Innovations

There are two basic values that arise within the relationship of the customer and the enterprise:

1. The values for the customers – they want to receive “as much as possible for as little money as possible”

2. The value for the company – it wants to earn, to create profit – currently and also in the future.

With this way of doing business we enter into a conflict – on the one hand the value for the customers who wish to obtain “as much as possible for the lowest possible price” and the values for the company which wants to make a profit. Growing competition reduces the real price and the firm has to reduce the costs as well. However, this is possible only up to a certain point. The long term solution lies in reducing the costs but also in innovations which enable an increasing of the maximum price by creating a new market and entering it with an original solution which hitherto has not existed.

It is not enough only to compete with a low price and it is no art to sell cheaply. The art of business is to sell for high prices and at the same time to satisfy our customers. Think of how to sell for high prices and to have satisfied customers. Take a look at the best restaurants, how they are doing it, or producers of premium products.

How to define value for the enterprise? The company is inventing and making new things which should bring profit in several areas:

1. The finance – higher turnovers, bigger profit, larger market share, etc.

2. The customers – a higher satisfaction and loyalty of the customers, new customers and markets

3. The innovations – new knowledge, know-how, image, progress in the value chain towards customers, etc.

4. The processes – higher flexibility, quicker serving of the customers, better service, etc.

Do you know the needs of your customers and the level of their satisfaction? Do your customers talk to you about their desires and dreams? Do you know the world of your customers enough for you to be able to reveal their hidden needs, desires and dreams?

So many questions and so few answers because we live our lives trapped within our own worlds.

Ask a development engineer about a product he has just designed – he/she will describe thoroughly all its technical functions. However, when you ask him/her about the customer and the way of using the product, then arguments are often lacking. A short time ago I was discussing with development specialists in a firm about the benchmark of their product. A table full of technical parameters which I did not understand at all. When asked if the customer understood it, I received the answer that they do not make products for “blondes”. We often do not realise that the customers do not buy a drill from us but the hole that they want to create. Sometimes we ridicule a customer who does not understand our language; however, the important thing for us is to understand the customer’s language. The language which will reveal the deficiencies in his/her work; his/her unfulfilled needs and sometimes the unexpressed dreams. In a language in which we can find an opportunity for our innovation.

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Visit your customers, observe them at work and listen to them.

If I were to choose an expression as the most important one for our lives and the making of decisions – for everything we are doing, no matter if it is business or love in our lives, I would choose just one single word. It is the word “listen”. To listen to the signals which life brings, to the people in our surroundings, to the voice of our conscience that is deep within, the voice which determines our mission in this world.

Instead of listening we often talk, yell and shout each other down. We often think we understand everything, underestimate our customers, speak for them, but we do not know their real language at all. The largest source of failure is the success which brings pride because it is that pride which removes our ability to listen.

The word “listen” is the basis of leadership. To listen to our inner voice, the voice of our fellow-workers, customers and world means to replace pride with humility, yelling with silence and our own words with the words of others. To listen to the customers means to learn their language, to understand their problems and to have the chance to give them more than our competitors.

Every entrepreneur attempts to have satisfied customers. It is fine to have satisfied customers but it is much better to have enthusiastic customers who relate positive anecdotes about you; found fan clubs and discuss on the internet.

Do you know who can be a better source of your entrepreneurial success than a satisfied customer? A dissatisfied customer or a non-customer. A non-customer is that one who is not served by us because he/she is unaware of us and our offer, or denies our offer. A dissatisfied customer is that one who expresses reservations about our product, service or method of service. He/she is giving us two opportunities at the same time – information on what we can improve or innovate, and an opportunity to resolve the situation for him/her to become our fan.

Don’t explain to the dissatisfied customers that they are not right. Listen to them. And convert their annoyance and dissatisfaction into a positive relationship. I observe the doctors or nurses how sensitively they respond to criticism. However, the patient has more reason to be sensitive than a doctor – a professional. Don’t let’s forget that the customer needn’t be a professional in our field of work and does not speak our language. We are those who have to learn the language of the customers, we have to be patient and generous. Let’s keep in mind that angry customers and listening to them are the best business opportunities.

