CAPTURING DEEP CUSTOMER KNOWLEDGE

There are (at least) three divergent schools of thought in literature and research about customer-led innovation.

One school of thought says that customers and users can’t innovate because they don’t know what’s possible and they can’t even envision how their current way of doing things could be radically transformed.

Another line of thinking says that it’s impossible to capture customers’ deep domain knowledge about what they want and need, so don’t even try. Instead give them tools that enable them to invent their own designs and solutions while at the same time availing themselves of your firm’s deep solution-space expertise (since the tools you provide let them access and avail themselves of your solutions).

A third school relies on deep customer research--let’s call it ethnography--to capture customers’ real needs and context--from which to involve customers in the co-design of innovative new solutions and approaches. This third approach is the one taken by many (not all) entrepreneurs as they figure out what customer needs are and how to build a business around addressing that need. It’s also a good way to shift the culture of an existing organization from inside out to outside in.

As I’ve been researching innovative companies that are taking an “outside in” approach, I’ve found a number that have done a great job of ethnography--really walking in their customers’ shoes. When it’s done well, this ethnography isn’t something that’s done by a market research organization. It’s something that product developers and designers and product managers and marketing executives and e-business executives get personally engaged in. You don’t do it once. You do it continuously.

There are (at least) three divergent schools of thought in literature and research about customer-led innovation.

One school of thought says that customers and users can’t innovate because they don’t know what’s possible and they can’t even envision how their current way of doing things could be radically transformed.

Another line of thinking says that it’s impossible to capture customers’ deep domain knowledge about what they want and need, so don’t even try. Instead give them tools that enable them to invent their own designs and solutions while at the same time availing themselves of your firm’s deep solution-space expertise (since the tools you provide let them access and avail themselves of your solutions).

A third school relies on deep customer research--let’s call it ethnography--to capture customers’ real needs and context--from which to involve customers in the co-design of innovative new solutions and approaches. This third approach is the one taken by many (not all) entrepreneurs as they figure out what customer needs are and how to build a business around addressing that need. It’s also a good way to shift the culture of an existing organization from inside out to outside in.

As I’ve been researching innovative companies that are taking an “outside in” approach, I’ve found a number that have done a great job of ethnography--really walking in their customers’ shoes. When it’s done well, this ethnography isn’t something that’s done by a market research organization. It’s something that product developers and designers and product managers and marketing executives and e-business executives get personally engaged in. You don’t do it once. You do it continuously.

The founders of Zopa, the peer-to-peer lending exchange we’ve recently written about, engaged in deep customer research, out of which the concept and business model for the Zopa lending exchange emerged. Then they kept the community going--constantly going back to them as they’ve evolved their business and their tools.

U.S. office supplies’ retailer Staples has been using various forms of ethnography to understand its small business customers deeply, and based on that understanding, to seriously revamp its Web site, its rebate program, and, coming soon to a Staples near you, transformations to additional customer-impacting processes. You may have noticed that Staples turned in great financial performance this year, based largely on the inroads it’s making in the small business market. Understanding these customers deeply is paying off!

Koko Fitness is a promising new strength training system that is currently being piloted in health clubs in the northeastern United States. Its founders, Mary Obana and Mike Lannon, spent three years doing deep customer research among baby boomers about their health and fitness needs.

Their findings: a 30-minute, easy-to-use, idiot-proof way to do strength training that is tailored to my specific needs. My prediction is that Koko’s all-in-one personalized, interactive strength training solution will be a blockbuster success. (In the fitness industry, selling hundreds of millions of dollars of equipment in nine months is not uncommon, since every health club has to have the same equipment, once customers get enthused.)   

Zopa, Staples, and Koko used traditional forms of ethnographic research. They lived with people. They watched them as they engaged in everyday activities. They interviewed them deeply with no preconceived notions about what they were seeking to find. But there are additional forms of ethnographic research that are springing up to complement or perhaps even replace some of these in situ observational techniques.

I’ve been quite interested in the success that many businesses are having in gathering deep knowledge from online communities. National Instruments (B2B) and LEGO (B2C) had the advantage of customer communities which sprang up organically around those customers’ products and their customers’ use of them. (Many companies’ products spawn online user groups and forums--do yours?) NI and LEGO have both done remarkable jobs of fostering rich customer dialog and harvesting results in terms of actual product innovations, business process improvements, business model changes, and market positioning ideas.

What I like about the National Instruments’ forums, and which seem to work well, are the built-in rating and ranking tools provided by the online forum tool they’re using from Lithium Technologies. Customers rank each others’ contributions and gain cachet among their peers and influence with the company, the more value they offer to each other and to the company. Note that both NI and LEGO’s executives spend a lot of time monitoring customers’ comments and responding to them. The online community has become the heart and pulse of the organization.

I’ve also been studying the use of online communities for ethnographic research in less organic situations. Unilever, Hallmark, Charles Schwab, and a number of other companies, have gained enormous insights,  actual product ideas, and lots of marketing/positioning help from ongoing online communities of customers who were explicitly recruited to give the company insights into their lifestyles and needs.

The particular examples I’ve studied were all communities that were facilitated by Communispace. What’s unique about these customer communities is the fact that most have been going for three to four years. It’s like having a group of customers sitting 24 x 7 in the conference room down the hall--any time you want to know something, you can pop in and ask them. What these customer communities do is bond with one another around common issues and passions. They share photos of their lives and their homes. They go to great lengths to give you a view of their world. And, they’re full of ideas.

Communispace has been really successful in the B2C space. We’d like to work with them to apply the same techniques in the B2B space. If you’re interested in trying out their solution, let me know. Diane Hessan, their CEO, and I are looking for a few good clients who would like to build a deep customer community, keep it going for a few years, and punctuate the online dialog with Customer Scenario® Mapping--customer co-design activities. We think it will be the ideal mix of online ethnography with face-to-face co-design activities.

What better way to build customer loyalty and to innovate than to start with the issues and needs that surface from customers’ real jobs and invite them to co-design their ideal solutions? Then continue to keep them involved and engaged as you prototype, pilot, iterate, and bring their ideas to fruition--all in an open lab that your entire company can observe (and participate in).

Comments

[Frederick Anthony]

What should be the customer knowledege management focus be for a telecommunication firm in Africa.

[Patty Seybold]

Hi Steve,
I agree that inspirational "aha's" often come out of our own experience. That's how Netflix was formed, for example. Reed Hastings, Netflix' founder, went from dropping off an overdue video to his 24-hour health club and wondered why he couldn't have a "use it when I want to" video rental experience...the rest is history.

I believe ethnography is ONE way to give you the ground truth/current reality that you need to juxtapose with your ideal vision in order to create the structural tension needed to fuel the innovation process. If it's a current reality that, excuse my language, sucks, in your own life and a vision of how you'd like to have it be better, that works. If, on the other hand, you want CUSTOMERS to Innovate things/processes/new business models that will close their current reality to ideal state gap.. then you need a way for you and them to capture current reality and vision and a way/place/mechanism to hold onto that structural tension to let them co-create the innovations, or, in the case of arming them with toolkits, let them create their own...

[Account Deleted]

Thanks for the examples of companies that are using ethnography - I hadn't heard of some of those, and it's always good to know more about who is doing what, as the field is of course always shifting.

I think I come across an online example just about every day; it's clearly an exciting area, just one that doesn't interest me very much. I am firm believer in the types of inspiration that come from your own direct experiences; that when you get out of your comfort zone and experience something unusual or surprising, that's when you truly become able to grasp the world from someone else's perspective. That empathy - going from etic to emic, as they say - is crucial. IMHO, of course.