When it comes to understanding customers, you can't handle the truth

 With all due respect to Jack Nicholson, who said this line in A Few Good Men, and to Aaron Sorkin, who wrote the words, most companies cannot handle the truth about the wants and needs that their customers have, because the truth is inconvenient at best, and often ignored at worst.  It is far easier to assume you know what customers want, and further to assume that they want what you have already.  Rather than create something new or different based on actual needs, your teams continue to create products that your firm is comfortable creating and you assume you are meeting the needs of your customer.

If innovation is creating new products or services to meet unmet needs, or creating or modifying existing products and services to make dramatic improvements for existing known needs, then something has to change - either the customers need to change their perception and the value they place on your existing products and capabilities, or you need to change how well you understand what your customers want and value.

Staple yourself to an order

I was speaking recently with a new acquaintance and told him about an article originally written about business process improvement entitled Staple Yourself to an order originally published in the Harvard Business Review.  It involved the haphazard way many business processes flowed through an organization, not based on straightforward processes and logic, but based on the ebbs and flows, straightaways and eddies of a process built and modified over years, bridging internal siloes and different compensation systems.  The original intent of the article was to encourage managers to actually walk through the set of steps that a customer order would go through and to remove those that did not add value, shorten the time in each activity if possible, and ensure that every activity added value.  

Today, we'd call an activity like that a "customer experience journey", which many innovators are borrowing from design thinking.  In my previously mentioned conversation, I told my colleague I thought the new mantra should be "staple yourself to a customer" to understand and experience what they want, what the need, and what they experience when they buy from you or when they use your product or service.  Only then can you understand the gaps, the near misses and the absolute failures associated with your offering.

You'll need some objectivity

Many such activities start out appropriately, trying to understand what a customer really wants or needs.  But they quickly fall into a rationalization process - "but if they only understood our product" or "but our product solves these other needs".  It can be very difficult to have the objectivity you need to fully understand what customers need, because often they can't fully communicate what they want - but they can tell you what's missing, what's absent, what pisses them off and what they think should be possible.  This can be hard to hear, and often may not align to what your company's current capabilities are (that's the part about handling the truth) but this truth can inspire you, and give you insights that can lead you to better products, services and solutions.  You just need the strength of character to listen and not get caught up in defending your own products.

I've often found that most people are good at doing this - just not in their own area of expertise.  Take some financial services clients I worked with.  They could describe for hours gaps or areas of concern or missed opportunities with products and services in healthcare, but struggled to find areas of concern in their financial services products.  I think this is true across the board, because we struggle with fixedness - seeing only what we want to see - and struggle with the fact that we need to admit our own products and services don't really do all that much for customers.

New Insights, New willingness, New risks

If you want to innovate, you've got to either create something so dramatic that people find you and adopt your product or service, or solve problems that customer have that they might not even be aware of.  To do the latter, you have to find new insights, new customers and new needs.  It is as simple as that.

Once you've found new insights and needs, you and your organization needs to be willing to confront the existing product and service offering with what's missing and what needs to be created or changed, and that will be difficult.  No one wants to say anybody's baby is ugly, least of all their own, so getting people to think differently will take a lot of evidence and some willingness to change.

Then, if you can get that far, you'll have to plunge into the unknown, because you'll be creating new products and services that solve newly identified needs, and that will stretch your capabilities to the fullest.  These new developments will introduce risk, but if you can address customer needs and handle the truth about what customers want, and create products and services that meet those needs, you'll mitigate the risks substantially.

Checklist

So, to do innovation well, you've got to:

1. Be prepared to learn and grow
2. Be willing to listen and discover new needs
3. Be willing to acknowledge that the existing solutions simply aren't good enough
4. Be willing to engage customers and prospects to uncover existing unmet or unarticulated needs and validate those needs
5. Be willing to handle the truth that your existing products and services aren't differentiated and aren't good enough
6. Provide all of this evidence to your management team and trust that they are willing to listen, absorb and learn
7. Make big bets to create new products and services that meet these needs, rather that rationalize about your existing products and how customers don't understand them

You can call anything you create "innovation".  In fact it is an over-used word that has lost its meaning.  If you want to create products and services that customers want, think are differentiated and worth paying more for, then you need to create something that is 1) new and 2) valuable and 3) that may not be exactly what you already offer.  The new and valuable parts are discovered and validated by understanding what customers want and need, and letting the facts speak for themselves.  Can you handle the truth, or will you rationalize what you hear?