Look around you and you will find hundreds of successful businessmen who have built their firms on some of the aforementioned trends. And probably you will reveal other new trends which are just being developed. Don’t be worried by an idea because nobody has ever done it like this. When everybody is doing it, there is no new opportunity any more, only business with commodities.

Now, let’s look at the value from the point of view of the customer. What have you bought during the recent year?  What was the thing that made you happy and satisfied? What was the reason for your satisfaction? A good price, usefulness, the novelty of solution, attractive design or something else?

In the table look for values which could address your customers.

Value Example Our opportunity
Novelty Mobile phone, smartphone, iPad, Red Bull, lighting with LED, MP3, passive houses, e-bike, electro mobile –  new solutions which have created or are creating new markets and new business models (blue oceans)
Output Increasing the computer output enabled simulations and animations of complicated processes, increasing the output of digital cameras gradually killed off traditional photography
Customer adaptations, customisation The company Nike will make you tailor-made shoes, in the firm Shirtinator you can create your own T-shirt design, special e-shops assemble customised bikes, on a cooking course the customer collaborates with the cook in creating a meal, etc.
Improving the work  of customers, increasing performance efficiency of their process The delivery chair from the company Borcad saves 40 % of the room surface and 18 % of the doctor’s time, the 3D scanning of the spaces radically increases the designer’s productivity of work
Design The firms Apple, BMW, Loewe link the technical parameters with exceptional design
Brand, status The brands Harley Davidson, Ferrari, Christian Dior, Gucci, Calvin Klein, Channel or Rolex symbolise the status, image or lifestyle
Price The customer usually appreciates an offer of high value for a lower price – luxury for an adequate price, all inclusive. Tata Nano is sold for 2,500 dollars in India and has enabled people to swap bicycles for cars
Cost reduction for the customer The digital printing processes or computer systems have reduced the costs in production, the passive house reduces the costs for living
Risk reduction The hospital bed LINET reduces the risk of the patient’s falling to the floor, developing infections or bedsores, NOD 32 from the firm ESET reduces the risk of viruses penetrating the computer
Availability of the inaccessible Henry Ford made the car accessible to the general public. Similarly, Southwest Airlines and Ryan Air travel by airplanes
Simplicity The iPad has a simple and intuitive control, the purchase of books on Amazon is simple and quick

 

And at the end, one more glance at the possibility to create value for our customers – let’s take a look at the whole chain of purchasing and utilising our product. How can we increase e.g. the customer’s productivity or non-complicatedness in the purchasing process? Have a look at your e-shop or the system of selling. I often think about this value when I am registering at a hotel reception and undergoing a tedious and complicated process after a long drive. Are we able e.g. to increase the customers´ comfort when delivering a product – by delivering the goods to their homes or automatic installation? Does our product possess any entertaining features or image? Can I eliminate any customers´ risk when they use my product or improve its productivity making the maintenance simpler, or eliminate the ecological risks during its disposal?

 

Purchase Delivery Utilisation Accessories Maintenance Disposal
Customers´ productivity
Simplicity
Users´ comfort
Risk
Entertaining character, image
Environment-friendliness

 

Can you see what a magnitude of opportunities we have for us to create new values for the customers? You will certainly find others, your own ideas and inspirations. However, one thing is important – they have to be values acknowledged by the customers and not values enforced by us.

Until now we have dealt with the problem of what values we can bring to the customers and to us with our new product. Now, let’s continue and we will look for an innovation potential of our product.

