You can’t lead by listening to your customers! Yes, I do in fact mean exactly that, and as you might expect, I’ve taken a lot of flack for that position over the years. I know it flies in the face of everything taught in B-school, but never-the-less, it’s true, and I’ll explain a bit about why I believe that.
What spurred me to write about innovation is a recent interview in CIO magazine with Eric von Hippel, head of the Innovation and Entrepreneurship Group at MIT. Mr. von Hippel states in the interview that most companies lack the ability to innovate because they are stuck in a mode of “find a need and fill it” that leads to a fruitless dependency on market research. Instead, he argues, companies should identify “lead” users whose’ dissatisfaction with current products leads them to modify those products to meet their needs. Identifying these users, empowering them to experiment and then importing their innovations will enable manufacturers to lead the market in his view of the world. Mr. von Hippel’s contention that companies are stuck in a market research rut of listening to their customers struck a chord with me, but I think he has missed a couple crucial points.
Why does listening fail to lead to innovation?
To understand why listening to your customers fails to generate innovation, consider what your customers are going to tell you. First, I don’t care how loyal you think a customer is, he’s telling the world what he needs because having competing vendors benefits him. Therefore, you’ll learn exactly what your competitors already know and nothing more. Second, and this is the most important part, customers lack the ability to tell you everything they need. Unless you’re selling to IBM or Verizon, your customers simply don’t know what’s possible based on changes in the underlying technologies. Therefore, they apply their own understanding of what’s possible to your offering and provide feedback accordingly. Modifications based on such input will certainly help you evolve your product, but will seldom lead to true innovation.
Watch, watch, and watch some more!
Instead of simply listening to your customers, I firmly believe you have to carefully watch them. Watch them interact with your products. Watch them interact with your competitors products. Watch them interact with each other. It’s not what customers say, especially to vendors, but what they do that will lead you to innovation. This is especially true when there’s a disparity between what customers say and what they do. I’ve had the chance to work with quite a few professional market researches and they’re never surprised by this. However, executives frequently are. I can’t tell the number of times I’ve been told “I don’t care what the research shows customer Y told me this morning all we have to do is . . .” With one company this was so prevalent that we gave it a name, “Executive Briefing Center Disease” or EBC for short. This inability to properly weigh discussion and observation is what’s really at the root of the problem Mr. von Hippel addresses in the interview. I also happen to believe it’s a large part of the reason true innovation often comes from outside the core of an industry or from small companies started by disenfranchised innovators of larger companies.
One more thing. When you take a break from watching your customers, visit your vendors and watch how their processes work. As a marketing geek, vendors were constantly amazed I took the trouble to visit them. As a result, I was often treated like royalty. More importantly, though, learning about the underlying technology shifts they were experiencing helped me to understand what was possible for my customers.
A brief example
Let me give you an example I experienced first hand. While at Bay Networks in 1996 customers were constantly telling us they wanted ATM switches. Of course, for more than a year, vendors had been feeding them data about how fast ATM would be and how Ethernet had reached the end of its life. Not that we’re geniuses, but a few of us did a little digging and discovered our customers had no understanding of ATM at all. They were merely parroting what we and all the other large vendors had told them. Meanwhile, our customers didn’t know Ethernet could be made to operate at 1Gbps so they didn’t ask for it. Turns out customers wanted speed, and not ATM or any of its many features. Executives, though, were convinced the customer was right and plowed millions upon millions into ATM development. The result? ATM died a horrible, ugly, painful death in the enterprise. None of the major vendors invested in building Gigabit Ethernet products. And, as you may expect, some of us left to build gigabit Ethernet switches.
Evolution vs. Revolution
So far, however, we’ve only addressed one form of innovation. In his interview, Mr. von Hippel sites backpacks with power strips in them, surgical implements modified by doctors, and even new mud flaps on mountain bikes as innovation. I disagree. I see these as evolution of existing products. My chosen examples of innovation would be Apple’s first PC, Xerox’s first GUI; VisiCalc’s first spread sheet, the first web browser, Yahoo’s first index, and Google’s page rank system. None of these could come from any amount of market research. Users simply had no way to know these things were possible before they were built. No amount of time trying to explain your idea to users will be enough because they simply have no frame of reference to comment about it. In fact, often, even the first prototypes aren’t enough to convince users. Remember, it took Chester Carlson years to find a manufacturer for his xerography process. These innovations had to be built on faith, given to users, and then iterated quickly. Unlike user led product evolutions, these types of innovation are engineering led revolutions. Mr. von Hippel makes no mention of engineering led innovation in the article and I think that’s unfortunate because the rest of his points are quite valid.
Back to utility computing
So, how does all of this relate to utility computing? Simple. I believe utility computing is an engineering led revolutionary change. Having shown our system to almost 100 potential customers, there is a small subset who can internalize it enough to venture predictions about how it will affect their business. The rest are just anxious to try it. As a result, I’m constantly reminding our engineers, and investors much to their dismay at times, that we absolutely can not predict all the ways customers will use the new tools we’re providing them. To be sure, we’re always thinking about how the system will be used and these use cases help guide us. However, I’ll go on record now that at least 80% of our assumptions will prove to be wrong.
That brings us full circle to Mr. von Hippel again, because there’s one idea he puts forth that’s of critical importance; we as vendors need to view our systems as starting points for our users rather than as complete packages. Rather than dictate to them, we need to enable them to use our system in ways we never anticipated and we need to learn from and internalize that usage.