In Part 1 of this series, we discussed why you need to rethink the role of technology in your business.  The main drivers were:  changing customer expectations, increased competitive pressure, and the emergence of new technologies.

So you’re ready to rethink the role of technology in your business.  Where do you start?  Choosing technology begins with stepping into your customers’ shoes and rethinking your business itself.  Before you can select a solution, you need to understand what you’re trying to accomplish for your business and your customers.

With that in mind, start with the overall customer experience you want to create and work back towards the technology.  Think about your business and your customers and consider the following questions:

• What do your customers really care about?  Time, money, convenience, risk?
• What’s the ultimate benefit they receive from your products or services? 
• What are the frustrations your customers experience?  Why?
• How many of these are taken as givens by the rest of your industry?
• What are companies in other industries doing?  Could these ideas be applied to your business?
• Are there regulations impacting you or your customers?

The Importance of Listening

Chances are you’ll come up with several useful insights and probably a few additional questions.  So far so good.  Now it’s time to get out of the office and listen to real life customers.   

Here’s a great way to get the conversation started – ask your customers where they would invest in your business to get better results for themselves.  Ask why.  Listen.  They will likely tell you how to tweak what you already do well and point out areas where you need to improve.  Go through the above questions with them.  Again, ask why and avoid the temptation to defend your current practices and really listen.

“Why?” is a really powerful question.  Many times people respond with ideas and feedback in the form of solutions:  you need after hours support, or you should email me a confirmation.  Asking why can help you identify the underlying problem or need that’s being expressed.  Don’t take solutions at face value – keep digging until you uncover the real issue or objective.

During your conversations some people will talk about problems.  Others will discuss needs or ideas.  The only difference between a problem and an idea is the language used to describe it.  With a bit of creative thinking and word play, you can transform a problem into an idea that you can get excited about.

Get to Know Your Competition

The next part is trickier, but well worth the effort.  Talk to your competitors’ customers.  This is not a sales call!  What do they value most?  What improvements would they like to see made?  What drew them to the competition in the first place?  Did they consider your company?  Again, ask why and listen.

Understanding your competition can help you in two ways.  First, you may find that you actually serve different market segments.  For example, your competition may target customers that want to tweak and configure while you aim for customers that want a turnkey approach.  Guess what?  Your two companies should work out a referral or lead swap program.

Second, you may learn where you can, or do, offer a better product or service than your competition.  In both cases you have learned how to better differentiate your company.  You can now help prospective customers understand when they should pick you and why.

Rethinking the role of technology in your business starts with the customer.  What problems or frustrations do they have?  What improvements would they make if it were their business?   How can the customer experience be improved?

In Part 3, we’ll discuss how to organize the feedback you’ve received to identify common themes and determine which ideas hold the most value for your business and your customers.

Think back to when you first started your company or started working in your industry.  You wanted to make a difference by offering your customers a unique experience; one they couldn’t get anywhere else.  You chose tools and technologies to help create and deliver your offering.  As you talked with customers and prospects, you pointed out the benefits of working with your company and how you were different from the competition.

Over the years you have fine-tuned your offering in response to customer feedback and new offers from your competition.  Perhaps you’ve even added a few new tools and technologies to the mix.

So why do you need to rethink the role of technology in your business now?

For starters, the business landscape has changed and continues to evolve.  Here are some key drivers that are impacting your business:

• Your current customers’ expectations have changed.  What was new and exciting 10 years ago is tried, true, and boring today.
• A new generation of potential customers has emerged.  These “digital natives” are daily consumers of technology and look for companies that use and embrace new technology as they do.
• New competitors have sprung up.  They have taken advantage of new tools and technologies to develop new offerings in order to compete with you and lure away your customers.

What’s more, the list of commonly used technologies has grown as well.  Here’s a short list of technologies that can dramatically change how you interact with your customers:

• Web applications
• Mobile applications
• Voice, e-mail, and SMS notifications
• Software as a Service (SaaS)
• Cloud computing
• Social media channels

Rethinking your use of technology involves more than fine tuning and incremental additions.  The goal is to step back and ask yourself:  If I were starting my business today, how would I use technology to offer a better product/service to my customers?

The real value of new technology is rethinking how it impacts your business and improves your interactions with your customers.  Appropriately used, new technologies provide your customers more visibility and greater access to your services, while improving the way they do business with you.

