Turning Customer Intelligence into Innovation

It's a paradox of the information age. The glut of information that bombards us daily too frequently obscures true insight. Intelligence should drive better innovation, but unless it is strategically collected and used, it functions like a summer beach novel — an engaging distraction.

Thoughtful companies intertwine customer intelligence throughout the three phases that characterize most successful innovations. Innovation starts with discovery — where an innovator pinpoints an important problem to solve. Ground-level intelligence is critical to this part of the process.

While companies are increasingly using detailed analytics to fine-tune pricing, packaging, and product performance, analytics have their limits when it comes to finding the next big idea. After all, data only exists about the past — discovering untapped opportunities typically requires a heavy dose of primary research to tease out what the customer needs but cannot easily articulate. Consumers don't do a good job reporting what they currently want or do, let alone what they might want or will do in the future.

Procter & Gamble is famous for its deep commitment to these kinds of anthropological approaches. For example, in the early 2000s, P&G investigated the cleaning habits of Indian consumers who washed garments by hand. At first glance that's a counterintuitive place to look for new growth, because those consumers are unlikely to buy P&G detergents formulated for washing machines. But since hand washers constitute 80% of the home-based washing market in India, it was too big a market to ignore. P&G observed that many consumers were in fact hand washing garments using machine-oriented detergents to take advantage of their superior cleaning benefits. However, the chemical formulations weren't intended for hand washing and could cause abrasions or burns.

Insight in hand, innovators next blueprint a solution to address the identified problem. In the case of P&G in India, the idea the company ultimately commercialized was Tide Naturals, a special formulation that lets hand washers get the cleaning benefit of Tide without suffering the downsides of machine detergents.

There are substantial opportunities to generate real-time intelligence by involving customers in the blueprinting process. For example, four years ago the Indian company Godrej & Boyce was working on an idea for a small, battery-powered refrigerator to reach the 80% of Indians without refrigerators. The team working on the idea brought an early prototype of the concept to a rural village and showed it to 600 women. Navroze Godrej, who leads the company's disruptive growth efforts, describes how the event was a way to get "instant feedback" allowing Godrej to "co-create with these women. It was also here that the final color we went with — ruby red — was decided pretty unanimously with 600 women."

P&G has a number of mechanisms to facilitate this kind of real-time customer input, such as a specially designed "Home of the Future" and "Store of the Future" 30 miles north of corporate headquarters in Cincinnati, online networks such as VocalPoint, where hundreds of thousands of mothers provide feedback on products, and the regular practice of bringing "real" consumers into its offices.

The final stage in the process is to iteratively test an idea by executing smart experiments to test key assumptions. Does the product (or service) solve the consumer problem it was intended to in a way that generates repeat use and re-purchase? Will consumers purchase at the required price point? Can the idea be reliably delivered at scale? Do the economics work? Ideally, tests to answer these kinds of questions aren't run in the laboratory, but with real customers in everyday settings. Presenting early ideas to customers to get their feedback provides vital intelligence that helps increase the success rate and sustainability of innovation.

There are a number of ways to generate this kind of real-world input. Many consumer-facing companies use employees as "customers" to test new concepts inside their walls. For example, the headquarters of Unilever's India operations contains a "street" with shops and kiosks selling Unilever products to glean insights from employee customers. Business to business companies can consider bringing rough ideas to customer councils, running pilots with select customers, or even using booths in industry conferences to gauge interest in new ideas. Since the goal is learning, companies should ensure they keep tests simple and focused. Affordable online tools such as LinkedIn, eLance.com, SurveyMonkey, Wix, Amazon's Mechanical Turk, Appmkr.com, and Google SketchUp can complement live testing to accelerate effective, affordable experimentation.

Companies seeking to more formally intertwine intelligence with innovation should consider three straightforward starting points:

  1. Mandate that everyone in the company increase the amount of time they spend with customers — however much time your company is spending, it is probably not enough.
  2. Find simple ways to make customer conversations more frequent. Consider forming a lead user panel or creating an online community like those offered by CommuniSpace.
  3. Build a little-bets lab, a mechanism by which you can selectively introduce early ideas to the market. For example, at beta620.nytimes.com, users can test drive early experiments offered by The New York Times Company. Little bets labs facilitate the thoughtful process of strategic experimentation that typifies successful innovation.

Want more intelligent innovation? Starting by intertwining intelligence and innovation.

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