When Innovating, Should You Be Led By Customers?

A few weeks ago a retail client asked us how user generated content could help develop new ideas and rate product and service improvements they have made. This got me thinking: should you be driven by your customers when innovating or should you rely on experts in the field?

Innovation is fascinating. The way in which teams arrive at new ideas and develop them into successful services, designs, products and trends are very different. Two models:

Customer Led & Qualified Innovation: This approach takes customer opinions and existing suggestions and prioritises them. A lot of recent technology has allowed new ways of generating and testing ideas, from phenomena such as crowdsourcing and multivariate testing to instant feedback through tools such twitter. This model has made companies like Salesforce.com successful, where they regularly get customers to vote on the product innovations real customers have proposed. This is not a new model, Hollywood has employed test screenings since 1919 to test, generate ideas and refine blockbuster movies.

Expert Led Innovation: This school of thought advocates hiring the best people in the business and ‘just going for it’. This is the Henry Ford school of thought. Brands like Apple are great examples of design innovation with little or no influence from the customer when innovating. To continue the film analogy, this would be and independent film director sticking to their vision and ignoring the feedback their given from initial screenings.

Both models work so how do you pick what’s best for your company. I posed this question to those clever innovators at Triiibes (thanks to fellow Triiibesters Igor Asselbergs, Steven Devijver, Sarah Farrugia, Stephen Snyder and Bonnie Larner for their thoughts) and began to form an initial view on which model should to pursue.

Pick customer led innovation when: there is clear customer demand for elements of your product and service that you can knowingly innovate on. Pick this model when your customers are informed and engaged in what you sell, where there is already a lot of differentiation in your offering or when you have a low toleration for perceived risk.

Pick expert led innovation when: there is a high degree of technical complexity in your marketplace, when your customers will pay for quality design, if you have a strong vision and long term plan, when you have access to great experts or when your core market changing rapidly.

So, while it’s clear that customer led innovation and feedback is important (as evidenced by the wealth of feedback received by Facebook everytime they update their user interface) there is still a place for expert led innovation in todays world. But as a number of the community at Triiibes pointed out, with innovation, “success is more likely if we're first or best at something”.

Why Spotify Will Beat iTunes And What We Can Learn From Them

It’s an exciting time at the moment as we're seeing existing business ideas made great by new innovations and user experiences. Spotify is one example. I feel it will beat iTunes and further revolutionise the media industry. Or at the very least make iTunes rethink the way they sell music.

If you haven’t used it, a brief introduction. Spotify provides quick access (no buffering means no waiting around for songs to load) to almost any song or album you want to listen to (after using it since January I’ve found I get 80%-90% of the music I want) through a desktop application (which means you can access it offline) which allows you to build playlists quickly. And the quality of the music files it plays is high. In exchange, you get an advert every 20 minutes, or for a small monthly fee, no adverts at all.

It’s great. As a big music consumer myself I can see it will put a big hole in the mp3 market. Spotify have done a number of things well that others should copy, namely;

Finding an unfulfilled customer need – What Spotify is doing is not new at all. Their model has its origins in Napster, Myspace, iTunes and last.fm. The customer need it fulfils is new though. Spotify takes the needs of ‘I want access to all the music in the world through a really easy interface’ (which iTunes has but last.fm doesn’t) and ‘I want free music and a community ’ (which last.fm does really well) and brings them together to exploit an unfulfilled need of ‘I want all the music in the world, for free, and have a great user experience’. This can be applied to be any industry, and perhaps your own. Spotify is a good example of how to do it well.

Understand the power of networks – In his recent book ‘What Would Would Google Do?’ Jeff Jarvis talks about the power of networks, and changing your commercial model from ‘charging the highest fee that the individual customer will bear’ to charging ‘the lowest cost you can charge that the entire network can bear’. His logic is that if you’re doing this the competition can’t undercut you without making a loss. Spotify have understood this – and made their service easy for a wide network of users to adopt with no or very little cost to the user – Spotify have their eye on making a living from the entire network and not the individual.

Make the user experience great – Use Spotify in comparison to last.fm and you’ll be impressed by its ease of use. They understand that users would be impressed by a ‘no waiting’ approach to loading tracks and their interface was familiar and easy to adopt (building an experience based on the design of the iTunes interface that users already knew well).

Get the right blend of advertising – Spotify kept it simple and didn’t overload their service or the users with adverts, and allowed users to opt out of commercial messages for a fee.

From Audience to Customer: How Media Companies Can Steal From Retailers

Media companies aren't having a great time. Demand for their content is a strong as ever, but people are expecting it for free. And users now dictate what they watch, hear and read more than ever. And advertisers are spending less.

A few are doing well, the Financial Times reported a 13% rise in profits for 2008 through a well judged transition to online by charging for selected content and well managed subscription models. Most, though, are struggling.

