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Innovating in Today’s Economy

27 April 2010

Below is a comment to an article in this week’s Business Week. The article is a debate of sorts about how to best innovate in today’s economy: customer-focused vs. needs based on new ideas. The full article can be accessed here.

The most interesting part of the article were the comments that followed, in particular this one, which I am quoting in full, below. The points that the commentator makes are worth noting for how well they summarize how and why innovation can both help and hurt a company. Bottom line: innovation has to lead to profits and to do so it must answer specific questions that the customers have. (Side note on Apple, the genius of which is creating products that answer questions customers didn’t know they had.)

To quote Charles Kettering (former head of research at GM, inventor of freon, the electrical starting motor, and holder of 140 patents), “A problem well-stated is half-solved.”

Question: How do we define the problem for customers for the purposes of innovation?
Answer: Customer needs define the problem.

More to the point, customer needs become the criteria that are used to judge a particular idea’s worthiness.

Full comment below and full article here.

——————-

Innovation without an understanding of customer needs?

Surely you’ve heard the Roger Miller song, “You Can’t Rollerskate in a Buffalo Herd.”

You can expect similar results from either of those approaches.

If you are executing an innovation process without an understanding of customer needs, you are really just creating a bunch of science projects. Oh, sure, they can be fun to do. They can be interesting. But nobody is going to purchase something just because the company thought it was fun to build. Have you had someone show you four hours worth of family video detailing their vacation to Michigan? I’m sure they enjoyed creating it, but I’m doubting that you asked for a copy to watch later on your own.

In the innovation space, this is a real problem. Universities all across this country are buried in intellectual property that has no utility. Companies spend billions going down technological rabbit trails with no returns in investment.

What is the problem here?

The problem here is that many are executing innovation with the intention of profit-creation without understanding that this is fundamentally a problem-solving exercise. To solve a problem…., any problem…, you must first define that problem.

To quote Charles Kettering (former head of research at GM, inventor of freon, the electrical starting motor, and holder of 140 patents), “A problem well-stated is half-solved.”

Question: How do we define the problem for customers for the purposes of innovation?
Answer: Customer needs define the problem.

More to the point, customer needs become the criteria that are used to judge a particular idea’s worthiness.

OK now, I’d like to respond to a few specifics of the dialogue above:

Mr. Thull:
Your argument is all about creation of value, yet you provide no definition of value. I respectfully submit that value is defined by customers, and therefore, by their needs. Your statement about iPad, AT&T, etc. describes the network externalities which enable customer needs to be satisfied to a higher degree. However these factors are separate from the customer needs themselves. My personal customer needs for my iPhone include communication and entertainment. I do not have a need for Apple to be integrated with AT&T. I also do not have a need for the application developer system that was created. In fact, if Apple becomes too in love with its products and solutions rather than customer needs, then it will be displaced as well. Think Blockbuster.

Mr. Walker:
Your comment about Henry Ford’s quote shows that you are confusing customer needs with currently available solutions. If Mr. Ford asked customers what they needed, and if he had expertise in acquiring data from customers, the customers could have easily told him that they would like to travel from point A to point B in comfort, safely, and as fast as possible. With this input, he could have provided a better solution, such as an automobile.

Mr. Dovgodko:
You are also confusing customer needs with solutions. Please read my clarification about Henry Ford’s quotation.

Mr. Innovationist:
You make good points. Wall Street encourages behavior which is not good for a company’s long term growth. Peter Drucker was writing about this in the 1980s and it is more true than ever today. SVA-type performance measurements will destroy a company slowly. You say that you “agree with Jeff,” but based on the rest of your comments, I am hopeful that I have convinced you otherwise.

Attempting to innovate without customer needs provides no direction, no idea of what problem is to be solved, and no criteria by which to judge any idea that is presented–no matter how creative, useful, or interesting.

So, you can’t innovate without customer needs any more than you can rollerskate in a buffalo herd, but at least “you can be happy if you’ve a mind to.”

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