Outside Innovation
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Outside Innovation

Patricia B. Seybold

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eBook - ePub

Outside Innovation

Patricia B. Seybold

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About This Book

How dynamic businesses of every size can unleash innovation by inviting customers to co–design what they do and make.

Reading line: The 8 Roles Customers Play in Trend–Setting Companies

The refrain is familiar for Patricia Seybold in her journeys as a top technology and management strategist: "I want our company to be acknowledged as the most admired and most customer–valued in our industry and to be recognized as the company that has forever changed the way things are done." "How can we become the Google of banking?" "How can we be the eBay of software?" "I want to be the JetBlue of manufacturing."

"How can we become the undisputed trend–setter in our industry–with a competitive bar no one can topple?"

In Outside Innovation, bestselling author Seybold taps her close relationship with dozens of high–innovation companies to reveal the untold strategy behind the trendsetters and the next HUGE leap forward in customer strategy. Seybold shows that companies that are dominating their category and staying ahead of the pack are collaborating at every level of their business with their customers.

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CHAPTER ONE

How to Harness Customer Innovation
Co-Design Business Models, Business Processes, and Solutions with Customers to Help Them Accomplish Their Goals
How do you figure out what customers really want, need, and will pay for? This is the foundational question for any business. It’s also a question to which many business theorists and practitioners have devoted a lot of thought (and ink). We were delighted to discover that Clayton Christensen, the author of two well-regarded business books—The Innovator’s Dilemma and The Innovator’s Solution—has discovered and documented a basic business truth that we’ve been practicing for almost twenty years: You design solutions to help customers accomplish their desired outcomes. We call these Customer Scenarios®; Clayton refers to them as “the jobs that customers need to get done.”
Customers—people and companies—have “jobs” that arise regularly and need to get done. When customers become aware of a job that they need to get done in their lives, they look around for a product or service that they can “hire” to get the job done…. The functional, emotional, and social dimension of the jobs that customers need to get done constitute the circumstances in which they buy. In other words, the jobs that customers are trying to get done or the outcomes that they are trying to achieve constitute a circumstance-based categorization of “markets.” Companies that target their products at the circumstances in which customers find themselves, rather than at the customers themselves, are those that can launch predictably successful products.1
We believe that what Clay Christensen groups together under the rubric “circumstances” actually includes several distinct concepts: the customers’ context, the “job” they need to do (our Customer Scenario), their desired outcomes, and their constraints (what we refer to as “conditions of satisfaction”2).
Thi concept of “jobs that customers need to do” or Customer Scenarios® is subtly different from traditional customer segmentation and needs analysis. But that subtlety is important. It’s not enough to identify a group of customers who have certain things in common for whom you are going to develop a solution; you also need to know what scenarios these customers actually care about accomplishing. What outcomes are they trying to achieve?

A customer scenarioÂŽ
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A customer scenario identifies how a customer ideally wants to achieve a desired outcome.

What’s the Relationship Between Customer Scenarios® and Innovation?
Innovation occurs naturally as a result of the structural or creative tension between what you ideally want and what you currently have. The secret to mastering the creative process is to understand and to leverage the structural tension that powers it. Once you’ve created the correct structures, creativity will take the “path of least resistance,” according to Robert Fritz, who authored a seminal book by that title.3 “People think innovation is about brainstorming; it’s not. It’s a very focused activity,”4 Frit_z explained. “Pople studying innovation should start by understanding the creative process.”
Innovation is a form of creation. Like any creative endeavor, innovation emerges from the structural tension between current reality—the way things are—and a vision—what we’d like to achieve.5
The keys to unleashing customer innovation are to:
  • 1. Find lead users who are already closing the gap between how they do things today and what they’d ideally like to be able to do and commercialize their innovations.
  • 2. Engage with your most creative, yet grounded, customers—your lead customers—to work with them to co-design how they’d like to achieve their ideal outcomes.
  • 3. Empower your lead customers with co-design tools and innovation toolkits so they can design their own solutions, innovating as they go (a favorite approach of both von Hippel’s and mine).
In all three approaches, the discrepancy between what customers can do today and what they ideally want to be able to do is the structural tension that spawns innovation.
How We Use Customer ScenariosÂŽ in This Book
In the case studies in this book, we’ll identify the key Customer Scenarios® that companies have addressed though customer co-design and customer-led innovation. The firms you’ll be reading about have used a number of different approaches for harnessing customer innovation. We don’t claim to have worked with each of these firms, nor do we claim that they used our particular methodology in their journeys. We offer this common terminology of Customer Scenarios® and customer outcomes for understanding customer-led innovation as a way to help us all stay focused on “the jobs our customers need to do.”

