Embrace Change by Embracing Innovation

by Gaurav Bhalla

Until recently, several popular and academic books and articles advised companies to compete by steering clear of market leaders, because they were nearly impossible to displace, suggesting somehow that market leaders were exempt from the ravages of change. This may have been true in an era of rigidly walled product categories, definitely spurious in today’s markets, characterized by converging technologies and overlapping product functionalities. Market leadership doesn’t confer uncontested rights to customers’ hearts and wallets for perpetuity.Just ask yesteryear’s market leaders Xerox, GM, Kodak and Sears.

Embracing change is critical, no doubt about it. The key question is how? The fields of strategy and leadership are overflowing with recommendations on how best to manage, cope and conquer change — organizational structure, personal readiness, communications, shared expectations and more. While these recommendations are laudable, they have a significant weakness: They are all inward looking, and, therefore, incomplete. The type of change that poses the greatest threat to a company’s future wellbeing— changes in customers’ needs, structure of markets, types of competitors and the evolution of technologies—originates outside, not within.

Consequently, effective prescriptions for coping with this type of change must also be outward looking. Hence this article, because the most effective outward looking strategy for embracing change, which occurs in customers, markets, competitors and technologies, is embracing continuous innovation. It is the single best investment a company can make to retain and grow its customer base. It is also the best safeguard against hubris and the self-damaging belief system that states that companies will continue to be successful tomorrow merely because they are successful today.

Embracing Innovation Strategy 1: Listen to Your Customers
Most companies excel at talking about themselves, mostly in positive ways. But few excel at listening, especially to their customers. Chest thumping may enable a company to achieve a short-term bump in sales, but it’s not going to help it uncover opportunities for innovation. Shortcomings of a product (the non-stick coating peeled off in a month), wish lists (I wish this dipping sauce was more spicy), adopting alternate behaviors for satisfying existing needs (I can’t remember the last time I printed a boarding pass), all of which are fertile ground for innovation that can only be detected when a company is in listening mode. Not listening to customers is like double jeopardy. First, the company misses on important opportunities for innovation.

Second, when companies don’t listen, customers stop talking to them. Why bother? So ask yourself, are you doing enough to balance the one Voice of the Company with the other more important Voice of the Customer (VoC)? Are you doing enough to actively listen to customers using a variety of tools and at a variety of locations — when customers are playing, when they are working, when they are online and when they are offline. Please don’t give yourself an A+ if the only time you listen to customers is when you conduct marketing research. Customers are more likely to provide greater insights in natural settings than in the manufactured crucible of 10-point scales and top-three reasons.

Embracing Innovation Strategy 2: Disturb Your Own Equilibrium
The chances are pretty good that if you encountered the partial sentence, “If it ain’t broke…” you’d fill in the blanks with the phrase, “…don’t fix it,” or some variation thereof. But getting cozy, even if you are No. 1 in your category, is antithetical to embracing change — it’s loving the status quo. Some of us might have heard the parable of the boiled frog that gets cozier and cozier as the temperature of the water increases, gets desensitized to further increases in temperature and ultimately boils to death as the temperature climbs beyond what the frog can handle.

The title of Andy Grove’s book says it best, “Only the Paranoid Survive.” Universities, hospitals, healthcare providers, automobile companies, the list can go on endlessly, would be well advised to be paranoid. Shifting customer expectations and innovations in service delivery models are seriously disturbing their equilibrium. Consider the rise of online education, emergence of new companies driven by innovative business models, like Coursera and Zipcar, and the growth of uncharted territory like medical tourism. These developments should provide a significant incentive to embracing change by embracing innovation. Celebrating success has its place, provided companies remember that it is a celebration of yesterday. Growth and future well-being lie ahead and are best pursued by disturbing today’s equilibrium and best done before competitors and other market forces force it on your company.

Embracing Innovation Strategy 3: Rethink Customer Value
When companies compare their offerings against their competitors, they usually pit the attributes and features of their own brands against competitors’ brands. It’s time to rethink and update this conception. Value is not what companies do to their products and services in their factories, value is what customers get as a result of interacting with the company’s offerings; it is what customers do with these offerings in their day-to-day lives. And what customers expect today lies at the intersection of several benefits, requiring a different kind of value engineering than before.

Look around you. We live in world characterized by “and” not “or” customer needs. Increasingly, customers are unwilling to make trade-offs. They want to do more with their purchases. Amateur golfers wanted the power of a fairway metal and the control of an iron. Golf companies innovated, produced the hybrid club. Today, even golf pros use it. Time-pressed office workers want breakfast foods that are easy to prepare, tasty, nutritious and filling. Companies like Kraft are constantly scrambling to help the customer by embracing continuous innovation. Without embracing innovation in rethinking and engineering customer value, customers are bound to head for the exit in search for a more fulfilling offering.

Embracing Innovation Strategy 4: Engage with the Whole Customer
Today’s customers are better educated, better connected and have more information at their fingertips than ever before. They expect companies to be able to relate to all their needs in connection with their offerings. Take, for example, a task performed by millions of households every day to fulfill one of the most basic needs — grocery shopping. When a customer shops at Whole Foods, his or her needs extend beyond the items on her shopping list. For example, are the eggs from free-range chickens or from caged birds? Is the packaging from recycled materials? Is the fish fresh caught or farm raised? Even if fresh caught, is it approved by “Fish2Fork,” a company that provides fish facts to guide people who want to eat fish and seafood sustainably?

The whole customer is concerned about packaging, local farmers, organic produce and a lot more. In order to relate to the customer’s entire ecosystem of needs, Whole Foods needs to embrace innovation across its entire spectrum of operations, from procurement to packaging, and display of in-store information.

Anything less will leave the customers dissatisfied. Customers may not exit en masse, but they may shift a portion of their purchases to other stores, like Trader Joes.

Embracing Innovation Step 5: Collaborate and Co-Create
The boundaries that once separated companies from their customers exist in name only today. Consequently, several companies like Hallmark, Electrolux, Mayo Clinic, Kaiser Permanente, Pepsi, Proctor & Gamble, Unilever, Dell, IBM, Adidas and MasterCard have adopted a brand new mindset toward understanding, interacting with and establishing relationships with their customers.

For these companies, customers are not just a source of revenue and market share, they are a real-time resource (or they are real time resources). They are collaborators, involved in the co-creation of products and services that produce mutual value for both customer and company.

The adoption of a collaborative mindset is not merely a symbolic public relations concession to vocal customers who expect to be heard and involved. It is a genuine realization that co-creation with customers will produce more effective innovations, thus providing a more resilient and sustainable defense against the unanticipated consequences of change. Despite its best intentions, no company, no matter how rich or prescient, is totally exempt from the downside of change.

However, it is possible to mitigate the pain associated with change, and, even more importantly, benefit from the opportunities that all change cycles present by embracing innovation. The strategies listed in this article can help a company migrate from intention to action. For companies concerned with return on investment, it is worth repeating that embracing change by embracing innovation is the single best investment a company can make in its survival and future growth because it keeps customers front and center of all change management efforts.