Why customers are critical in the innovation process

Michael Schrage's talk at DevOpsGuys

The aim of any business is to generate profit and return on investment – but achieving this isn’t necessarily easy. However, the common assertion is that the customer is always right. At the end of the day, if an end user doesn’t like a product or service, they’re not going to buy or recommend it to others.

Clearly, businesses need to understand their customers to ensure the success of products and drive revenues. This can be a difficult task, though. Markets and consumer attitudes are always changing, so rapid innovation is a must when it comes to staying ahead of competitors. The question is, how can this be achieved?

Putting customers first

MIT research fellow Michael Schrage – who is an influential thought leader on the connection between business and innovation – argues that companies, technologists and teams can only innovate successfully when they focus on the needs of customers and their acceptance of products. To him, this is fundamental in ensuring money is well spent in the business environment.

Backed by the Welsh Government and BeTheSpark, Schrage recently delivered a talk on his thoughts on innovation and unlocking customer value at the DevOpsGuys head office in Cardiff. It attracted delegates from the technology industry, government, academia and financial services.

Schrage has developed a range of practical steps that can help businesses get a return on innovation investment. His techniques use rapid prototyping, simulations and modelling. He’s detailed his ideas in the critically acclaimed books Serious Play: How the World’s Best Companies Simulate to Innovate and Shared Mind: The New Technologies of Collaboration, as well as in columns for Fortune, CIO Magazine and MIT’s Technology Review.

Products as experiences

During his talk, Michael positioned innovation as a human capital investment. In other words, the people buying and using a company’s products are critical stakeholders, and there’s a great deal of value businesses can get from them. For instance, every click and movement a user makes on Google helps it refine its search algorithms. While this is a minimum investment for the tech giant, users get access to an endless source of information in return.

The academic said businesses should try to make their customers feel more valuable. “People don’t buy products; they buy better versions of themselves,” he remarked. Essentially, products and services are experiences, and companies should always be on a mission to fulfil the needs of their customers with these. Basically, firms need to link innovation and stakeholders.

If you provide customers with the best products and services, they’re likely remain loyal to your brand. But it’s still easy for companies to view customers as mere financial opportunities. Schrage said business decision-makers need to shift away from this way of thinking, instead providing customers with the tools to accelerate innovation. 

Pioneering ahead

Michael used Henry Ford as an example of an iconic pioneer. Although he didn’t invent the car, his mass production techniques enabled more people to purchase them – making drivers the products of cars. In the decades since, cars have become an integral part of not only everyday life, but also business and commerce.

Schrage likened this idea to the rise of mobile devices and internet networks, which drive productivity in the modern world. But the end user should always be the focus of companies. “The most important product of the network is the networker. We shape our innovations, and they shape us,” he said.

Virtuous circles were an important focus of the talk, too. These are a complex chain of events that exist within a feedback loop. Michael used this concept to describe the importance of human capital. In this context, he argued that segmentation, socialisation and smartification can be combined to drive innovation and customer experiences.

Data was another big topic. Schrage made it clear that analysing complex datasets has big benefits, particularly around effectively understanding customers and improving products. However, he thinks firms aren’t taking data seriously enough; After asking the audience whether they had ever put data on their balance sheet, most of the room went quiet. In his opinion, it should be treated as a critical business asset. The academic urged the audience to explore the value and opportunities that can be unlocked through data.

“Innovations are investments in the human capital, capabilities, creativity and competitiveness of customers and clients,” concluded Michael. The audience was left with the sense that innovation, technology and customer engagement are things that go together. By tapping into them, it’s clear that companies can achieve great success.

Image credit: BeTheSpark

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