Innovation guardrails

 Have you ever been driving along a dark road at night, and been thankful for the guardrails that line the roadside?  Of course, if the road is relatively flat and straight, guard rails are not very important, except to keep you out of the oncoming lane.  But consider a high mountain pass, with rock facings on one side and a relatively sheer drop just off the other side.  In that setting, on a dark night in poor conditions, you'd be very happy to have a guardrail there, to keep you from plunging over the edge if you made a fatal driving mistake.

In this regard, guardrails are like corporate culture and unwritten rules.  When the way is easy and you stick to the straight and narrow, the culture reinforces you, gives you comfort.  When the way is more challenging or difficult, the reverse may be true.  The culture acts as guardrails to keep you in line, to keep you from going beyond what the culture or unwritten rules feels is appropriate.

Then you have to ask yourself - are the guardrails there to keep me in (limiting exploration) or to keep me from crashing (to allow some exploration but keep you from the worst accidents possible)?

Like a trained elephant we limit ourselves

I've written before about elephants that are trained when they are young to stay in one place with a leg collar.  They learn when they are young that they cannot pull the anchor out, so they act passively.  However, when the elephant grows larger it has the power to pull out the anchor, but it accepts its training that it cannot pull the anchor up.  We in the corporate world are very much like the elephant.  We have been trained by our executives, our peers, our culture and by society in general that we should stay in the straight and narrow, watching but never approaching the guardrails.  This helps organizations operate efficiently, when everyone knows their role and their place and never varies or creates exceptions.

This limits innovation, however, because it is difficult to create interesting ideas to begin with, and more difficult to find people, time and resources to develop the ideas, while simultaneously fighting with the culture and feeling like the guardrails are pushing you back to status quo.

Culture isn't wrong, but our interpretation may be unhelpful

So, again I ask - is the guardrail there to keep you on the straight and narrow, or is it there to help you avoid the worst crashes?  I guess this is a subtle difference, but it grows in magnitude when we consider corporate culture as the guardrail.  Is corporate culture there to force you to think in a specific way, to create automatons of us all or is it there to guide thinking and help you make better decisions?  I'd like to think that culture, its unwritten rules and its compensation models are there to encourage innovation, risk taking and new growth, but we are so aware of what "not to do" that we read corporate culture too literally.

What does your culture actually say about innovation?  What does it accept, encourage and nurture?  What does it avoid or attempt to block?  Could you be reading your culture too narrowly, or is your corporate culture really not a guardrail but a guide rail, like those kiddie rides that dictate exactly where the car will go, regardless of how you steer?

Innovating from the outside in

 I've written about this idea more than once, but more than ever it seems so vital.  It's past time to innovate from the outside in.

What I mean by that is to start taking your cues from your customers, the environment and future realities, and shape your capabilities and products to meet those emerging wants and needs.  This is, of course, exactly opposite from what we've been told to do over our careers.  What we've been told to do is to build a product or service based on our capabilities and convince people that they need it.

Well, when it was difficult to compare products and services, and when people had less information, it was easier to market a product that didn't fit, or only partially fit, a consumer need.  The Blue Ocean folks have an entire hierarchy of needs, from fully met to partially met.  The vast majority of products we use meet some, but not all, of our needs.  In other words, we are constantly compromising.

What we innovators need to do is to turn the approach around, starting first and foremost with what customers and consumers need, rather than what we can do.  Understanding the need - in its entirety, by the way - and then understanding how to deliver that need in full, with your own capabilities or by acquiring or partnering the things you don't do well, is what will win the day.

Starting from the outside in

Imagine if you will a consumer who has a need that they can't fill - they want to solve a problem they have or address a need that simply isn't addressed.  Most of these customers are more than willing to describe what they want if only someone will listen.  The range of tools and methods to discover customer needs is enormous - focus groups, lead users, ethnography and the list goes on.  Therefore, the information is easy to get, if not always easy to assimilate.  Companies that create strong listening programs that interact with customers and consumers to understand their needs and present real market and product opportunities to their business will be rewarded.

The environment and your ability to read the business environment can tell you a lot about current and future opportunities as well.  What your teams do to understand what is happening in the market, and in adjacent markets, can tell you a lot about what customers want and what they value.  Again, this isn't hard work in the gathering process but requires creativity in the analyzing process.

Understanding how the future is likely to unfold, using trends and building scenarios, can give you insight into what people are likely to want, and moreover may signal new emerging markets or customers.  This information, again, is not hard to collect but can be challenging to synthesize.

So, starting from the outside in means wading through a lot of freely available data and having a small team capable of determining what all that data means.  The first part is easy and rarely done, the second part is rarely attempted and when it is, the result often conflicts with the status quo and is abandoned.

