Innovation Cooking—The Customer Comes First

Why do more than 90 percent[1] of all customer-facing innovation initiatives fail to achieve their stated business objectives? Whether developing new products, services, business models, or enhancing existing ones, the current models and methods for driving innovation are clearly broken.

In today’s ultracompetitive business environment, a hyper-focus on creating customer value is necessary to be a successful business. Thus innovation, defined as creativity that creates value, is the lifeblood for a company’s long-term viability. Learning how to drive and manage innovation is a crucial skill for business leaders.

History shows that successful innovation does not occur just by outspending competitors on R&D. Regardless of the budget, if innovation isn’t customer focused, it is destined to fail. Additionally, companies increasingly face threats from more agile competitors that put the customer first.

With so many intelligent people and significant investments applied to innovation projects, the boding question is ‘why do so many innovation initiatives fail?’ Examination of innovation initiatives across industries reveals that most failures occur because of lack of achieving product-market fit. That is, failing to be in a good market with a product/service and business model that satisfies the target customers’ needs. This problem is rampant in both established companies and startups, which fail at about the same rate as corporate innovation initiatives.

The reason for this high failure rate is that traditional innovation methods based on conventional market research and waterfall product development are flawed. They are internally focused methodologies that put customers at the tail end of innovation, but only the customer can truly validate product/market fit. Basically, customers are not part of the process until the new/better product or service launches or some other near market ready stage, at which point they are too late to an initiative to provide any real input into the innovation process.

• Conventional Market Research Fail: While some may argue that market research represents the customer viewpoint, the fact is that surveys, focus groups, and other traditional market research methodologies are not effective for innovation. Market research can be effective at finding out customer opinions, demographics, and psychographics; information the company wants to know based on known questions. But innovation and product-market fit validation requires deeper insight into customer behavior to identify pains, needs, and buying journey that may not be consciously known and/or self-reportable, especially when seeking both the question (i.e., opportunity) and solution during an innovation initiative.

• Waterfall Planning Fail: Waterfall planning also assumes the answer is known and the project’s beginning and end are clearly defined. This type of sequential design process cannot effectively deal with the unknowns and ambiguities of the innovation process. Rapid iteration based on customer input is required

To solve these problems, the Innovation Hacking methodology was developed by the author through observing and applying the best practices used in successful startup and corporate innovation initiatives over the last 20 years. At the core of Innovation Hacking is the practice of placing the customer first with a laser focus on finding product-market fit throughout the process. While customer-facing innovation successes can occasionally be found from internally focused projects (e.g., stealth R&D labs), research reveals most successful innovation initiatives focus on customer value creation and an obsessive customer-facing process that is almost completely opposite of traditional innovation methodologies.

Innovation Hacking starts with effectual reasoning, a type of problem solving that takes the future as fundamentally unpredictable, yet controllable through human action. Then, beginning with customer discovery, an iterative innovation process is conducted to identify and validate market opportunities. Leveraging small and diverse agile teams, Innovation Hacking provides a methodology drive innovation from ideation to scalable business. Since very few formal business plans for new products or businesses withstand the first contact with customers, the emphasis is not on developing plans but validating and executing the business model. Innovation Hacking also emphasizes building a customer-focused culture across the value chain to drive lasting innovation-based growth.

Success or failure is decided by your customers, so place them first. As Jack Ma, founder & executive chairman of Alibaba Group stated, “Forget about competitors, just focus on your customers.”

[1] US Department of Commerce