What is Innovation, Anyway?

The process of Innovation is “to innovate,” which, according to Merriam-Webster, means: “to make changes; do something in a new way.”

The important thing to note in this definition is that it does not specifically refer to a new thing or product (although both could qualify). The definition describes doing things in new ways by having new ideas about how to do them—in other words, thinking differently. This is precisely what great leaders at great companies do in how they approach innovation: they think differently, with new ideas about innovation, driven by a deep understanding of what specific customers really value. What leaders at these organizations have learned, by the way, is that while customers love new products, services, and technologies, they often appreciate other components of customer value even more.

This is an important distinction and one that is often difficult to convey to Nincompoopery-trapped managers and employees who live in customer-free zones (e.g., executive row, the back office, the factory—actually, any location or position that doesn’t have regular contact with real people who buy things from your organization). The traditional (i.e., outdated) way to think about customer value is that it involves something we make or do or offer—adding value to work in process, offering a product to an end user, delivering services or information. All these activities can be components of customer value, but by themselves do not constitute customer value in its modern context.

Big Innovation Job #1: Leverage delivery and logistics for competitive advantage.

Customers have always wanted services and products to be delivered on time. But in an era when just-in-time deliveries are critical to organizations adopting lean management principles, precision delivery is a differentiating component of value. If a customer has only limited inventories of a key part that you provide—or needs your service to delight their customers—and you screw up a promised delivery, they’ll never forget you. But not in the way you hoped. For most large and mid-sized businesses, the solution to improved delivery lies within, by improving measurement practices and operational processes both internally and externally.

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In a truly small business it’s different: you just have customers who love your organization’s creative touch but still want things now, and aren’t afraid to tell you where else they can buy them. In this situation you’ll need a partner, likely one of the major shipping organizations (DHL, FedEx, US Postal Service, etc.) to offer value-added logistics. How do you use delivery and logistics to separate your organization from the competition?

Big Innovation Job #2: Partner with customers by offering business expertise in creative new ways.

Total cost of ownership (TCO) used to refer to purchase price plus annual fees and maintenance. Now, however, customers conceive of it much more expansively, and include evaluations of such diverse factors as:

• How difficult is your organization to work with?
• How well do your management and information technology (IT) systems integrate with those of the customer?
• What business expertise, even if not directly related to your product or service, do you offer?

In short: Are you a good partner? Don’t kid yourself: this is terrifying stuff. It’s hard enough to do great work or provide great products; being a great partner is even harder, but it does offer big opportunities for the brave.

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Other industries (like packaging machinery and computer service) are adopting similar models in which customers only buy the production or service time they need, while the manufacturer or service provider retains ownership of the equipment or process, even if that machinery or process is still on the customer’s premises.

How would your customers buy differently from you, if they could? All of this is a terrific new business model if your organization is big enough. It takes millions (or, even better, billions) of dollars to finance equipment, staffing, and accounts payable for customers, and requires you to maintain sophisticated accounting and IT systems to track their usage and billing and . . . Oh, the hell with it: if you run a small company, this model may not work for you. Yet. Except partnership doesn’t have to involve vast sums of money and a break room full of MBAs. Smaller companies can be good partners by offering specialized expertise or other value, even if that know-how or help is initially unrelated to what the customer is buying.

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It’s even easier for small companies to partner with other small or mid-sized companies. In these situations, building a deeper relationship can be as simple as asking: “We have a great [insert one: hiring/safety/training/etc.] program. Can we share that with you?” The point isn’t how much money you spend, but how much real connection (and resulting goodwill) you can create between your two organizations, at multiple levels, among a variety of departments and employees. Your best customers will recognize the long-term value that this type of partnership creates, which will reduce the importance of price in your negotiations with each other and prevent competitors from even getting in the door. What are you doing to deepen your relationships with customers by offering expertise unrelated to your core product or service?

Big Innovation Job #3: Incorporate data and information into your value proposition.