In Part 2, we’ll take a look at how to rethink your business to stay relevant in the eyes of your customers and set yourself apart from old and new competitors alike.

Most discussions of cloud computing focus on the technical benefits:  scalability, accessibility, redundancy, usage-based billing, and so on.  While valuable, these are behind the scenes benefits that indirectly impact your customers and their perception of your business.  Simply moving your existing applications to the cloud may offer benefits, but it does not change the way customers do business with your company.

The real value of the cloud is the opportunity to rethink how customers interact with your business.

If you provide your customer the appropriate visibility, ability, and access to your business, your cloud services strategy can improve the way they do business.  You deliver more value to your customers by providing your Business as a Service (BaaS).

The result is that your business becomes an integral part of their operations.  Customers incorporate your services into their business processes to help them run their company better and to provide more value to their customers.  You become more than a vendor – you become a vital part of their business.

Visibility

The architecture of the cloud enables expanded opportunities for integration.  This means the information your company generates through the normal course of business can be made available instantly to your customers.

Without visibility, your customer has to call or email you to get the information they need.  Their next step is to wait while you look up the information in your system and get back to them.  With cloud services, you can expose the appropriate information to your customer so they can find what they need when they need it.

Ability

Because your cloud services are integrated with your business software, you can allow your customers to take actions directly.  They can enter orders, track shipments, and get the information they need to provide value to their customers. 

In effect, you can give them benefits of your business that they didn’t have access to before.  Your customers can then offer these benefits to their customers and stand out from their competition.

Access

Cloud services are built for the web.  This means that they are available 24/7 from anywhere.  Your clients are no longer tethered to their desktop.  They want to get information and take action from a web browser, a tablet device, or a smart phone anytime, anywhere.

Vital Partnership 

When you utilize cloud services to provide visibility, ability, and access, you’re really offering the benefits of your business to your customers as a service.  Your customers can use your offering as a part of their business and pass the benefits of your service along to their customers.  This helps your customer differentiate themselves by providing a higher level of service at a lower cost.  In effect, your cloud services become part of their business strategy.

You now become much more than a vendor.  You become a vital partner.  As a vital partner, you give your customers better value.  Because your service is integrated in their operations, you form a stronger relationship with your customer and provide them with benefits that can lead to repeat business and referrals.

The year is 1997 and Steve has just returned to Apple as CEO.  All the famous "i" products haven't been created yet.  What he shares in the video is really the essence of Apple's strategy for the next decade.

He starts with a business question:  How do you go about selling $8 - 10 billion of product a year?

His answer is simple and powerful:  Start with the customer experience and work backwards to the technology.

It’s a telling sign that the Amazon team didn’t start by trying to improve on Firefox or Chrome.  They took a step back and asked a much broader question – a question that ultimately enabled them to do something innovative:

               “How would you build a web browser in the era of cloud computing.”

To keep themselves from getting too focused on technology, they also asked another important question:

               “What do customers really care about?”

The Amazon team determined that the most important aspect of browsing the web on a mobile device was the time required to get something usable on the screen.

These two questions enabled the team at Amazon to think differently about browsing the web.  They were able to apply the latest technology to reinventing the web browser in a way that provides a significant benefit to their customers.

We can all learn from this example.  First, make sure you understand what your customers really care about.  Don’t guess – ask them! 

Next, rethink how you would build your product or service in the era of:

• a new technology, like cloud computing
• a new government regulation, like health care reform
• a changing competitive landscape, like a new startup or global player in your market

Asking the questions is the easy part.  The hard part is to have the courage to act on the answers you and your team generate. 

Too many people like technology for its own sake.  They get caught up in fancy gadgets, spec sheets, and bullet points.  They think that having technology is innovative in and of itself.  This is not true.  Innovation only happens when you use technology to provide a real or perceived value to your customer.

There are two primary uses for technology in business: to meet the status quo (web site), and to create something new that moves the business forward (innovation).  In either case, the use of technology should be driven by the needs of the business and the customer.

The status quo case is basically the price of admission.  Every company these days needs a web site.  It really doesn’t add much value to your company, but you need it to do business.  The most successful companies are those that use technology to support and enhance their market differentiators.

Take, for example, Domino’s pizza.  After mounting criticism of their pizza from focus groups and social media sites, Domino’s decided to try something new: listen to their customers, speak frankly to them, encourage feedback, and create a better pizza and a better experience.

