobuild operational processes around what the customer is trying to do (not the business).
There are three key steps that can help you build customer-centricity and bring a customer strategy to life. In my past posts I spoke about the first two steps.
- Putting yourself in the shoes of the customer (customer personas)
- Understanding how customers experience the world (customer empathy mapping)
- Understanding customer experience with your industry and/or business (customer experience and utility mapping).
Today I talk about the final of the 3 steps: customer experience and utility. Understanding customer experience and utility is the most critical of all the steps because its where you connect the customer with your business. Customer experience is about looking at the customer experience holistically. Utility is about customers deriving value (or lack thereof) from an experience with a product or service.
Customer Experience & Utility
Understanding customer experience can help you create customer value and innovation in three key ways:
- Creating better customer service. Understanding customer experience and utility can help you refine your current business processes so they respond to what the customer is trying to do rather than activities of the business.
- Create differentiated value. Understanding current customer experience and utility within your industry can help you identify current customer pain points and unmet needs (note: these insights are very rarely picked up in customer research). These insights lead to value creation that exceeds current industry standards.
- Create new value innovation. Bring customer experience and utility to concept development of new products or services and you can createexceptional (and differentiated) customer value.
Each of the above situations is about making business decisions while looking through the lens of the customers experience rather than the business. It gives you a concrete understanding of where the opportunities for improved customer value and experience lie.
Customer Experience & Journey Maps
There are a number of different customer experience/utility maps or customer journey maps available. Some are designed for high-level strategic discussions (ie: to create differentiated value or new customer value). The Blue Ocean Strategy Buyer Utility Map is a good example. It groups customer value into to six key utility levers. It encourages you to look to the blocks to utility (ie. pain points or work-arounds) against each step of the customer experience cycle.
Customer Journey maps are more detailed and excellent for crafting new customer experiences and service design. After mapping a customer journey you consider the low points and high points of customer experience. With journey mapping you also consider customer touchpoints against interfaces, backend processes and operational policy etc. The customer journey map will help you to improve current customer experience or designnew products and services that customers value.
I suggest you bring various customer journey tools to strategy and operational meetings. You will soon work out which map is the most effective for which strategic conversations. Each will help you transition from a business-centric to a customer-centric organisation more effectively.
There’s something benumbing about industry disruption. Many decision makers are witnessing disruptive new entrants in their competitive space and they know it spells trouble. Yet the tendency for many companies facing industry disruption is to do one of two things (can you see yourself in either of these scenarios?):
- Ignore the disruption: hoping that it’s a fad or that it’ll take years to really impact on the business (by which time you’ll have a response strategy). This is inertia bias: the attractiveness of doing nothing even in the face of certain destruction.
- Try to compete with the disruptor: emulating their model and hoping you can take back some of their market share (or at least hold on to your best customers).
Neither course of action will help you manage disruption. At best it may delay the inevitable (but even that is doubtful). It is almost impossible to go up against a disruptive new entrant and compete (even acquisition of your competitor is no guarantee).
So how do you effectively defend market share and achieve growth in the shadow of disruption?
Firstly it’s important that you look deeply into the disruptor and its model to fully understand the unique value and utility they bring to the market. You don’t want to look just to a disruptor’s extrinsic value (which is where most competitor analysis stops). You want to understand their intrinsic value. What is about their value proposition that engages customers? What shifts in customer expectations, needs or attitudes does the new model respond to?
When you can fully appreciate the value customers gain from the disruptor’s offer you can then look to create new and differentiated value rather than trying to compete against an agile and powerful competitor.
A great example of this approach comes from the hotel industry, which is responding to Airbnb’s disruptive model. I have seen three very different responses from hotel groups. Look to each of these responses and ask yourself which best describes your company’s response to disruption:
Some hotel groups have chosen to view Airbnb as nothing other than a new channel to market. I’ve overheard hotel executives stating the model is a fad and that regulators will eventually step in to put a dent in its growth. Given Airbnb has 1.5M listings in 190 countries and is expected to achieve triple figure growth this year (pundits project 80M room nights) we should expect regulators to bend to the marketplace not the other way around. Ignoring Airbnb is a deleterious strategy.
Other hotel groups have looked at the Airbnb model, understood it as a disruptive ‘channel’ and decided to enter into the game. We see a number of hotel groups investing in sites such as onefinestay, lovehomeswap and airbnb itself in order to try and get some skin in the game. To my mind they’re missing the point. They are looking to the share economy model on the basis of its business model (how it goes to market) rather than its value (why customers participate).
One of the most exciting responses to Airbnb’s disruption has been from serial innovators Atyzen Group. They created CitizenM: the low cost luxury hotel (a great case study in itself). Their new venture is a hospitality concept for ‘digital nomads’: Artyzen Habitat. Habitat disrupts the hotel and airbnb model by offering a unique communal living space where travellers (including a growing market of working nomads) are able to connect to the community during their stay and have access to co-working and social spaces. Habitat staff play the role of host (rather than hotel employee), offering a non-obtrusive and personal service.
Artyzen Group has understood the value intrinsic in the Airbnb model. It’s not about the channel to market; it’s about creating community for travellers. They have looked at airbnb’s disruptive model only in terms of gaining essential new insights. And then they have created their own disruptive innovation. While yet to launch, Artyzen Habitat is creating enormous interest and is certain to have every chance of success. I myself can’t wait to book a stay at an Artyzen Habitat hotel.
How will you manage disruption?
So what does this story tell us? What is the lesson for incumbents as they witness impending disruption? Firstly – don’t ignore it. Responding to disruption through innovative strategy may have risk, but it’s not nearly as risky as the status quo (where eventual failure is certain).
Secondly, look beyond the disruptor’s business model: it’s only part of the story. Instead seek to understand the unique value that the disruptor offers to customers.
What new value does it offer?
Finally allow these insights to inform you only as far as they allow you to reimagine how new and unique value can be offered to your market (or emerging markets). Look beyond your assumptions and traditional market boundaries to find your own unique offer to the market place: your own disruptive innovation. To manage disruption, become a disruptor.
To learn more about Artyzen Habitat - watch the clip below.