An Approach to Customer-Centric Innovation
Generating innovative ideas is imperative for the survival and growth of any organization, including libraries. However, those ideas are only worthwhile insofar as customers value them. Authors Larry Seldon and Ian C. MacMillan propose a process of customer research and development (R&D) that results in products and services that directly address customer needs. Their HBR article, Manage Customer-Centric Innovation â€“ Systematically addresses the “growth gap” that results when R&D is far removed from customer and investor support.
The solution for more relevant innovations, as they see it, is a process they call “customer-centric innovation” or CCI. This is a growth strategy as well, since the process results in an extension of the consumer base as well as product offerings. The process consists of 3 phases:
Phase 1: Establish and develop the core
In this phase, the focus is on understanding current customers better and developing a value proposition for them. The authors define the value proposition as,
“the complete customer experience, including products, services, and any interaction with the company.”
In the authors’ example of how one company achieved this, designers applied ethnographic research to understand the exact relationship between their product (luggage) and their current customer base of male frequent business air travelers.
Phase 2: Extend (2a: Extend Capabilities; 2b: Extend Segments)
Here, innovators need to devise the resources and mechanisms for filling the needs identified in Phase 1. Essentially, this phase ensures that the firm is keeping its core segment happy.
In the process of completing Phase 1, researchers should seek other customer segments who could benefit from them their offerings. These segments have similar needs to those in the core segment, but their needs are different enough to justify modifications to offerings using the firm’s existing resources.
Phase 3: Stretch (3a: Stretch Capabilities; 3b: Stretch Segments)
In my view, this is the phase where innovators leave familiar territory for the unknown, and where greater risk enters the process.
New capabilities are developed to attend to various needs of existing segments as well as new segments.
Here, the organization attempts to find segments unrelated to the core who can benefit from existing offerings.
In this CCI model, a deep understanding of current customers and abilities forms the basis of growth in two arenas: what the organization is able to do and who it’s able to do it for.
There are three other key components to a successful CCI. First, frontline employees MUST be participants in the R&D. As the authors put it,
“Our experience shows that the only way to sustain customer R&D is by putting customer-facing employees behind the wheel.”
They mention numerous companies that do so successfully, including Best Buy which has 750 outlets designated as Customer Centricity stores. In these stores, frontline employees are free to experiment with marketing tactics like signage, product groupings, and displays to determine what effect these changes have on customers’ behaviors. The result has been sales growth that is double that of the rest of the stores, according to the authors.
Secondly, organizations must retain a defensive posture. In doing so, they continually scan for changes in customer expectations, technology, and other possible disruptions. The authors insist,
“Customer R&D’s mission is to know more about the companyâ€™s existing customers than anyone else on the planet and to ensure that the company is strategically and operationally prepared to preempt any competitorâ€™s move.”
Finally, did I mention that CCI should involve customers too? Not just observing customers, but bringing them into the R&D process as co-innovators. One company mentioned in the article uses an online panel of thousands of customers as sounding boards for new projects.
What does this mean for libraries?
There are a number of key points I took away from this article as it relates to library work:
- Managers must put frontline staff in charge of innovation. The innovation process is not a top-down approach. If anything, it’s a grassroots effort. Internal structures may need to be realigned so as to empower employees and entrench innovation as a part of doing business.
- Innovation begins here and now. No library can expect to add new services or attract new patrons without first being able to identify, understand, and serve existing ones. The innovation process begins with taking stock and knowing your patrons and their needs at a level of detail unmatched by anyone else.
- Instability is the only way to stay safe. If we’re not scanning the horizon for new and better ways of serving patrons, we’re vulnerable to competitive threats. Experimentation and risk-taking, though possibly disruptive, are healthy and the basis for successful, meaningful growth.
- Patrons are innovation partners. To get to know our patrons better than anyone else, we need reach out to them as well as bring them into our organization as partners. The authors of the CCI article take customer involvement a step further:
“The firm should institutionalize customer centricity. This is accomplished by making the customer segments the basic business unites of the company; that is, organizing by customer segment rather than by product, geography, or function.”
In this way of thinking, we’re not only in business for our patrons, they quite literally ARE our business.
[This article can be found in the Harvard Business Review, April 1, 2006, p. 108-116.]