Are your customers limiting your innovations?
You are probably surprised by the title. Isn’t it counter-intuitive? We have been taught to stay close to our customers to understand their pain points so we can continuously innovate and support them.
Yes, it is true that in order to continuously improve our products and/or services, we need to stay close to the customers with a keen eye on the competitive landscape. However, this comes with a price as this also creates a closed-loop system where dependencies become so integrated that all innovations turn out to be merely incremental. It leads to a cheaper, faster, or better of the “same thing”. If this is your business goal, this is perfect. You have a captive customer base and your customers have a captive provider. Everyone is happy until a disruption happens. Kodak’s demise in the face of digital cameras is a textbook example of the closed-loop system.
If your company is seeking breakthrough innovations, then you must find a way to dissociate from your current customer base. The question is- how do we accomplish this?
Big company vs. small company
Most big companies (with some exceptions) are terrible at bringing breakthrough innovations to the market. It is not due to the lack of talent but it is because large organizations are prisoners of their own success. Investors expect them to grow at a certain rate and therefore they have to invest in safe bets. Another factor that limits breakthrough innovations in such companies is their organizational structure. There are immense checks and balances in place to ensure the smooth running of large organizations. This infrastructure is required to run large operations but unfortunately is not conducive to out-of-the-box thinking and disruptive innovations. Some large companies allow employees to spend 10-20% of their time on new ideas and some have a separate ‘concept car’ type of satellite sub-organization, yet the rate of success is low for such initiatives. Large organizations and their customers are a perfect example of a closed-loop system.
On the contrary, small organizations have to invest heavily in new disruptive innovations to stand a chance to become successful and eventually be long-term viable organizations. In a competitive market, this is a must for their survival. Often the less controlled infrastructure and sometimes even chaotic environment become the hotbed for breakthrough innovations. With the exception of the smartphone (Apple), many breakthrough innovations came from start-ups, namely, video streaming (Netflix), ride sharing (Uber), online education (Khan Academy), and vacation rental property (Airbnb).
Be passionate yet dispassionate (really?)
One of the attributes which helped me to be mindful of breakthrough innovation opportunities is to take time out and zoom out of the current business situation. Often, we are very passionate about our business and want to do everything to drive growth and customer satisfaction. Our strong views create confirmation biases in our decisions.
However, it is important to develop an outside-in view to see our own business with a fresh perspective. Ask if you are satisfied with the growth and what would you do to expand in a new market. What are the adjacencies to expand your business? Find an entirely new set of customers to explore new use cases of your technologies. Question if you need to invest in product specifications (which is incremental innovation) or need investment in breakthrough innovation which will streamline and simplify a complex workflow and will eventually lead to bigger growth opportunities.
You must be deliberate to break the closed loop system. There are no set rules and each situation is unique. The key is to be dispassionate while evaluating your own situation. This is critical to be objective in your analysis and deciding next out of the box innovation. I have to admit, being dispassionate is hard, but then, anything of value is not easy either.