The best companies (B2B) I’ve worked for during my career were highly innovative, and they continuously innovated. But the source of their innovation was not:
- Whiz-bang Technology
- Genius Personnel, or
- Competitive Research
What was the source, you ask? Well, the type of innovation those companies practiced was…
Customer-Driven Innovation
The most successful B2B companies I’ve worked for practiced Customer-Driven Innovation.
What do I mean by “customer-driven innovation”? I mean:
Innovation driven by a deep understanding of customer needs.
A deep understanding of: Not just what the customers asked for, but also why the customers asked for it. And the business problem customers were trying to solve, or the business objective they were trying to meet.
Advantages of Customer-Driven Innovation
I believe customer-driven innovation offers B2B companies several advantages, including:
- Higher odds of success: When your innovation is driven by actual customer needs, I believe your odds of success are much higher. When it’s driven by technology or competition, your odds of success are likely to be much lower – i.e. hit or miss.
- Can be systematized: The process of creating successful innovation based on customer needs can be systematized, whereas the process of relying on one or more people’s epiphanies or Eureka moments cannot be.
- Repeatable: This follows from the previous point. Once a process is systematized, it can be taught to others in the company and can be repeated.
- Scalable: When the innovation process is systematized and taught to others – it can be used not only to enhance existing products, but also to launch new products in the same market, in adjacent markets or even new markets. All of which leads to a business that can scale.
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Tom – Very true indeed. Customer-driven innovation is much harder. Hence fewer companies do it!
Relying on things like “Eureka moments” or being competitor-driven is much easier. Hence many companies do that. B2B Companies who can do this successfully are few and far between. Even when some can, usually it’s neither sustainable nor scalable.
Great post. I definitely agree customer-driven innovation has all of the benefits you’ve described. Interestingly enough, it can be harder than it sounds meaning it takes some time to really build a customer-driven culture and product development process.
I think part of this has to do with competing with Eureka moments and the time commitment it takes to do always-on customer research (versus just some fits and starts or calling sitting on sales calls “research”).
Tom
I often think about innovation from a risk-reward perspective. I’ve generally found that customer-driven innovation yields evolutionary changes (i.e. low-risk and low to medium reward). However, to get revolutionary changes (i.e. high reward and high risk), the company can’t necessarily rely on the customer for input. Pixar, Southwest Airlines, and Apple are examples of company-led (not customer-led) innovations.