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Over at the Fast Company blogjam, Dave Pollard looks at whether great product innovation really starts with the customer – and describes the whole issue as a chicken or egg question.

Involving the customer in product innovation is not an either or proposition – it is something that should always be done – but done in the right context. And when listening to customers companies need to realize that their mileage will vary depending on the type of product or the phase within the product life cycle.

In some product categories, people could care less about the products or the companies that manufacture them – making customer feedback useless at the least, or potentially dangerous if given too much weight.

Newer products that are still primarily appealing to innovators and early adopters have a different problem with potentially similar consequences. Assuming the product is successful, customers probably care about the product in this case. But their ability to innovate ahead of what is available will likely be several steps behind the ability of the team that came up with the innovation – and giving too much weight to customer feedback may limit the future product potential and give the competition an opportunity to catch up and out-innovate the incumbent.

Then you have more mature product categories where people care – probably the area that yields the most valuable customer feedback. Except that here too you have to be careful about how much weight you are giving to that customer feedback. If your goal is to grow your product revenue by 80% in the future, then you have to realize that “all” current customers only make up a fraction of your future customer base. Attaching too much weight to their feedback may eliminate a large number of future customers that do not share their profile. And according to Harvard Prof. Clayton Christensen’s disruptive innovation theory, your trajectory of product improvement will eventually cross the mainstream trajectory of customer need – limiting your potential future customer base, and opening yourself up for a disruptive innovation.

All that being said, and according to MIT Professor Eric Von Hippel, in some fields there are a small number of “lead users” who invent new products out of necessity and who can be an important source of new product concepts. The kind of customer listening that is required in this case is very different from what most people think of when talking about customer involvement in product innovation!

Related posts:
- You cannot outsource innovation to your users!
- Where will your killer competition come from?
- Whatever marketing becomes…

[Tags: customer feedback marketing product innovation innovation customer listening marketing innovation]

Kathy Sierra over at Creating Passionate Users has a great post on why you cannot count on customers/users to innovate for you.

Quoting from her post, she says:

In this Web 2.0-ish world we’re supposed to be all about the users being in control. Where the “community” drives the product. But the user community can’t create art. (And I use “art” with a lowercase “a” as in software, books, just about anything we might design and craft.) That’s up to us…

Our users will tell us where the pain is. Our users will drive incremental improvements. But the user community can’t do the revolutionary innovation for us. That’s up to us.

Bingo!

Of course you need to listen to your customers, and of course the customer is in control of many things that used to be controlled by the companies marketing their products and services – i.e., information about the product or service that levels/changes the balance of power in buying situations.

But that does not mean that your customers are in control of designing your next breakthrough innovation! It will never happen…and those companies that try to “outsource” their product innovation to their customers will inevitably condemn themselves to a slow dead by innovation monotony and product insipidness.

In an interview with Peter Drucker many years ago in Context Magazine – Drucker adds a few reasons why you cannot or should not outsource your product innovation to your customers:

• 99.9% of your customers couldn’t care less about your product or service.
• 70% of the people or organizations that should be your customers are not yet (and therefore by letting the existing customers dictate what your next generation product should be – you might very well never be able to meet the needs of those 70% who will make up your needed growth)
• customers never buy what we sell

[Tags: customer control innovation product innovation outsourced innovation]

It is a fairly well documented fact that some breakthrough innovations come from spaces that are not originally considered to be competitive. Nevertheless, it is still fun to witness one of those shifts firsthand.

If you have done any traveling in densely populated areas lately you may have witnessed a few of them. Have you noticed how fewer people seem to be wearing wristwatches – especially young people? Where did the competition come from? Cell phones…A quick online check indeed validates that the worldwide market for wristwatches is down by 10-18%.

So what else is happening? Are there fewer people carrying laptops in favor of web-enabled cell phones with email capability? Are more people using their phone to take snapshots instead of compact cameras? A quick online check does not offer any validation of these trends yet – if indeed they are real trends. But could the cell phone disrupt the wristwatch industry, the laptop market and the digital camera space?

Do you know if your industry may be under siege by stealth competition like this? Are you even looking outside your space?

[Tags: innovation disruptive innovation competition cell phone]

Doc replied to those who disagreed with him on Hugh’s blog – concluding that whatever marketing becomes will start as a technology trend.

I do agree with many of the assertions in his reply regarding the poor state of marketing and especially product management in the Linux World and the Tech world in general. I would not, as he does, differentiate between marketing technology products versus marketing consumer electronics or consumer packaged goods. The role of marketing and the skill set requirement are very much the same across all industries. Having deep industry experience is an additional requirement layered on top of that.

Across all industries, marketers must play the role of “cultural anthropologist” to distinguish the real needs from the short term annoyances that people will find workarounds for by the time you can address them with either a new product or a new feature. They must also be able to interact, negotiate, and mediate with R&D, engineering, suppliers, competitors, partners, and other groups, to finalize “feasible” product plans that will meet the customer needs and include all the “relevant” innovations coming from those groups. And they need to be able to do that without being a gatekeeper or information traffic cop. In an age of rapid development and co-creation, they need to be comfortable in an environment where everyone can and should talk to everyone – regardless of organizational boundaries. Because, and within the constrains of not aggravating the customer, all of those groups need to have direct access to the customer to test and validate certain assumptions. Again, there is no difference in those fundamentals across industries.

