The Empty Whitecoat

Future customer innovation: A pioneer's agenda

Many blogs here and on Jennifer Rice’s, John Moore's, John Porcaro's and Robert Paterson's blogs have discussed the potential for the development of “buyer-centric commerce”. or individual-centric customer value. Most focus on our experiences as consumers – our value-gaps – and our call for businesses to respond by filling these gaps with new services and solutions that take account of our diverse and individually-defined needs - needs that are often at odds with those of corporations and managers ..

Yet in reality, the growth of buyer-centric customer innovation will largely depend on managerial need (rather than consumer need) and by extension, a firm’s issue-based rationale for experimenting with new forms of delivering customer value. This will then determine the desire to build a business case to justify creating the new capabilities and developing / adapting existing infrastructure and resources to implement it successfully.

Yet in commercial organisations, only very rarely is there a collective demand or recognition for “radical” change and to innovate for the customer. More often, it is an enlightened individual who has a personal motive, passion or vision to create something better for mutual gain. Such individuals are usually led by intuition and gut-feel (they may be inherently and obsessively entrepreneurial or “maverick”); others are influenced by a unique combination of past experiences. Importantly, very few are incumbent senior managers. Indeed, most managers today are “suffocated” by “defensive routine” and paralysed by choice themselves, focused on maximizing efficiency from existing operations and resources rather than looking at big market opportunities and new concepts such as Buyer-Centricity (I use this term loosely now yet in fact I mean all kinds of discontinuous / radical customer innovation).

More often, the need for organizational change arises as a result of a big failure in the business model or a pressing need to address a deep-seated commercial issue (think IBM or Marks and Spencer in the UK). For example, the only reason the world’s fastest growing retailer - Tesco - is where it is today is arguably, because of a crisis it faced at the beginning of the 1990s. Then, its market share and share price was falling, it was under big pressure from continental European discounters such as Aldi and Netto and it was effectively forced to completely re-thinking its existing strategy and into developing its highly successful customer-led business philosophy…

In the "maverick and visionary" domain of customer innovation, there are some important yet often neglected lessons from Henry Ford. So often, history remembers Ford as the inventor of the mass production assembly line in 1909. What is often forgotten is that as early as 1894/5, Ford had started building his own gas-powered car in a rented garage in Detroit. Although Ford’s ingenuity took the assembly line method of production to new heights of efficiency, he was first and foremost a visionary and an obsessive, someone who implicitly foresaw the opportunity to create a mass market for affordable, family transportation. But, he did this only after experimenting with the design, build and testing of his own vehicle (as an aside, his first car was too big to get through the garage door and he had to knock the walls down with an axe to get it out!!)…

There is something about Ford and his vision that has lessons for how we communicate our goals for the nature and value of breakthrough customer innovation. If we put ourselves into Ford’s shoes (black probably!) when he was thinking of how to realize his own very personal vision, I wonder how we’d describe it (e.g. at parties) when we were asked “what are you up to, Henry?”. Well, I doubt he’d have said that “I am going to create the means for mass market production”, or “I am going to fill the personal transportation value gap by setting up the world’s first mass production business” Instead, what he would most likely have said is that “I am building a car for the great multitude, now pass the bottle opener please”!!!

So what is the point of all this? Well as Ford said himself, “Obstacles are those frightful things you see when you take your eyes off your goal”. The point is that it seems to me that there is a danger we focus too much on the “how” rather than the end-result. the goal of change, be it buyer-centricity or radical customer innovation – i.e. the customer’s actual experience of it. Because when the endgame or the reality moves centre-stage, the language we use to describe “what it is we are doing” or even “what it is”, becomes less important. Instead, we begin to envision the future according to how it will look from an individual, personal perspective.

The following questions might help with such an envisioning process, pertaining to customer innovation:

1) What does the future of customer commerce look like in existing markets?

2) What are the new markets for creating and delivering more positive customer context and value?

3) What are the new and more powerful types of multiple customer value that commercial and public sector organisations can and should create in the future?

4) What does this value look like and how is it experienced by individuals and communities?

5) What difference do buyer-centric (customer innovating) organisations make to our daily lives? How do they enrich us?

6) What are the new types of relationships between firms and individuals that we should be developing?

Collectively, these questions will define a vivid picture of future customer value. Importantly, by painting and acting out such vivid scenarios (and how they are manifest in real life), managers can begin to see the why and maybe then, the how to shift from their defensive “zone of comfort” to a new “zone of opportunity”. For customer innovating pioneers, only by depicting the endgame – Ford’s "a car for the great multitude" vision for example – can we grab the attention of business and make them wake up to the new possibilities. Also, by describing the opportunity in terms that managers in their role as consumers can instantly personalize and recognize, we are able to communicate its value in a way that anyone can understand and see the value of.

So my recommendation to customer value pioneers is to focus on the following activities as an agenda for action:

1) To envision and develop - through dialogue - practical and realistic future customer experiences which explore and depict customer value in vivid action in new markets (such as wellbeing, transportation, home management, wealth management, personal passions, community development, personal entertainment, lifetime education, environmental / green management, loneliness / connecting etc. etc…)

2) To build and test a limited number of key assumptions about the nature of - and justification for - new forms of customer value. They must then continually hammer these home at every opportunity to change managerial beliefs concerning the traditional seller-centric tenets of customer value (e.g. marketing adds value, choice adds value, “we know best”, products are the source of all competition etc. etc.).