They revamped their recipes, created a new marketing campaign, and tried again.  They also used technology in several targeted ways to facilitate communication between them and their clients.

Specifically, they created an online Pizza ordering tool that allowed customers to, 1) order their pizza, 2) track its cooking and delivery process, and 3) provide feedback to the store about “how they’re doing”.

The result of the campaign?  Domino’s reported a more than doubled fourth-quarter profit.

The driver of innovation today is not technology, but insight.  What do customers want?  How can you make it easier for them to do business with you?  And where can technology help reinforce those insights? 

Marketing and innovation create value, all the rest are costs. -- Peter Drucker

Successful business leaders know that their organizations must continually improve existing offerings and roll out new ones in order to attract and retain customers.  This process of continuous improvement lies at the heart of innovation.  If you’re not innovating, someone else is.  As a result, if you’re not moving forward, you’re moving backward relative to your competition.

Example:

• Gymnast Albert Azaryan was the first person to do the Iron Cross in international competition.
• He was world champion on the rings in 1954 and 1958 and the Olympic champion in 1956 and 1960.
• Over time, the Iron Cross became a common sight in gymnastics routines.
• Currently on the A – G grading scale (A easiest, G most difficult) the Iron Cross is now graded as a B.

The iron cross is still difficult, but it has become a “price of admission” exercise for ring routines.  Those that haven’t taken it to the next level are now left behind.

What is Innovation?

Innovation is the specific tool of entrepreneurs, the means by which they exploit change as an opportunity for a different business or a different service. It is capable of being presented as a discipline, capable of being learned, capable of being practiced. Entrepreneurs need to search purposefully for the sources of innovation, the changes and their symptoms that indicate opportunities for successful innovation. And they need to know and to apply the principles of successful innovation.  -- Peter Drucker

Innovation is a key ingredient in the growth of companies of all sizes and industries.  When you started your business, you did so because you saw an opportunity to do things better than your competition.  That was your first innovation.

A definition is in order: Innovation is anything added to your offering that is perceived by the customer to be new and to add value.  The key components here are the customer, a new offering, and added value.

Your Customer

Successful innovation starts by focusing on what your customer needs, not on what the competition is doing.

The target audience for innovation is your customer.  While this seems obvious, history shows that companies routinely get caught up in technology, industry trends, business or market fads, and end up “innovating” for the wrong reasons. 

If you’ve bought a new HDTV recently you experienced this first hand as you tried to figure out the difference between 1080p and 720p.  As a customer, you don’t care about pixels; you just want to watch Blu-ray movies.  Geeks care about the technical specs associated with new gadgets while most regular people just want the benefit or experience that technology can provide.  Focusing on the experience of the customer and what they’re trying to achieve is paramount.

New Offerings

Innovative ideas don’t always start with new technologies.  Sometimes an old technology applied in a new way can offer more value.

What’s new to you may not be new to your customer.  If your competition beats you to the punch, then you’re not offering anything new to your industry – you’re just keeping up with your competitors.  Conversely, things that are old hat in other markets can offer new value to your customer when applied to your business in unique ways.

For example, tracking the progress of a shipment as it makes its way across the country is nothing new.  However, being able to track the cable guy across town certainly would be!

Added Value

If I'd asked customers what they wanted, they would have said "a faster horse". – Henry Ford

Finally let’s look at value.  The customer is the final judge of value (and innovation) because they alone decide which products and services they are going to purchase. So while a change in your pricing model, return policy, etc. may add value to the company and its shareholders, the customer may not be as impressed. 

Value to the customer means you have solved a problem, made their life easier, or enabled them to do something they hadn’t even thought of yet.  You have to understand your customer before you can craft an offering that they will value.  Creating value requires a combination of marketing and innovation.

Takeaways

• Innovation sets you apart from your competition.  It gives you something they don’t have.
• Over time, innovations that are successful and distinctive when they are first introduced become commonplace and even expected.
• Innovation is an idea or practice that is perceived as new by the customer.

Yes, the economy is shaky, but what better time to focus on new offerings to grow your business.  The biggest advantage of acting now is that it’s easy to stand out and get attention when your competition is running for cover!

It's not a very compelling answer.  And it's also not the whole story.

Knowing what you do is the easy part. Knowing WHY you do it takes some introspection. For us, we believe that investment in innovation is critical to long-term business success. Software development happens to be the tool we use to make innovation happen.