Next they need to find ways to communicate with customers about the new products and services in the face of “attention” being the new scarcity. And while the solutions will differ from market to market, the range of options that need to be evaluated are the same across all industries. As part of that they also need to make sure that they set up the proper infrastructure to “listen” to market feedback on an ongoing basis instead of in episodic waves as they currently do.

Whatever marketing becomes will be enabled by technology. Wiki’s, blogs, social bookmarking, technology enabled CGM, and many other new technologies are very powerful tools for companies to execute all the marketing functions – including all the customer touch-points – in different and better ways. Hopefully marketing will not become “defined” by technology, as that would make things much worse. Just take a look at what CRM did to sales and marketing…

Lastly, it is important to keep all things in perspective. What marketing becomes is not all that different from what it should have been all along…just take a look at what Peter Drucker said during the last three quarter century:

• “Because the purpose of business is to create a customer, the business enterprise has two–and only two–basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.”
• “The aim of marketing is to know and understand the customer so well the product or service fits him and sells itself. “
• “The most important thing in communication is hearing what isn’t said.”
• “Quality in a service or product is not what you put into it. It is what the client or customer gets out of it.”

And hopefully, what marketing becomes will also be heavily influenced by other disciplines besides technology – including sociology, anthropology, politics, economics, science, and others. Some of the best “field-specific” innovations have come from seemingly unrelated fields. Again, Drucker has a good example of that: “The new approaches to the study of history have, for instance, come out of economics, psychology and archeology all disciplines that historians never considered relevant to their field and to which they had rarely before been exposed……. By itself, specialized knowledge yields no performance.”

Related post:

Marketing: The View from Silicon Valley vs. Madisson Avenue

[Tags: doc searls marketing peter drucker attention scarcity co-creation innovation]

The June issue of the Harvard Business Review has an interesting article describing some of the latest findings in the psychology of new-product adoption (here – can be purchased or requires subscription).

According to the author, Prof. John Gourville, there are a few psychological biases in decision making that need to be considered when using Everett Rogers’ “relative advantage” as a measure for successful product adoption.

Gains and losses:
First off, people evaluate attractiveness of new products and services not on an objective scale, but on a subjective/perceived scale which is based on products they already own. Every benefit of the new product compared to the new one is considered a gain, and every shortcoming is considered a loss. The kicker is that potential buyers give losses a much bigger weight than gains in their decision making process. In fact, multiple studies have shown that gains have to outweigh losses 3:1 before customers will adopt the new product or service.

The endowment effect:
Because of this loss aversion, people value what they have more than what they don’t have. In fact, multiple studies have shown that people demand 2-4 times more compensation to give up products that they already possess than they are willing to pay for those same items in the first place!

Status quo bias:
The status quo bias explains why people tend to stick with what they already have, even when a better alternative exists. Studies have shown that the extend of loss aversion grows over time from a factor 2 to 4 – meaning that people’s pain perception of giving up something increases over time and reduces their willingness to trade up.

But that is not all! Not only are consumers overvaluing losses and existing benefits of entrenched products by a factor 3, sellers are also overvaluing the benefits of their innovations by a factor 3. That makes the mismatch between what innovators think consumers desire and what consumers really want 9 to one!

So what is one to do? The author has a few suggestions. Come up with products that contain few product changes and require little behavioral changes and you will end up with an “easy sell.” If your new product has considerable product changes compared to the incumbents – make sure that they require little behavioral changes. By doing so you may end up with a “smash hit.” A high degree of product change combined with a high degree of behavioral change is much like the TIVO and those innovations are “long hauls.” Doomed out of the gate are those new products with little product changes that require a high degree of behavioral change.

[Tags: buying behavior product adoption innovation adoption of innovation]

Last week at SuperNova, Amy Jo Kim from Shufflebrain gave a great presentation on the lessons that can be learned from the gaming industry to better design software services and applications.

Neuroscience tells us that games shape behavior by leveraging our “primal response patterns,” which are deeply embedded in our psyche, and by engaging us in “flow” – that spot where skills and challenges are somewhat in balance.

Based on that, there are 5 game dynamics that can make an interactive game more fun, compelling and addictive. They are:

• Collecting – the ability for people to collect all kinds of stuff and brag about it – be they weapons or other artifacts in worlds like WoW or Runescape, or friends in MySpace
• Points – both social points given by other players as well as ratings given by the system
• Feedback – whether visual or auditory, a way to tell a person how well they are doing
• Exchanges – especially social interactions, whether explicit or implicit
• Customization – whether customization of your persona or your environment. After you invested time personalizing your world, you are less likely to leave

If you can embed some of those game mechanics into your traditional software service or software application, then those too will become more fun, compelling and even addictive. Some of the software applications that have successfully embedded those features include Flickr, MySpace and even eBay.

