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. Itâs 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 booksâThe Innovatorâs Dilemma and The Innovatorâs Solutionâhas discovered and documented a basic business truth that weâve been practicing for almost twenty years: You design solutions to help customers accomplish their desired outcomes. We call these Customer ScenariosÂź; Clayton refers to them as âthe jobs that customers need to get done.â
We believe that what Clay Christensen groups together under the rubric âcircumstancesâ actually includes several distinct concepts: the customersâ context, the âjobâ they need to do (our Customer Scenario), their desired outcomes, and their constraints (what we refer to as âconditions of satisfactionâ2).
Thi concept of âjobs that customers need to doâ or Customer ScenariosÂź is subtly different from traditional customer segmentation and needs analysis. But that subtlety is important. Itâs 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 scenarioÂź
A customer scenario identifies how a customer ideally wants to achieve a desired outcome.
Whatâs the Relationship Between Customer ScenariosÂź 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 youâve created the correct structures, creativity will take the âpath of least resistance,â according to Robert Fritz, who authored a seminal book by that title.3 âPeople think innovation is about brainstorming; itâs not. Itâs a very focused activity,â4 Frit_z explained. âPople studying innovation should start by understanding the creative process.â
Innovation is a form of creation. Like any creative endeavor, innovation emerges from the structural tension between current realityâthe way things areâand a visionâwhat weâd 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 theyâd ideally like to be able to do and commercialize their innovations.
- 2. Engage with your most creative, yet grounded, customersâyour lead customersâto work with them to co-design how theyâd 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 Hippelâs 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 ScenariosÂź in This Book
In the case studies in this book, weâll identify the key Customer ScenariosÂź that companies have addressed though customer co-design and customer-led innovation. The firms youâll be reading about have used a number of different approaches for harnessing customer innovation. We donât 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 ScenariosÂź and customer outcomes for understanding customer-led innovation as a way to help us all stay focused on âthe jobs our customers need to do.â
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 youâll see throughout the examples in the book, by understanding your customersâ scenariosâthe jobs your customers are trying to doâyou can help them create the outcomes theyâre seeking. In essence, customersâ scenarios should fuel your business strategy.
Letting Your Customersâ Ideal Scenarios Power Your Business
How do you truly design or transform your business from the outside in? Many companies claim to be âcustomer-centric.â Yet too often we find disconnects between the things that customers care about and the way that companiesâ 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 youâre going to produce and distribute it, and along the way, of course, decide to whom you want to sell it and how youâre 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.
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 wouldnât describe the business definition process as following the approach weâve 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 todayâs businesses are structured and observe the ways these businesses behave, this modelâwhich we describe as the âold wayâ to design a businessâis 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 customersâ 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 OutcomeâFocused 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 accomplishâtheir ideal scenarios.
As you and your customers work together to close the gap between their ideal scenario and their current way of doing things, youâll 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 differentâbut also uniqueâexperience for Mini Cooper owners. Staples, the office supplies superstore chain, provides an âeasyâ 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.
The outside innovation approach to business design: You begin by identifying a customer audience and their ideal outcomeâthe 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 customersâ ideal scenario(s), and determine the appropriate distribution channels based on customersâ 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 customersâ ideal scenarios play just thatâa supporting role. Products should not be the focal point of your company. They arenât your customersâ focal point. Customers care about the âjobsâ 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 customersâ 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), youâre probably on the right track.
Your distribution channelsâhow you go to market and distribute your products, whether direct or through agents or retailersâshould be determined by your customersâ context. Where are they when they need this product or service? Whatâs 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 youâve made it easy for them to accomplish their outcomes, theyâre ready for the next transformational experience). Or focus on addressing the most crucial scenarios for a different audience. Each audience/scenario combination g...