New Mantra For Product Innovation

Published by MBA Skool Team, Published on March 24, 2012

In an age where business models are decaying with surprising speed, does a company emulate the virtues of an Apple or a Google that sustained remarkably through rough times? Weaving innovation into the fabric of an entire organization is imperative today, but careful molding of past systems to function successfully in the current scenario is needed first. Simply organizing and institutionalizing past innovation practices is not enough to create sustainability. It is important to develop a holistic understanding of the evolution of innovation methods in order to draw upon the strengths of previous approaches and improve upon their shortcomings. The goal of this paper is to take readers across the journey of the evolution of innovation practices and give them an idea of where the field is headed.


The advent of technological advancements such as easy and affordable access of secure online transactions opened a vast e-commerce segment for a plethora of businesses in various sectors. Similarly, improvements in communications infrastructure and technology broke down cost barriers and physical constraints in storing and transmitting information. For instance, the use of ATMs and electronic funds transfer at point of sale (EFTPOS) led to a large shift of electronic retail transactions, by reducing customer reliance on access to bank branches and providing cost saving as well as 24-hour customer service.

Technology-driven Model

However, sole dependency on technology for creating new offering did not always deliver customer requirements. Hence, this model eventually evolved from being a technology-centric to a more customer-driven approach. This enabled companies to capitalize on the untapped potential of the innovative consumers across segments for new product generation. After all, who can better understand the needs of the consumer than the consumer himself/herself? So, in this approach the idea was to give the consumers a potent voice and a platform to express their ideas. The path breaking research by a group of scholars including Eric A. von Hippel, a professor of technological innovation at M.I.T.’s Sloan School of Management, suggests that the traditional division of labor between innovators and customers is breaking down. Mr. von Hippel and his colleagues conducted the world’s first representative large-scale survey of consumer innovation. The team discovered that the amount of money individual consumers spent making and improving products was more than twice as large as the amount spent  by all British firms combined on product research and development over a three-year period.

Customer-driven Model

The customer base is not only a deep pool of innovation but also an invaluable source of imperative market insights for product development.  However, most companies except those in service industry are unable to access this pool. Greater customer involvement translates directly towards better utilization of this resource pool. Thus, companies came out with various techniques to create greater customer involvement which also boosted sales by generating higher levels of brand loyalty.

In the ‘Me and Meri Maggi’ ad campaign consumers were invited to share their own Maggi story which if selected could feature on Maggi packs or on television advertisements. Along similar lines the new Tide ad campaign of send in ‘Your Tide story’ helped in performing psychographic target customer segmentation and creating better positioning of the brand. At the same time it created an attractive opportunity to acquire fame. Similarly, the ‘Lays: Make a new flavor’ campaign by Lays spurred innovation in consumers and attracted them by giving them access to fame. This also lured in potential consumers, created greater brand awareness and reinforced brand loyalty in the minds of existing consumers.

There also have been campaigns which have adopted a slightly different strategy. They showcased the product’s competitive edge to a potential customer, won him over and created an ad out of it.   A good example of this is the Harpic ad Campaign, in which actual demonstrations were performed in prospective buyer’s homes.  Real customer testimonies are the greatest growth tonic for any product promotion as it effectively persuades the target customer for a trial. Word-of-mouth has a very strong influence on the Indian consumer psyche, and this ad campaign leveraged this factor in increasing its customer base.

A large number of companies have also capitalized on the growing giant of social networking which sits on massive valuable and easily accessible data on consumer behavior. Generating customer involvement in this arena is paramount. There are a large number of sites trying to get greater attention of the clients to visit their sites. Here, differentiation is the key. Many companies understand the fact that social networking sites are primarily driven by the teenagers and the youth. The intricate web of connections in this network propels the message with lightening speed across continents thereby generating immense awareness, following and subsequently interactions at a very large scale. Messages where personal recognition is established instantly resonates with this group tremendously. Airtel’s ‘Har ek friend zaroori hota hai’ ad campaign targeted the youth of the nation and was one of the most widely shared ad jingles of recent times. It was able to generate several hits since its release. The more recent Coca Cola advertisment ‘Sushine waali dhoop’ is a similar example.

Also, it has been observed that the ad campaigns with social messages when formed correctly translate into a greater awareness.  Who can forget the legendary ‘Jago Re’ campaigns by Tata Tea which was able to create one billion votes in association with Janaagraha? These campaigns also create a general goodwill in the minds of the consumer toward the companies and provide a more ready group of consumers for interaction.

The customer-driven innovation approach has been in vogue recently in the last decade and is gradually shifting towards outcome based approach which allows more exact and comprehensive targeting of consumer needs.

In the previous two approaches we can observe that either customer experiences were being enhanced through the use of technology or customer involvement was being sought to more closely meet customer needs. However, wrapping technology around a customer’s core need or gathering suggestions from a customer without being able to extract the input that the company’s professionals need to create a beneficial product or service is not up to the mark. In the technology-driven as well as customer-driven approaches there are gaps that prevent an organization from fully realizing its potential in creating successful products and services.  Experts have identified these problems and have suggested improved approaches such as the outcome-driven approach that does not leave scope for gaps in understanding customer requirements.

Outcome-driven innovation is a process that defines customer needs with great deal of clarity, finds a way to identify all the customer needs, determines exactly which needs are yet unmet and then devises solutions for them. This approach focuses on the fundamental goals customers are trying to accomplish in a given situation rather than on a particular product or service they are looking for. The product or service is the end result rather, that will emerge at the end of the exercise. It is the fundamental goal or function from the customer’s perspective that is most important for value creation, because the function’s perfect execution would reflect what the customer truly values. Determining how to help customers perform a function better or help them execute new functions is the real motive of innovation for businesses.

Outcome-driven model

Businesses should thus use metrics that help to measure and assess the successful execution of a function rather than the performance of a particular product to determine whether customer demands are being met well. For instance, a floppy disk, a CD, and a USB mass storage device, all help customers accomplish the task of storing information. However, focusing on creating a better floppy disk doesn’t help in creating a CD or USB mass storage device. Instead, focusing on improving storage devices supports the discovery of innovative methods of performing the same function. Once all customers needs have been identified, the company must determine which of them are most important and least satisfied, and hence, represent the best opportunities for growth. Then, rather than using the traditional method of presenting the integrated product solution to the customer for evaluation, the company should ask customers to evaluate the degree to which a new feature will satisfy an existing need. Using these approach businesses can determine quantitatively the improvement in customer satisfaction through a potential product feature.

Finally, innovation in a company should be a continuous rather than a sporadic process. The outcome-based approach has emerged from the technology-driven and customer-driven approaches and while it is superior to them in some ways, it must be remembered that its predecessors did produce a fair share of successes for companies and helped in creating value for consumers. Whether it involves growing existing markets, creating new markets or engaging in disruptive, radical innovation, the outcome-based approach can assist in ensuring that the company is creating the best possible value for the customer, and thus, is a promising method for the future of product innovation.

This article has been authored by Shweta Verma and Shilpi Ghosh from IIFT.

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