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  • What is Outside Innovation?
    It’s when customers lead the design of your business processes, products, services, and business models. It’s when customers roll up their sleeves to co-design their products and your business. It’s when customers attract other customers to build a vital customer-centric ecosystem around your products and services. The good news is that customer-led innovation is one of the most predictably successful innovation processes. The bad news is that many managers and executives don’t yet believe in it. Today, that’s their loss. Ultimately, it may be their downfall.

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      Eric von Hippel coined the term "lead users" to describe a group of both customers and non-customers who are passionate about getting certain things accomplished. They may not know or care about the products or services you offer. But they do care about their project or need. Lead users have already explored innovative ways to get things done. They're usually willing to share their approaches with others.
      I use the term "lead customers" to describe the small percentage of your current customers who are truly innovative. These may not be your most vocal customers, your most profitable customers, or your largest customers. But they are the customers who care deeply about the way in which your products or services could help them achieve something they care about.
      We’ve spent the last 25 years identifying, interviewing, selecting, and grouping customers together to participate in our Customer Scenario® Mapping sessions. Over the years, we’ve learned how to identify the people who will contribute the most to a customer co-design session. These are the same kinds of people you should be recruiting when you set out to harness customer-led innovation.
      You no longer win by having the smartest engineers and scientists; you win by having the smartest customers!
      In more than 25 years of business strategy consulting, we’ve found that customer co-design is a woefully under-used capability.
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    « Use Smart Customization to Recession-Proof Your Business? | Main | How to Spend the Infrastructure $$ in the U.S. Stimulus Package (Part 1): Broadband for All? »

    January 20, 2009



    I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.


    Graham Hill

    Hi Patty

    Very timely after recent posts.

    I think the real challenge isn't so much the product smart custimisation that you describe but services and experience customisation. In many cases this should be easier as services and experiences are by their nature flexible in a way that solid products never can be. Yet so many services and experiences seem to be hidebound by rigidities that go way beyond nature's physical laws.

    One example of smart customisation in services that was very successful is the Customer DNA concept we developed at Toyota for cross-business customer lifecycle management. Although only Type 1 smart custimisation, we identified all possible push & pull contacts that a customer was ever likely to have with Toyota or one of its dealers and created a customer lifecycle management system that allowed Toyota to make the right contacts with the right customers at the right time.

    The modular contacts were implemented into a cross-business customer lifecycle management system (where system = IT system, data, processes and other resources) that used business rules to decide what to do about an individual customer at any moment in time. By looking at what contacts the customer had had in the past, what different contacts the customer was eligible for at that moment and the contact management rules, the system could identify the best contact from all eligible ones. Generally no contact was the best contact. We didn‘t want to bombard customers with contacts just because we could. But sometimes several contacts might compete with each other to be made.

    It enabled Toyota to combine contacts pushed by Toyota, e.g. a marketing promotion, with the contacts pulled by the customer, e.g. a request for a brochure, with local dealer contacts, e.g. a main inspection reminder, all in a seamless way. It also allowed Toyota to prioritise conflicting contacts and to automatically decide what to do with the lower priority contacts. So the brochure request might suppress the marketing promotion if it wasn't about the same vehicle family. But it wouldn‘t interfere with the vehicle main inspection reminder. Having said that, it would generate a contact for the dealer service advisor to talk to the customer before they had their main service about replacing the vehicle if it made sense for the customer.

    One of the best things about this smart customisation approach was that it allowed other groups who wished to have contact with Toyota customers to build their own family of contacts and to integrate them into the customer lifecycle management system, without having to recreate the system from scratch. So when the Customer Experience Group decided to build an event-based experience offering it was relatively staraightforward to identify all the potential contacts and their busines rules and to integrate them as a family into the customer lifecycle management system. And the same with lead management contacts a short while after that.

    The customer lifecycle management system was explicitly designed to emulate the charachteristics of DNA expresssion. This was because DNA is the most powerful way of managing information known to man. It has evolved over billions years and controls what an organism can be, how it develops and how it responds to environmental signals. It even repairs itself when mistakes occur. Families of contacts = chromosomes, the individual contacts themselves = genes and the unique combination of contacts from different families that each customer is eligible for = the customer's DNA.

    Sounds complex but it was actualy quite easy to build iteratively and to implement. I blogged about it in a post on The Lean CRM - Toyota Story.

    Simple smart customisation in business modelled on the ultimate in evolutionary smart customisation. The power of biomimetics.

    Graham Hill
    Customer-driven Innovator

    The comments to this entry are closed.

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