Getting the picture right

Once you have assimilated all of this information, you'll have a good indication of the needs that are met, and unmet, or, if you prefer ODI, jobs that are getting done, or not getting done well.  Now, you are armed with really valuable information that almost no one else has.  The trick will be turning that valuable insight into a product or service reality.

That's because the next step is confronting your internal operations with the amazing possibilities for new products and services, only to hear that the existing and planned capabilities of the firm don't address or service those needs.  So, the safe course is to create half a loaf - address as much of the need that you've defined as possible using the capabilities you have, or worse, double down on existing customers and markets with full focus on internal capabilities.

Now, any business needs to leverage its capabilities to the fullest in order to lower costs and provide value to customers, but too often companies miss the opportunity to expand into new adjacent markets or opportunities simply because they lack a capability or market access. 

The resistance to an outside-in innovation and new product development process has got to change.  Providing partial solutions to consumers, products and services that partially meet their needs or partially allow them to get their jobs done, means that they are partially fond of your product and service and are more than willing to change.  Plus, with the ubiquity of information, product reviews and information on alternatives, everyone is constantly seeking a product or service that meets as much of their need as is possible.  Incomplete products are simply not going to be successful.

Leaving the Inside Out Model

Starting with a technology or capability and building products or services and hoping customers will buy them is an old and tired model.  The amount of sales and marketing you need to create to convince customers to buy your products is indicative of how much your solution misses the ultimate need.  There's an old saying that (even as I am a marketer) has credence - marketing is the price you pay for being unremarkable.  I think that sales and marketing are the costs you bear when you create half a loaf, solving a portion of a job to be done, rather than understanding the need from the outside, from a consumer's point of view.

In the old days when there were limited channels, little product information and difficulty comparing products and services to each other, consumers were more willing to accept what they could get, and did not have the information to compare offers and features as readily as we do today.  

Today, we often know everything there is to know about a product before it is launched, and have already slotted its strengths and weaknesses against existing offers.  Therefore, the more closely you understand the real needs and wants of customers, and the more closely your product or service addresses all of the needs or the entirety of the jobs to be done - what Geoffrey Moore called the "whole product" - the more likely you are to see greater sales, greater profit and greater market dominance.

Get a new paradigm

As innovators, we need to start with a blank slate, with the willingness and ability to look at what customers want, and then apply your company's capabilities to what those needs are, and then fill the gaps with new development, partnerships and acquisitions.  It's helpful that almost any business can scale whole functions today in ways that were impossible even a few years ago.  

But thinking this way requires you to be willing to cast off for a little while what your company "does" and seek out what customers want, then try to solve for the entire problem or opportunity.  Your innovation teams need new paradigms in their approach, and the rest of the business cannot be allowed to treat radical new ideas as if they are radical COVID viruses to be killed.

So, ask yourself - is your "innovation team" thinking this boldly?  Is it allowed to?  Or is it constrained by existing capabilities and existing markets?  If you aren't thinking about new products and services from the outside in, you are doing - at best - incremental innovation, which will keep the lights on but won't change your market position or create new revenue streams or highly profitable products.

Ready or not, the future is unfolding

 I'm back to talk about understanding the future, returning to a subject that I think needs much more examination.  By this I don't mean trying to find out when we'll all get our promised jet backpacks and fly to work rather than drive.  No, when I am talking about understanding the future, I'd like it to be a bit more practical - say a future two or three years from now, with just enough notice about the impending changes that my company can structure new solutions in order to meet shifting market demands.  We need to prepare for the future that we can reasonably address, and understand the future that will unfold just beyond our product cycles.

But no one, and I mean no one, cares about the future in most businesses.  Oh, of course they want a positive future, where margins are higher and costs are lower.  They all want a future where the stock price is higher than it is today - after all, many of us have compensation tied to appreciating stock prices.  But, beyond wanting a better future with a higher stock price, what are we willing to do to understand the future and prepare for it?  Really, not much.  It is no one's responsibility or job, and many people do not believe that it is worth the time to investigate what the future may hold.

Don't believe me?  Let me give you a few examples.

I was speaking recently to a group of executives interested in innovation, and one asked me - what are some of the activities that we can do to get a lot of return for little cost and risk?  And I told him what I've said for years:  the lowest hanging fruit in the innovation world is in understanding trends and understanding what those trends mean, so you can get to the market with what customers want and need as the need unfolds.  The general response from the group was a big "meh" - I think they were hoping for a magic wand.  Trying to understand the future is squishy work that belongs to no one in particular.

Most companies I've worked with have very competent product managers, who are skilled at managing existing products, but at best have one person in a "strategy" office somewhere who thinks about what's next, and no one to convert that thinking into new products and services.