At first we will analyse the process of the customer which possesses the following principal steps:

  1. The first contact – we can have the best product in the world but it makes no sense if the customers do not know about it. The first contact means that the customers have to know our firm and our products; they have to get that first impulse for them to visit our shop, our web-site and to take our product or catalogue. The first contact is important, unfortunately, it sometimes remains the first and only contact, and if there is any negative experience, the customers may even promulgate that negative experience concerning our firm or product. A first contact may arise accidentally; it can attract a customer through an event, e.g. an exhibition or conference. It can arise during a talk with friends or chatting on social networks. Each of us remembers our first love or the first meeting with the beloved person. How are we prepared for the first contact with the customers? What image do we want them to acquire about us? What is the thing with which we want to attract them? Don’t let’s forget that during the first contact emotions can play a much greater role than any of the sophisticated reasons supporting our sale.
  2. The decision about purchase – for the customers to decide for our product, they have to acknowledge its value. We were discussing the value for the customers in the previous chapter and it is important to keep in mind that the customers have their own view of the world, they have their criteria, values and needs and we should not press them and enforce on them something they do not need. Here let’s mention the sellers of insurance and bank products or street vendors in Kathmandu or Istanbul. On the other hand we have to work with sophisticated arguments (see defining the value in the previous chapter) to be able to explain to the customers exactly in what aspects our product is important for them. The people who assemble windows or build houses often tell me that they are better, more reliable or cheaper. These are no arguments. Better or faster in what? In which parameters? Compared to what? Are we cheap for building a house or the assembly of windows; however, are we also cheaper during the next 20-year operation of our product? All of them tell us how good they are, but I have never met a window- or blind-assembler or a house builder who would give me a leaflet where it would be clearly explained how he/she should be dressed, in what state he/she is to hand over the work and if I am to check how long the process will last and how much I will pay, etc. Did the boss of the given worker ever contact you and ask you how your needs and determined standards have been fulfilled? My friend often remembers a check-up at a doctor in the USA. Soon afterwards a representative of the insurance company called him endeavouring to ascertain if the doctor had arrived on time, if the operation had been carried out properly, if it had been effective, if the patient had been satisfied, etc. A talk like this is maybe more important for the firm providing the product or service than for the customer because it is the main source of innovations. When people are buying a car they are interested in its fuel consumption, service, performance, safety and other parameters. It is interesting that the majority of people who build or buy, e.g. a house, are not concerned about energy consumption, service or safety and security because they are often not able to formulate these criteria exactly. And maybe they would be surprised if they found out that the energy consumption of an older house is 200 – 300 and of a modern passive house it is e.g. less than 50. And only a specialist would require information about the leak tightness of an object. Why do we have different criteria when buying a car which we use a few hours a day and run it for several years, and a house we will have for all our life and will spend at least half of our time there? Why do we pay a  construction company for something we are not able to measure? Installing an air-conditioning system for you to have quality, clean air and heat convenience. Can you measure it? Or the lighting of a room – its quality is not measured by lux or lumens. The company OMS came with a revolutionary concept for measuring lighting quality – LQS (Lighting Quality Standard) and is able to measure what quality of lighting the customers receive and how much they will pay for it. This is the way to give the customers a value which can be measured. Let’s prepare for our customers a calculator or simulator where they will be able to model their concepts including the price they will pay for them.
  3. The purchase. We have arrived at an important point. The customer is taking out the wallet, credit card or asking for an invoice. There are also plenty of opportunities to simplify this process or to remove the risk here. The customers often have a difficulty – they have not enough cash for the purchase and we can help them through instalments, through giving them a share in the common business, etc. A lot of firms have problems because they offer high quality and reliable products which work very effectively but their price is higher. A high price can be an insurmountable obstacle if a conventional purchaser is your partner. He/she has usually three requirements – 1. the price, 2. the price and 3. the price. If you have an exceptional product at a high price whose operation is reliable and cheap, you are selling not a product but a service. Examples? Don’t sell a car but the kilometres driven, instead of a compressor sell the pressurised air, instead of a lamp sell the light.
  4. The transport. People buy more and more on the internet. It seems that the permanent store has today more of a showroom function than the function of a real outlet. Therefore we have to look for methods of how to deliver the product to the location of its usage – quickly, at a high quality level, safely and with an emotion added.
  5. The preparation for usage – what’s your feeling when you buy a product and have to wade through a thick manual which is difficult to understand? Or when you have to assemble it according to low-quality and illegible materials. Or you buy a product that you will assemble intuitively because its designer created it in such a way that you cannot make any mistake during assembly and the whole assembly process will be quick and simple. The preparation of the product for usage is connected also with the fact of how exacting the training of the personnel is, how ergonomically the operation panels as well as the menu, pictograms, etc., are designed.
  6. The usage of the product is the key process – it is the reason why the customer buys the product. The customers purchase our product to fulfil their needs through using it. Therefore it is important to know the activities of our customers and when analysing their process to understand their expectations and use their metrics for measuring the performance, quality, reliability, etc.
  7. The service – many of us have had experience of the unavailability of services when e.g. our boiler fails at home during the Christmas holidays or the printer in our firm breaks down when we need to print something important. An ideal situation is when the broken equipment is able to diagnose the failure in collaboration with the customer or is able to support him/her in removing the error. Some printers can serve as a very good example. Car producers as well as manufacturers of production equipment have started supporting customers through systems with virtual reality which help them during the exchanging of components or removing a failure. The hotline is another important part of service, consultancy, etc. The service is important not only for the customers but also for the manufacturer because it is one of the best sources for recognising the real problems of the customers and acquiring quality impetuses for innovations.
  8. The exchange – every product at some time ceases to exist, but customers may also exchange a product for other reasons – e.g. the functional furniture which is obsolete, the functional clothing which is out of fashion or a functional device which lacks some new applications. And here lies a great opportunity for innovations – e.g. to exchange the old furniture in the hotel for new and to repair the old furnishings, to exchange an old and obsolete bike for a new model or to complete the functions of an old-fashioned product.