3) To help managers and their organisations develop a customer innovation mindset that recognizes and responds to the new challenges and opportunities inherent in the new customer markets and the new customer experiences. This is as much about managerial “forgetting” as it is about organisational learning…

4) To extol the virtues of buyer-centric and other individually-derived forms of customer value as a process of strategic discovery towards the envisioned endgame rather than a prescriptive doctrine or set of rules. Critically, we must acknowledge to any skeptic that no single firm is likely to be capable of being “buyer-centric” on its own. Rather, it demands the setting-up of collaborative networks to provide the necessary customer experiences – therefore a key challenge is helping managers and their firms to understand the why, the benefits and the new rules of collaborating to create our new envisioned forms of customer value.

Positive context customer markets: Into the I-SPACE

Customer-centricity continues to emphasise the role of material conditions in shaping consumer needs and demand for products rather than the wider context in which people select, buy and use products and services. But, by thinking broadly about the challenges people face, rather than narrowly about what firms can sell them, new ways to make their lives easier and their decisions simpler can almost always be found. Individual-centric customer innovating businesses understand this and aim to overcome these challenges. They focus on creating a more positive brand, marketing and customer context; one that reconfigures mostly intangible (and hitherto unrecognised) aspects of people’s needs and problems into new forms of social, relational and brand capital. These intangible value dimensions include new drivers such as time, attention, knowledge, uncertainty, trust, privacy, personal productivity and simplicity.

Importantly, the delivery of “positive context” is independent of traditional markets. By viewing markets from an explicit individual value perspective rather than the more typical company-, product- or service-centric point of view, customer innovating organisations are able to locate and address the new intangible forms of customer value. I call these I-SPACE Markets (see graphic below which depicts the main parameters of I-SPACE value - I'll explain these in a blog and on The OMC Group web site soon).

The trick is to perceive markets as multi-faceted and connected holistic systems or networks and not as company-defined supply or value chains. Unfortunately, value chain thinking still dominates as a business concept today (as a client I was with yesterday demonstrated to my frustration).

But, by shifting from a world view of an assembler or value-added player in part of a supply- (or demand) -chain to one of becoming a nodal or partner player in an enhanced interactive positive context customer value network, the opportunity to identify, define and unlock new forms of holistic customer and business value are simply, huge. Quite often, the first question managers need to address is quite simply, what domain of customer value are we operating in?. This is then closely followed by the second question, how we can adapt to identify, design and deliver mutual value within the new individual-centric customer space?. Unfortunately, many organisations are so risk averse that they never even get to the second stage....

Below I blog some of the typical challenges faced once the positive context customer innovating mindset adjustment has been made...

Achieving future customer innovation: a managerial perspective

To become a successful "future customer innovating" organisation, where firms seek to move towards an individual-centric and experience-based view of customer value, managers need to address a new set of questions and overcome a number of significant internal barriers. For a start, simply recognising the opportunity requires bold leaps in managerial imagination and attitudes towards customers as they become the specifiers of value. It requires managers to acknowledge that the boundaries between their organisations, their partners and individual customers are disappearing. New individual-centric and experience-based dimensions of customer value also necessitate new collaboration processes defined by hetergeneous interaction with active, empowered individuals and value network partners rather than by the organised control of passive consumers. This is particularly the case regarding the ownership and distribution of customer and network knowledge. Here, managers must develop ethical, transparent and accessible information systems and expert customer knowledge management capabilities in order to maintain sufficient levels of trust and collaboration within the network.

In addition, an aspiring individual-centric customer innovator must assess whether their existing brands have the necessarily levels of trust and reputation to support a substantive shift in market orientation in the development and mediation of a customer experience value network. The "brand manager" must also weigh up the potential negative effects of distributing the ownership of its accrued brand trust across a network of partners. In fact, for many businesses, this risk of brand exposure represents the greatest barrier to the adoption of a more explicit active customer orientation.

A further barrier is the difficulty of achieving coordinated network innovation, collaboration and critical mass. Indeed, delivering a systemic innovation of this nature is particularly difficult when industry standards and operational infrastructure do not exist and must be pioneered. Although the advent of web services promises to enable a company to connect its applications to any number of trading partners relatively inexpensively and easily, many organisations remain islands of technology, operating their own assortment of systems, applications, databases, and communications technologies. Thus, a critical challenge also lies in discovering how and when to build the bridge to the consumer, which customer communities to select and who to share the costs of developing the standards for constructing network value.

However, for firms choosing to adopt an individual-centric customer strategy, there are evidently some important benefits, not least of which is the opportunity to develop deep levels of customer commitment leading to greater levels of loyalty and expenditure. By focusing on facilitating the creation of new customer experience spaces, particularly to deliver holistic and connected forms of value that people may not have previously experienced, studies show that greater trust can be earned and new brand extensions achieved more easily. It is possible, therefore, that the new customer value networks, founded on clear principles of consumer dialogue, interaction, transparency, support and advocacy, might realise a more authentic means of building long-term, mutual dependency between businesses and their customers. It would also provide new roles and skills for front-line employees many of whom will be empowered to resolve customer problems.

From an economic perspective, individual-centric customer networks have the potential to deliver greater economies of scope through network convergence (from the removal of functional duplication), knowledge-sharing and reductions in network customer acquisition and retention costs. Indeed, cost improvements in the matching of demand and supply are fundamental to the participation of value network partners.

Because the nodal network companies at the centre of the new customer value networks are capable of accerssing superior market-sensing and market-relating capabilities, these customer-innovating organisations are likely to challenge established practices, sense new market opportunities and create substantial economic, functional and emotive value more quickly for customers, partners and shareholders.