Creatively collecting, analyzing, and sharing data with customers offers a significant opportunity to differentiate. This can be as easy as sharing data on trends or end markets, in ways both simple and complex. A small organization might host a quarterly lunch-and-learn on the local economy, while marketers at professional services organizations—accounting, consulting, and legal firms, among others—have long understood that the way to engage customers is not via technical discussions of arcane rules related to commodity services (like audits or tax preparation). Instead, they offer thought leadership and content marketing (free research and content designed to offer insights to clients while highlighting the firm’s expertise regarding specific industries or issues). Visit the website of any top-25 accounting firm (Deloitte, Ernst & Young, KPMG, PricewaterhouseCoopers, etc.) and you’ll find digital acres of white papers, articles, newsletters, blogs, infographics, videos, and podcasts, each targeted at a mind-numbingly specific subindustry. Not coincidentally, you’ll find similar acres of thought leadership at most top-25 information technology providers (IBM, Microsoft, SAP, etc.), because leaders at these companies—acutely aware of how quickly today’s innovative software can become tomorrow’s cloud-based commodity—are trying desperately to recast their organizations as professional services firms that just happen to get paid for selling software.

The good news for small companies is that thanks to social media platforms such as Facebook, Instagram, Pinterest, and LinkedIn, thought leadership and content marketing are now affordable for anyone with creativity and chutzpah.

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Yet thought leadership and content are just two ways—and not always innovative ones, given the flood of boring thought leadership and atrocious content marketing out there—to use data and information to differentiate value. A better path is to provide information to customers so that they can independently make better decisions about how to customize and use your organization’s products or services, improving their outcomes (because solutions are tailored to their unique issues) and your profitability (because better information allows them to manage processes previously staffed by your company).

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What information or new products would your customers use or buy if you asked them?

Big Innovation Job #4: Offer value or solution bundles.

We’ve already determined that customers are overwhelmed by massive to-do lists, whether electronic or legal pad in nature, and desperately want partners who can make those to-dos disappear. Here’s the problem: most of their daunting lists have a series of bundled to-dos—a series of process tasks that together (might) solve a larger problem. An example might be: Our current batch of vendors stink, so I need to (A) generate a list of new vendors; (B) interview, research, and rank them all; (C) check with other departments to see if the new vendors meet quality and delivery standards; and . . . well . . . lunch is coming up, and now that I think about it, maybe our current vendors aren’t so bad after all.

All of which means that bundled to-dos require bundled solutions, which are typically more lucrative than individual products and services (customers will happily pay more to see a bundle of problems vanish) but much harder to deliver because they demand broader capabilities. Large organizations have a distinct advantage in providing bundled solutions; Apple’s success with the iPod, for example, relied less on technological wizardry (at the time, competitors had digital music players at least as good) than on its clout with music companies, which allowed it to secure digital music rights for the iTunes platform and create a bundled, portable music solution.

It’s important to note, too, that a bundled solution isn’t just throwing stuff in a bag and offering a volume discount; a Happy Meal from McDonald’s might be a good deal—and may even include a toy that temporarily prevents whining in the back seat—but it doesn’t solve a complex, multifaceted problem in new ways.

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If you run a small business; you don’t have the money, footprint, or technical expertise to provide an end-to-end solution. But you can do this Big Innovation Job by finding gaps in current value systems and bundling your new (or existing) product or service with another customer purchase to increase the value of both.

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Where can your organization create new value by cutting your customer’s to-do list in half—solving two, three, or ten of your customer’s most irritating problems at once?

Excerpted with permission from Nincompoopery: Why Your Customers Hate You--and How to Fix It by John R. Brandt, copyright John R. Brandt.

Over the past three months, I’ve been working on a rebranding project for one of my favorite clients. Unbeknownst to either of us, as a gift, the client’s mother hired and paid a website designer that both the client and I had long since written off. Thanks to past experience, we knew that the complex solutions we were looking for were not something they provided. Locked in a contract, we had no choice but to move forward and make the best of the situation. Before long, we found ourselves pushing back time and time again asking for essentially the same thing—a solution that at the very least would meet us halfway. Seeing that we were unwilling to budge, the “No’s” eventually turned to, “Let’s see what we can do.” Though it took time, they finally understood what we valued and took the time to figure out creative ways to make it happen. In short, they chose to innovate.

Whether you’re part of a large organization or you’re a company of one, thinking differently to find new solutions is always in the budget. It just may take a little extra time.

How has customer feedback helped you think differently about the products or solutions you provide? And how has it helped bring your customers value? Comment below to help others learn from your determination to innovate!