Defining Customer Innovation
Customer innovation incorporates a number of emerging
concepts and practices that help organisations address the challenge of growth
in the age of the empowered and active customer (both business and consumer).
It demands new approaches to innovation and strategy-making that emphasise
rapid capability development, fast learning, ongoing experimentation and
greater levels of collaboration in value-creation. Customer innovation impacts
upon all the following activities, functions and disciplines:
·
Marketing strategy and management
·
Brand strategy and management
·
Communications strategy
·
Customer experience design and delivery
·
Customer relationship management
·
Customer service design and quality
management
·
Market-sensing and customer learning
·
Market and customer segmentation
·
Creativity and knowledge management
including market research
·
Partner and customer collaboration
·
Organisational alignment and purpose
(values, behaviour and beliefs)
·
Innovation strategy and management
·
Innovation valuation, measurement and
prioritisation
·
Strategy-making
For
me customer innovation is not only an important perspective on value-creation
but a whole new strategy discipline that organisations must embrace if they are
to pursue growth successfully in the future. Put another way, customer
innovation impacts the fundamental means by which value is created and growth
sustained.
One
of the difficulties I encounter when explaining the concept is that the
"Innovation" word is traditionally associated with products and
technology. There is a section in The Only Sustainable Edge by Hagel and Seely
Brown that eloquently defines Innovation from a much broader organisational and
strategic perspective:
We underscore the importance of innovation but we
use the term more broadly than do most executives. Executives usually think in
terms of product innovation as in generating the next wave of products that
will strengthen market position. But product-related change is only one part of
the innovation challenge. Innovation must involve capabilities; while it can
occur at the product and service level, it can also involve process innovation
and even business model innovation, such as uniquely recombining resources,
practices and processes to generate new revenue streams. For example, Wal-Mart
reinvented the retail business model by deploying a big-box retail format using
a sophisticated logistics network so that it could deliver goods to rural areas
at lower prices.
Innovation can also vary in scope, ranging from
reactive improvements to more fundamental breakthroughs... One of the biggest
challenges executives face is to know when and how to leap in capability
innovation and when to move rapidly along a more incremental path. Innovation,
as we broadly construe it, will reshape the very nature of the firm and
relationships across firms, leading to a very different business landscape.
Although
Hagel and Seely Brown's book provides a great analysis of capability-building
and new innovation mechanisms at the edge of organisations (through new dynamic
forms of firm-firm collaboration) and specialisation, their discussion largely
omits the customer-firm colloboration, open innovation perspective. But, from
Hagel's most recent post and article in the Mckinsey Quarterly, this seems like
it could be the subject of their next book! Here is a quote from the article:
Cocreation is a powerful engine for innovation:
instead of limiting it to what companies can devise within their own borders,
pull systems throw the process open to many diverse participants, whose input
can take product and service offerings in unexpected directions that serve a
much broader range of needs. Instant-messaging networks, for instance, were
initially marketed to teens as a way to communicate more rapidly, but financial
traders, among many other people, now use them to gain an edge in rapidly
moving financial markets.
Compulsive Consumption
For most people a large part of consumer behavior is
simply a part of their everyday routine. Only unusual special or major
purchases stand out as being particularly significant to the typical consumer.
Many consumption activities receive little thought and require little
involvement. Even fanatical consumption by enthusiasts, collectors and
cognoscenti is typically limited to a small number of consumption objects or
areas. To some individuals, however, consumption itself can become particularly
central and deeply involving. It can have major, often severe, implications for
many aspects of their lives. In these cases, consumption becomes dysfunctional,
and is often typified by a compulsive quality.
This paper attempts to call attention to this
dysfunctional form of buyer behavior, discuss some of the major concepts and
issues involved, and report some very preliminary research findings on the
topic. Unfortunately, there is virtually no published research on the problem
of compulsive consumption. Therefore, to accomplish the goals of this paper we
have to rely in large measure on anecdotal accounts, as well as observation and
participation in self-help group discussions with credit abusers, and the
results of a small pilot survey.
Example Compulsive
Consumption Consumer
The subjects for the pilot study were 23 people attending
meetings of a San Francisco based self-help support group. The respondents had
been members of the group for differing lengths of time ranging from three
weeks to over a year. The majority were women (19 women and 4 men), and most
were in their thirties and forties (78.2%). Approximately half of the
respondents were married (47.8%), 30.4% were single and the remaining 21.7%
were divorced or separated. Annual household income varied greatly among the
respondents ranging from one person who earned under $10,000 a year to three
respondents who reported household incomes of over $100,000 a year. The
majority of the respondents had yearly household incomes of between $20.000 and
$50,000.
Consumer
ethnocentrism
Consumer
ethnocentrism is a psychological concept that refers to individuals who believe
that their country's products are superior to those of other countries. This
concept also describes consumers in one country thinking that purchasing
products in other countries is immoral or inappropriate because doing so is
unpatriotic. It is a common belief amongst groups showing signs of consumer
ethnocentrism that purchasing foreign-made products means not supporting the
economy and the job market of the home country.
Businesses
often study consumer ethnocentrism to develop strategic marketing plans for
entering new foreign markets. By understanding the attitudes and beliefs of the
foreign consumers, a business can better position itself to come across in a
more positive light. For example, a business entering a market showing consumer
ethnocentrism may want to include in its advertisements that purchasing from
them means supporting their country because the business has local offices
employing their neighbors.
Characteristics
of countries with consumer ethnocentrism include skepticism of foreign goods,
strong patriotism and high availability of domestic brands. If consumers
believe that foreign goods are generally inferior to their own home goods, then
they will be less likely to support foreign brands. These consumers also are
aware of economic conditions and want to support local jobs and businesses by
not buying items that will take their money outside of the country. If there
are no local brands to satisfy a need, then consumers will purchase foreign
goods until their needs are fulfilled locally.
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