The Value Equation for Customer-Centric Innovation

Blog /The Value Equation for Customer Centric Innovation
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Buzzwords, jargon and colloquialisms are a prominent part of today’s business communication, particularly among technology professionals. Today, “innovation” is among the most popular words used to describe practically any project, process, product or initiative. It is so overused by organizations trying to differentiate themselves that it has truly lost its meaning.

Some view true innovation as disruptive to the current market, focusing on shiny objects and referring to new products, particularly technology and electronics. What is missing is the powerful impact on processes and the business model. An altered business model – often facilitated by new technology – can forever change a company and entire industries.

While many equate it to an invention, innovation is the process of implementing new ideas that create value. To understand innovation, consider two aspects:

  1. Categories - Having the context of five categories simplifies discussions while broadening the perspective of the average employee. The recommended five categories are innovation in processes, marketing, business models, management, and products and services.

    This practical and memorable categorization moves away from thinking solely about new products — shiny objects — as there are more areas to innovate than most initially consider.
  2. Phase - The phase refers to where the idea falls on the product lifecycle. Significant innovations are called disruptive innovation and debut in an initial phase as a new product, service, management approach, process or business model that fundamentally changes the way we fulfill wants and needs.

    The next phase is incremental innovation. Once adoption begins, there are typically incremental improvements made to the idea that usually continue through its lifecycle. This is where most innovation efforts occur, albeit at a smaller, more frequently scale.

The power of incremental innovation in aggregate can be as competitively differentiating as disruptive innovation. Organizations focused on quality and speed, gaining improvements, and shortening cycle times wherever possible are those that typically win in the marketplace. Even then, organizations have to seek to disrupt themselves.

Many years ago, the now infamous Blockbuster Video focused on the most efficient ways to remove costs and speed up the selection and distribution of physical media. It was an impressive operation and facility but entirely focused on improving the existing business and operational models. They were efficient but ultimately not effective.

As an innovation is improved and refined, at some point someone rethinks the way we fulfill our wants and needs, which leads to disruptive innovation. Redbox disrupted Blockbuster Video on the low end with effective robotic distribution methodology, while Netflix, Hulu, and a host of other global telecommunication providers disrupted the company through digital delivery services. They built a better mousetrap while Blockbuster Video was focused on incrementally improving the mousetrap they had already established.

Understanding customer experience is essential

Technology has removed much of the friction that previously made it difficult to start a competitive business. Now, we must immerse ourselves in our customers’ world to understand the nuance of their experiences, anticipate future needs and constantly challenge existing business models and value propositions.

The strategic foresight that goes into customer experience in the boardroom should be echoed in the IT department. Businesses must monitor how customers engage across channels to develop insights that allow for customer-centric innovation.

Peter Drucker said in The Practice of Management, “The purpose of a business is to create a customer.” A company ignoring customer experience is destined to fail. The lifeblood of any organization is the customer, and becoming more effective in delivering value is today’s IT challenge. It is time for IT to lead.

To drive customer-centric innovation focus on the value equation

 NTT DATA Services Value Equation

For too long IT has been predominantly focused driving out costs by applying new technologies to existing business and concentrating on system efficiency. Today, CIOs must raise their expectations and motivate IT departments to do more than reduce costs. IT must be a significant contributor in identifying and developing new revenue streams, creating competitive differentiation and improving customer experience. IT must truly evolve to be involved in business strategy, not just technology strategy.

Overall, customer-centric innovation comes down to shifting the focus from cost savings to revenue growth and competitive differentiation. This type of innovation is a deep lesson on how to transform complete business models, rather than focusing specifically on technology. This should start with the customer in mind, and continue to incorporate them throughout the process, which will in turn create, establish and elevate a new customer experience.

Post Date: 9/12/2017

NTT DATA Services Doug Reeder Doug Reeder

About the author

Doug Reeder is the Innovation Leader in the Office of the CTO, at NTT DATA Services. In this role he helps clients define and achieve their business objectives, develops innovative new capabilities and competencies, and implements strategies to advance top line and bottom line growth for customers and the company. Prior to joining NTT DATA Services through the acquisition of Dell Services, Doug was the Chief Technology Officer of Commercial Industries.

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