In another example, I've been speaking to a few educators who are concerned about students returning to full time classes in colleges and universities in the fall.  If that happens, students will start arriving in August - just five months away - and everyone says they want students to come back.  But what plans are being made?  What contingencies addressed?  What forecasts about housing, food, faculty demands and so forth? Virtually none.  If students are going to return, universities need to be figuring out what that August will look like now (in all reality it's probably too late) but they could at least prepare.

There are a couple of reasons why there is so little focus and preparation on imminently obvious futures.  First, as described above, the work is distributed.  Everyone has a stake in the future outcomes but no one is responsible for preparing for it.  When "everyone" is responsible, no one is responsible.  Second, there are immense pressures to get things right, right now.  No one wants to hear about thinking about the future when we lack control over the present.  Third, people don't believe that good, practical tools exist for understanding the future, so it feels like a fool's errand.

What I fail to see is why this work is left undone.

The trends are out there and reported on regularly.  We know how fast the US is aging.  We have good data on immigration.  We know how fast the COVID virus is mutating and also the increasing supply of vaccines.  The future - or at least versions of the future - are somewhat knowable, and knowing what versions are likely, a company, university or government could begin to prepare.

Yet we are frozen, as if we are incapable of understanding the data around us and developing alternative futures and understanding their implications.  Or, more kindly, we are too busy with day to day activities to spend time to understand what our future challenges will look like, and, since we neglect the future now, we will continue to toil with too much work and too little insight when the future arrives.

In all things, look to Einstein.

As a lead up to my point, let me relate a story that is often told of Einstein.  He was asked - if you had one hour to solve a problem, how would you spend your time?

Now, gentle reader, when I tell people this story, I stop here and ask them - what do you think he said?  How would Einstein use his time?  Most of us would spend a few minutes panicking, and a few minutes arriving at what we think is the best possible answer, and spend the rest of the time building a solution.

Einstein responded - I'd spend about 55 minutes thinking about the problem, and about 5 minutes solving it.  Note that Einstein, perhaps one of the smartest men who ever lived, is doing problem definition and examining the ways the problem can be defined and gathering the information he has, only then to work on solving the problem.  We, on the other hand, rush to solving the problem.

The data is out there

This failure to prepare and anticipate the future becomes even more perplexing when we realize just how quickly the capacity is growing to gather data and analyze it.  We are in the midst of a data processing, Artificial Intelligence and machine learning revolution, yet we miss one of the biggest opportunities - asking these systems to gather data in a number of trends and make predictions about what the future might look like.  Even if you don't want to spare people to do this work, certainly you can spare some computing time.  These algorithms are good at Monte Carlo simulations and should be able to give you reasonable predictions about likely future scenarios if you will help with the design of the experiment.  We have the tools, we have the insight, we have the clues about what the future may hold.

Why do we fail to act on this?

Willful disregard

There is almost a sense of machismo around the failure to discuss, analyze and develop scenarios about the future.  We'd rather rush around, focused on today's problems and continue to be caught unaware by the unfolding future that in many cases is, and was, predictable to some degree.  Some people say we could not predict COVID, but we've had MERS, SARS and Ebola just within the last 20 years, and the mis-named Spanish Flu before that.  It's not as if the future is unknowable, we just choose to ignore the evidence.

I blame the scientific management revolution in the 1950s and 1960s.  Those managers distilled everything into numbers that can be understood and manipulated and downplayed any other way to think or manage.  When we start talking about future opportunities, trends and scenarios, the common refrain is - but is the data statistically significant?  Can we make predictions without risk?  Of course not, but making predictions and assessing the scenarios and the implications of those scenarios can teach you something about the future, and that's what's important.

I also blame the expectations of slow, predictable change.  For 40 years after WWII, the US stood predominant in global business, and change was slow and predictable, but since then change has been more rapid and more discordant, but we still act as though the future is relatively predictable and stable. 

I also blame science fiction writers and movies - because we have the idea that talking about the future involves jet backpacks and life on Mars and that seems unimportant and unrealistic to people who need to deliver the next quarter.  Understanding the future and acting on it does not require a rocket or a spacesuit.  The future is not necessarily Utopian or a dystopian nightmare. 

What should we be doing? 

Gathering trends and looking for evidence of emerging needs and opportunities, the potential for new competitors to enter the market and possible market shifts based on new technologies, policies or demographics.

We should constantly be examining several time blocks - most importantly, two to three years from the current date, since that's most likely the least amount of time it will take for you to bring a new product or service to market.  After that, a 4-6 year time horizon and a 7-10 year time horizon makes sense to investigate.