Online retail is having a ball though, with pureplay success stories like ASOS, Threadless and Play.com trouncing many established brands. What retailers could teach media companies? A few ideas:

Change your view from audience to customer – big retailers learnt this with the advent of loyalty cards, and small retailers have known this all along: understand and respond to your customer, treating each customer as an individual. Media companies know their audiences very well as a group, but few have the ability to understand and respond to an individual customer. Here media companies can borrow from retailers by building ‘customer memory’ to understand individual customers and tailoring services accordingly.

Make everything you feature for sale – Trust in retailers own products reviews is being transferred to publishers and user generated content. Affiliate models allow media companies to take a slice of revenue, but there is an opportunity for media companies to own the whole transaction, making the products they feature a retail opportunity. Nike shows a great example of how this can be done.

Micro-commerce – Gartner defines Micro-commerce as transactions of less than US$1 (or about 70 pence), and is driven by new innovations in payment processing charging. These present a good opportunity for Media companies to monetise ‘special feature’ content at small prices seamlessly, replacing traditional offline subscription revenue.

Lead customer discussions - You could view a newspaper as just a set of blogs, and this shows a great opportunity to develop niche publications and channels to champion customer groups. Tone of voice and direction are vital and media companies should continue to differentiate their editorial and lead issues using social technologies.

Seth Godin London 2009: Marketing Lessons On Remarkableness, Scarcity & Revolution

Last week I attended the Seth Godin talk in London. Seth’s a respected leader in the field of marketing and all things web, and this was a rare opportunity to hear him speak. Staged in the grand setting of Church House behind Westminster Abbey this was a great event and I felt three points stood out for marketers which I’ve paraphrased below.

"Being remarkable" – It sounds obvious, ‘remarkable’ meaning being worthy of making a remark, but how many brands, experiences, products or services are truly remarkable. Many companies before entering into the social media space such as blogs, Twitter, forums or Facebook should take time to think about whether their companies products, services or the brand itself is worthy of customer remarks. Make what you market excellent and people will talk, otherwise the review and forum sections on your newly launched website will be empty

"Scarcity versus ubiquity" – Think about your industry, what has become commonplace, a commodity or ubiquitous; and what is rare, difficult to find, uncommon. Then think about how you market and how you charge for those products and services – a Blog is ubiquitous and common, so make that free – whereas a good speaking event is rare, so you can command a high fee. A good example of this in the entertainment marketplace is Live Nation who have understood that mp3 and file sharing has made recorded music ubiquitous and free, and have focused their business model on making money from what in their industry is rare, outstanding, uncommon and valuable – live music performances.

"If we’re in the middle of a industrial and marketing revolution, what are the new rules?" - During the day, Seth highlighted a vast number of traditional marketing rules were changing, highlighting recent changes brought on by social technologies and the low costs of commerce through the web. This was food for thought, but as well as understanding which rules were now broken, he suggested those who will do well through the recession will be the ones who build new marketing rules, particularly how companies can lead customer tribes.

See Green When Out Of The Red

This week Google launched Google Power Meter which gives consumers detailed information on their power consumption throughout the day by displaying data from smart meters. It's aim is to highlight areas where consumers can cut back, and help them track and monitor this

Google Power Meter is a great example of a significant trend. Until the economic situation worsened, last year saw a growing demand for 'green' or Corporate Social Responsibility (CSR) reporting. Historically this was driven by multinationals such as Shell and Anglo American who use greater transparency as a way of driving energy efficiency within the organisation and informing stakeholders. But in 2008 we saw detailed CSR information being used for marketing purposes, with pioneers such as Tesco putting carbon usage data on individual products.

Price and brand promotion is king at the moment, but will green be important to marketers when the recession is over? Some companies have fallen into the trap of greenwashing, a term for using general PR statements to pay lip service to green initiatives, but CSR reporting is going to be important because of the comparisons if will provide between rival products, services and companies. Online shoppers will be able to sort a basket of items on their carbon footprint, or compare a manufacturers energy usage or a companies CSR achievements.

If CSR and transparency is going to be an area is differentiation, and the companies who can show the most transparent accurate data gaining advantage, how do you get there? Three steps...

1. Have a ‘real’ CSR policy – Greenwashing is a waste of time and can damage your brand. A genuine focused CSR philosophy with clear targets will bring benefits in areas such as energy saving (which is just one area of CSR) and resonate with consumers and shareholders
2. Plan for a long term project - Reporting on this scale can't be achieved quickly and it's a journey – work with everyone from your suppliers through to customers to bring together this data
3. Get data in front of the public early - You shouldn't need to produce a full set of CSR reports before making them available to the public, pick a metric that your customers care about such as electricity usage and carbon emmisions and grow from there.

So in the current market when many are looking to cut costs and innovate, better CSR reporting can save money and improve your competitive standing.