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Other write-ups about the points made during the session include:

• Business Week’s Tech Beat
• Max Kalehoff at Online Spin

[Tags: gaming industry neuroscience software+development ]

Tom Guariello over at the Truetalk blog has a funny post on the recent hype surrounding customer listening and meeting their “unmet” needs through design, and how many people, in this case the SVP of Innovation at Pepsico (or her flacks) misuse all this rich terminology – based on a originall rant by Niti Bhan at Perspective.

[Tags: customer needs unmet needs design ]

Fortune Magazine’s latest issue has an article on how Fortune 500 companies that are still run by the founders are tearing up the market.

While the Fortune 500 sample is small, there is other evidence based on research of an Ohio State University finance professor named Radiger Fahlenbrach that companies run by founder-CEOs outperform the broader stock market by 8 %. One of the reasons being put forth for this finding is that founders care more. The study further uncovered other interesting facts – namely that “founder-run companies have bigger capital budgets and invest considerably more in research and development than nonfounder-run firms.”

Unfortunately, this is not a widely held belief amongst typical startup backers, who are too often rushing towards pushing founders to the side and replacing them with “professional management”- types to “babysit” their investment. There is no question that some founders are not CEO material, but before taking out founders from the executive team line-up, investors and board members should really look at complementing the weaknesses of the founders in other ways.

[Technorati Tags: startups founder VC]

Last week’s post on hyperspcialization drew quite an interesting discussion, which is being summarized here.

Olivier Blanchard over at the BrandBuilder blog picks up the conversation and adds a lot of interesting examples of how a broader background may help you innovate better then by being overly focused. He also makes the following recommendations “… my advice to you if you’re in a rut (or if you’re looking for your next big idea) is to just relax and go outside. Take a road trip. Take the afternoon off and go ride a bike. Go into a computer store and find out everything there is to know about inkjet printers. Go pick up a graphic design magazine and hang out at a tea bar. Take a stroll through an antique shop or your town’s hippest interior decorator’s gallery. Read a book about something you’ve never read about before. Go have a drink with a friend or a colleague or a competitor” – something I believe Tom Peters recommended over 20 years ago.

Mohamad Mova Al ‘Afghani over at NanoTechnology Law argues specifically about law in nanotechnology, and how a well formed legal platform for nanotech will have to be much broader than just one based on IP law. He also quotes Peter Drucker as saying “This is particularly important as innovation in any one knowledge area tends to originate outside the area itself….. The new approaches to the study of history have, for instance, come out of economics, psychology and archeology all disciplines that historians never considered relevant to their field and to which they had rarely before been exposed……. By itself, specialized knowledge yields no performance.”

Chuck Frey over at Innovation Tools wrote about this in the past and agrees that we need generalists to connect the dots.

Gautham Gosh over at Gautham Gosh on Management also wrote about this in the past, in one posts pointing to Dave Pollard from How to Save the World as saying that: “We live in an age of specialization, where we are encouraged to narrow our interests and our activities, to focus and limit ourselves to doing things at which we are very competent. So parts of our brain get a lot of exercise and other parts very little. What’s worse, this can actually narrow our comfort zone, the range of things we enjoy doing or thinking about and are competent in.”

Steve Hardy over at Creative Generalist argues that ideas come from the confluence of multiple disciplines but that innovations are always the result of specialists.

In the comment section of the original post it was also suggested that perhaps hyper-specialization might have a negative effect on ethics.

Here are some other links on the topic if interested:

- The Business Innovation Insider
- Mises Economics Blog

[Technorati Tags: management innovation human resources]

According to a CNET article, IBM’s executive VP for Innovation and Technology Nick Donofrio said last week that “An era of inventions ended with the passing of the 20th century. The fact is that innovation was a little different in the 20th century. It’s not easy (now) to come up with greater and different things. If you’re looking for the next big thing, stop looking. There’s no such thing as the next big thing”

Microsoft’s Don Dodge over at Don Dodge on The Next Big Thing does not believe so – saying that “The Next Big Thing does exist…it just doesn’t look BIG to IBM,” and listing a whole bunch of companies he is working with that could be the next big thing.

Charlie Bess over at EDS’ Next Big Thing Blog also chimes in, saying “Each organization will have their own next big thing. There will be some massive industry wide changes, but those are much more rare than the shift within a single organization — at least for most organizations.”

History (especially tech history) is littered with predictions along the lines of “this is the end of …(fill in the blank)” – and they have often been an indication that the author of the quote or the company they were affiliated with had reached an innovation impasse.

You really believe that there is no Next Big Thing? There will be Next Big Things for as long as humans do not screw up this planet. Saying that there is no Next Big Thing is like saying that we are the end result of evolution – millions of years were spent to this as an end result. That, of course, would have some serious implications.

But back to a more mundane level – of course there will be ongoing breakthrough innovations and a lot of Next Big Things. There are fuel innovations in the works that could lead to many next big things, there are management innovations that could lead to new type of organizations and governments that could eclipse existing organizations, there are innovations in the world of physics, and at the confluence of multiple disciplines, that could lead to many next big things. It is just all around us!

[Technorati Tags: idea management innovation the next big thing]