The video below is a TED talk by Simon Sinek. It reinforces the belief that WHY is much more important than WHAT.

As Simon says, "People don't buy what you do; they buy why you do it."

You’ve fallen into the first myth of innovation.

Myth #1: It has to be revolutionary to be groundbreaking

You don’t have to start from a blank sheet of paper or think of something that no one else has thought of before.  Innovation can come from making small changes to current ideas that solve specific problems.

Consider the term “overnight success.”  It’s true that innovative companies may achieve notoriety suddenly – after working on their business for years.  The truth is that innovation is an iterative process of solving many smaller problems.  Each small step is attainable, and people may or may not take notice along the way.  But at some point, one small step added to the others will push your product or service into the “breakthrough” category.

Take, for example, everyone’s favorite “innovative” company: Apple.  While the iPod was groundbreaking in the market, it wasn’t all that special from a technological point of view.  Portable music players had existed for decades.  In the 70s, we had transistor radios.  In the 80s, we listened to tapes on our Walkmans.  The 90s brought Diskmans that played CDs.  By 2000, MP3 players existed.  Apple didn’t start from whole cloth to create the iPod.  They took the portable media player and made it a little bit better.  And it changed the industry.

Myth #2: I don’t have innovative ideas

Innovation begins when you acknowledge that things can be better and set an intention to make them so.  If you see problems, you have ideas.  The only difference between a problem and an idea is the language you use to describe it. 

If you run a company, you already understand your business.  You know your customers.  You know what’s working and what you can make better.  Your problems are the seeds of innovation; you just have to train yourself to look at them differently.

Exercise:  Use the innovation worksheet to capture your ideas.

When Apple entered the MP3 player market, there was a problem: only technophiles bought MP3 players.  The market acknowledged the benefits of the MP3 player –  it was smaller, it could hold more songs, and you didn’t have to carry around CDs.  However, there was a barrier to adoption:  the average user didn’t want the hassle of getting their music onto their computer, maintaining a music library, and figuring out how to get it onto their device.

The market didn’t want a better MP3 player.  It wanted a better way to find and listen to music.

Apple’s solution was iTunes: an easy-to-use piece of software that helped people find music and listen to it.  By switching the focus from technical specs to customer experience, Apple didn’t build a more technologically advanced MP3 player, they created a better way to experience music. 

Myth #3: You have to wait for inspiration to strike

More often than not, inspiration doesn’t happen out of the blue.  You have to go looking for it.  Actively search for opportunities (sometimes disguised in problems) by listening to your customers, your employees, and yourself.  Anytime you want to change something, anytime you are frustrated with something – recognize the frustration as a possible opportunity to innovate.  Write it down.

This is where many people get stuck.  When they can’t see an immediate solution to a problem, they assume it can’t be solved and work around it.

To be innovative, don’t worry about HOW to solve the problem, first envision what could be accomplished if the problem was magically solved.  Would you make money?  How much?  What would the customer experience be like?  What does that mean to your business?

Exercise:  Use the innovation worksheet to capture envisioned outcomes.

Quantifying the outcome gives you a ruler you can use to determine how much energy it is worth to try and solve that problem.  If the opportunity is substantial, it may be worth brainstorming, involving your employees, or hiring a consultant to help you find a way to innovate.

The bottom line is there’s no secret to innovation.  It’s attainable for anybody, and you don’t have to wait for it to happen.  You can chose to make yourself more innovative by implementing a repeatable process in which you acknowledge opportunities and allow yourself to imagine what could be achieved if you realized them. 

It's not as hard as you might think.  Your ideas are a primary source of innovation.  These ideas come from insights you have into your business and your customers.  Every problem you see is an opportunity to make change for the better.  Every opportunity you identify is a chance to innovate.

We believe you can create a culture of innovation by acknowledging your ideas and deciding to act on them.  It doesn't happen by accident; innovation is a repeatable, intentional process of identifying opportunities, evaluating outcomes, and strategically investing your resources to achieve a return.

Sometimes technology can play a part.  But as Jim Collins has pointed out:  "Technology by itself can't make a company or leader great.  The role of technology is to accelerate greatness that's already there."

Since 1992, we've helped companies of all shapes and sizes build software to turn their ideas and insights into innovation.  Our goal here is to share our experience and help you, the reader, understand how to transform your ideas into business innovation.