How customer insights lead to new innovations

I guess my kids are just too old for crayons anymore, so I missed the CrayonMaker when it was first released, but I'd like to use it as an example of understanding customer needs and identifying lead users, and how an innovation can open up an entirely new market space and revenue opportunity.

For years kids have had broken crayons and their parents have melted them down and formed new crayons, often by mixing the broken pieces.  My wife did this for our kids just a few years ago using a muffin tin in the oven.  I'm going to guess that Crayola was aware of this activity, neither encouraging or discouraging the activity, until 2003, when it released the Crayon Maker, a machine that allows kids to melt down their crayons and create new ones.  Now, crayons have been with us quite a while, and parents have been melting down the broken pieces for quite a while.  What took Crayola so long to respond to these lead users who were creating their own crayons?

But let's push through the existing Crayon Maker and think about the opportunities for new innovation.  Right now Crayola is only positioning the Crayon Maker to melt down old, broken Crayons.  Why not offer Crayon Shavings or Crayon Bits, built specifically for melting down?  These would probably be cheaper to produce, and Crayola could probably charge more for them, giving kids two activities - making crayons and using the crayons.  Next, why not let kids make Crayons in different shapes?  Right now the Crayon Maker makes Crayons in the same shape as they come out of the box.  Creating forms or molds in different shapes wouldn't be difficult and could be more fun for kids.

Next, why not sell dies or additives that let kids make their own crayon colors?  You could turn the creation of crayons into a science experiment, allowing kids to create their own colors, textures and perhaps even scented crayons.  Simply by creating a machine that allows kids to create new crayons we can open up a lot of other product and service offerings.  What's taking you so long, Crayola?

Or how about a mold that allows you to make your own Legos?  A firm such as Lego could easily create and sell molds that allowed children and parents to make their own Legos out of Play-Dough or bread dough or a host of other viscous material.  Then the kids could create, and play with, their own Legos, perhaps creating Legos of different colors and textures.  When they were done playing with them, they could easily dispose of them (or in the case of Bread Legos, perhaps eat them!)

These examples are simply thought exercises that indicate how innovation should work.  A customer need or lead user is identified, a new product or services is delivered and it opens up an entirely new market opportunity.  What customer insights are hiding in plain sight in your business?  What lead users are creating products and services to simplify their lives based on your products or information?

Think this doesn't happen in the "real world" of adults?  Check out Mint.com, which is taking the financial world by storm.  Mint simply helps individuals consolidate a view of their financial lives online.  What we've been doing in spreadsheets is now done automatically for us by Mint.  Why didn't the banks see this opportunity?  What new products and services could a Mint create by offering a consolidated view of your financials?

It's important to interact with your customers and understand what they are doing and creating to improve your products.  Sometimes you may discover customers who have created entirely new products or solutions based on your existing products.  These lead users often point the way for new product or service development.  Once that new product or service is developed, it can open an entirely new market for your firm.