When analysing the customer process it is important to suppress our effort to speak about the functions of our product, material or the algorithms we inserted into the products, but we have to speak the language of the customers for us to improve the process metrics, the quality and productivity of their work and to improve the competitiveness, safety and security, convenience, etc.

Task:

  1. Visit your customer and analyse his/her process. Define his/her primary need because of which he/she buys your product, the location, environment, time and resources he/she uses. The primary need of drinking beer is to quench a thirst but it can simply be the need to enjoy beer, to have a pleasant social meeting, etc. Beer is mostly drunk in the afternoon and in summer, but we can drink it also in the morning (at work) and in winter (possibly boiled beer). Beer is drunk in the pub, but we can also drink it at home in the garden or at other places.
  2. Describe the process of how your customers utilise your product in their processes, how they measure the performance efficiency of their processes.
  3. Try to find deficiencies in the process – errors and dysfunctions, risks, instability, low productivity, etc.
  4. Suggest ideas which will improve the customers´ process performance.

Let’s remind ourselves of the properties of a successful innovation

–       it significantly increases the value for the customer as well the company

–       it improves the customers´ quality of life

–       it improves the environment

–       besides the measurable value it often evokes emotions

–       it removes controversies, conflicts, paradigms or contradictions which have so far not been resolved.

The customers´ process and its thorough knowledge provide us with a lot of possibilities to look for innovation ideas. Other innovation sources can be found e.g. in new technologies which can not only radically improve the customers´ process, the functionality of our product or service but they sometimes lead to the termination or regression of a whole line of business based on old technologies.

Further trends could be designated as transformational ones. They are the trends which arrive during the breakthrough time periods when the world of business is changed for long time periods, the industrial revolutions are under way – and they change the current rules and paradigms.

The evolutionary trends are the next source of innovations

The products around us develop according to evolutionary laws which say that every technical system has a life cycle in the form of an S curve, similarly as with human life – at its rise the system is imperfect, it optimises step by step, improves and then ceases to exist and is replaced by a system with a new S curve which lives it own “life”. There are several evolutionary principles we will not analyse here, e.g. increasing the level of idealness (the system permanently eliminates its harmful functions and improves its useful ones), segmentation, dynamisation and field deployment (material was cut by a sharp stone, axe, saw, grinding wheel, laser, plasma, water beam, a typewriter with letters changed into a needle printer which transferred to the black-and-white and later colour laser printer, etc.). The technical systems increase the density of the functions, they get smaller, they gradually increase their automation level, etc.

28. 2. 2014

Téma članku: Názory Jána Košturiaka

Autor: Ján Košturiak

Robí poradcu, trénera a kauča v oblasti inovácií, strategického manažmentu, organizácie podniku a priemyselného inžinierstva.

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