OUTSIDE INnovation

We waited two days for someone to mention the customer.

The keynote speakers, panelists and MCs had talked to participants at the utility sector conference for hours about operational excellence, building “smart grids”, and designing energy efficiency programs. The adjective digital was thrown around in its hackneyed noun form for good measure by the consultancies sponsoring the event.

Patience was growing thin by the time one attendee finally spoke up, asking the panel of consultants:

“We have heard people talk about deploying new energy management solutions and building a ‘utility of the future’. We have heard leaders talk about building a culture of innovation inside a utility organization. But we all know that innovation starts and ends with the customer. We also know that customers do not trust their utility providers. They struggle to understand their bills and what drives their utility consumption. It seems to me that customers are on the critical path for adopting any of these innovations from utility companies. How do you suggest we go about better engaging our customers?”

The panel was stumped.

The next day was different. A utility executive from New England started talking about the need to become “customer obsessed”. An industrial designer noted how there was “something missing from our conversations about energy transformation — people real people.” She contrasted the lofty visions of smart grids and digital solutions with the experience of customers:

“The utility bill is probably one of the least understood invoices that any customer receives.”

There has to be a better way to connect innovation and improvement efforts with customers!

Innovation Starts with Understanding the Customer’s World

Avoiding the insular, “inside-out” tendency in organisations is a perennial challenge for leaders and change agents in any industry. Whether it is developing a set of priorities for continuous improvement, launching a supply chain collaboration effort or driving adoption of a new service offering, the challenge remains — “How do we move outside of our organization and into the world of our customers?”

Below we offer a set of steps in order to make that transition.

Develop and agree a set of clearly-defined goals and behaviour-based outcomes
Who are our customers and what (do we think) they want? This is the starting point for outside-in innovation efforts. Here we identify a set of hypotheses about who our target customer stakeholders are and what we believe they want to be able to achieve. We can start identifying an initial set of goals and objectives for the innovation effort, for example:

“We want to help (these customers) be able to (do these things) by (providing them with this product/service/experience) in order for them to (realize this value).”

Identify the context in which these behaviours will occur

Customers and their associated behaviours all occur in a context (or set of contexts). Does the customer exist in a business or home context? Is their situation one where they are spending someone else’s money on your product/service or is it their own? How proximate in time are the points of ordering, using/consuming, seeing results and paying for your product/service? Understanding this context will give you insights into how best to position your customer solutions.

Identify “positive deviants” in order to discover where solutions may already exist
In many cases, the desired customer behaviour — or even the desired solution — is already working somewhere. Customers and “extreme users” may have developed a work-around for understanding their energy consumption, for example. In other cases, technologies, similar to the ones you want adopted, may already have been taken up by the very customers you are working with (e.g., electric vehicles bought by people with energy inefficient homes). Investigating what already works will provide insights into how to make your innovative product or service more effective.

Develop a set of customer (user) personas

Having a set of customers that you can keep in mind and use for design, development and testing purposes will keep your innovation efforts focused on human beings and their experience of your product or service. We aren’t referring to customer segmentation when we develop personas. We are talking about creating a customer archetype as close to a real person around whom we can develop and test hypotheses and design our products and services. This is less about developing a profile of a “Homeowner with a family of four” and more about working with a persona like “Katie, the office manager at a major department store”.

Develop a clear understanding of the “jobs to be done”(1)

We are now in a position to refine our understanding of the jobs our customer(s) are trying to do, based on the insights from the previous steps. Jobs to be done might include “Understanding, managing and reducing energy consumption” or “Shifting to renewable energy to lower the carbon footprint”, in the context of an energy utility. These are the jobs that your product or service will help the customer get “done”.

(1) The concept of “jobs to be done” comes from Lance Bettencourt and Anthony Unwick’s “The Customer-centered Innovation Map”, Harvard Business Review, May 2008.

Understand the customer experience

Using our personas, and getting out into the world of real customers, we need to map out and understand the “ideal” and the “actual” experience of our products and services. This will require an iterative approach, since our understanding of the “ideal” experience will be shaped by what we learn from engaging actual customers in the real world. Customer journey maps make for an excellent artefact for any innovation and improvement effort in this regard.

Apply an evidence-based approach

Fortunately for change agents there is a set of rigorous tools and methods to help with engaging customers to collaboratively define and design innovative solutions to their problems. Cognitive Psychology can highlight biases that cause people to make some choices and not others. Behavioural Psychology can provide useful frameworks(2) for the desired behaviour associated with an innovation to be adopted. The field of Human-centred Design also has a well-tested set of tools and techniques that will help change agents gather evidence, input, and insights from customers in order to better develop customer-centred solutions.

Conduct real-world experiments

The best data about an innovation is whether or not it works in practice. There are always customers willing to test out a new product or service — use that opportunity to gain real-world knowledge and to incorporate that back into the innovation and improvement process.

Finally … Iterate and Keep Learning

Continuous innovation requires continuous learning, which in turn requires continuous customer engagement. “Customer obsessed” companies understand this and realize that an outside-in stance is what gives them better insight into the problems their customers need to have solved with them — as opposed to having company-centric solutions imposed on them.

(2) For example, B.J. Fogg’s Behavioural Model (FBM) is a useful framework to highlight behaviours, triggers, motivation and ability when it comes to designing user interactions. See: www.behaviormodel.org