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Innovation occurs naturally as a result of the structural tension between your ideal scenario and your current situation. Truly creative people know how to generate and maintain that structural tension and use it to spawn innovative ideas and creative breakthroughs.

As you’ll see throughout the examples in the book, by understanding your customers’ scenarios—the jobs your customers are trying to do—you can help them create the outcomes they’re seeking. In essence, customers’ scenarios should fuel your business strategy.
Letting Your Customers’ Ideal Scenarios Power Your Business
How do you truly design or transform your business from the outside in? Many companies claim to be “customer-centric.” Yet too often we find disconnects between the things that customers care about and the way that companies’ resources are allocated and results are measured.
Shedding the Inside-Out Legacy of Business Design
In the inside out way of running a business, you usually design a product, wrap a brand around it, figure out how you’re going to produce and distribute it, and along the way, of course, decide to whom you want to sell it and how you’re going to describe and market it. Creating a viable business model is an important part of your business development and commercialization process. What will customers value? How much can we charge? How much profit can we make?
Then, as the business grows, you develop new products to sell to customers in the same market, and/or you diversify into new products for new markets.

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An admittedly oversimplified view of the classic product-centric approach to business model definition. You begin with your invention or product idea, figure out how to produce it, decide how to differentiate it (the brand), determine how to distribute it and identify which markets you can therefore address.

Most business executives or business school graduates probably wouldn’t describe the business definition process as following the approach we’ve just described. (They would claim that they start with a customer need and work from there.) Yet if you look at the ways in which most of today’s businesses are structured and observe the ways these businesses behave, this model—which we describe as the “old way” to design a business—is pretty accurate. Resources are allocated to product lines. Distribution channels drive business decisions. Customers are important, but they come last in the resource allocation and prioritization process. And nobody really thinks about customers’ scenarios and outcomes, except for the beleaguered customer experience executive who acts as the proverbial tail trying to wag an unresponsive dog (your organization!).
Adopting a Customer Outcome–Focused Approach to Business Design
When you take the outside innovation approach to business, you start by developing a deep understanding of your customers: the particular audience you are serving. At the core of that understanding is an appreciation of what they want and need to accomplish—their ideal scenarios.
As you and your customers work together to close the gap between their ideal scenario and their current way of doing things, you’ll be co-designing new products, new business processes, and new business models. That engine of customer-driven innovation powers your business, generating organic growth.
The ideal experience that customers want to have during their scenarios becomes your brand experience. That desired brand experience may be different for different customer audience/scenario combinations. So you may have a portfolio of customer audiences (and their ideal scenarios) and a matching brand portfolio of customer experiences. Or you may have an overarching brand experience that is instantiated differently for different customer audience/scenario combinations. For example, BMW offers a unique brand experience for owners of its cars and a different—but also unique—experience for Mini Cooper owners. Staples, the office supplies superstore chain, provides an “easy” brand experience tailored in one way for people who run businesses out of their homes, and in a different way for procurement agents and office administrators in large corporations. Whether your firm takes a single brand or a multibrand approach, the brand experience should be optimized for each customer audience and scenario combination.

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The outside innovation approach to business design: You begin by identifying a customer audience and their ideal outcome—the customer scenario. The ideal experience the customer wants to have in accomplishing that outcome is the brand experience you want to create. You develop products and services to support the customers’ ideal scenario(s), and determine the appropriate distribution channels based on customers’ needs. Customer-led innovation powers the business model, as you and your customers invent new ways to close the gaps between their ideal scenarios and the way they do things today.

The solutions, tools, services, and products that you provide to support your customers’ ideal scenarios play just that—a supporting role. Products should not be the focal point of your company. They aren’t your customers’ focal point. Customers care about the “jobs” they need to get done. They are happy to use tools and to buy and consume services that help them accomplish their scenarios. The solutions that customers need and value will change over time. As long as your product development and solution-packaging activities are designed to support and streamline customers’ ideal scenarios, and you co-develop new solutions to continuously improve those scenarios or to address new, more pressing scenarios (now that the original ones have been addressed), you’re probably on the right track.
Your distribution channels—how you go to market and distribute your products, whether direct or through agents or retailers—should be determined by your customers’ context. Where are they when they need this product or service? What’s most convenient for them?
Design Your Business from the Outside (Customer Scenario) In
For each group of customers you choose to serve, there will be several scenarios that are critical (read valuable) to them at any point in time. A good rule of thumb is to focus on one to three customer-critical scenarios for each target audience. Then move on to the next scenarios for that audience (since you’ve made it easy for them to accomplish their outcomes, they’re ready for the next transformational experience). Or focus on addressing the most crucial scenarios for a different audience. Each audience/scenario combination g...

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