Customer- and Partner-Driven Innovation

John Seely Brown and John Hagel III have a new article in McKinsey Quarterly (to which you must subscribe, hint, hint).

They describe creation networks: How to exploit the intelligence of partners and suppliers to innovate. "Creation nets work by mobilizing hundreds or thousands of independent entities in the pursuit of distributed, collaborative, and cumulative innovation. The creation nets orchestrated by ODMs, for example, can bring together myriad highly specialized component and subsystem vendors from different business ecosystems, including disk drive manufacturers in Singapore, lens designers in Japan, semiconductor designers in Taiwan, and software engineers in Bangalore," they say (see "reation nets: Getting the most from open innovation," McKinsey Quarterly, 2006 Number 2).

Interesting that they've left out customers! Customer driven innovation is critical, because innovation ain't innovation unless the new technology, product or service is actually adopted in the marketplace. A recent 1to1 webinar done jointly with SPSS pointed out one definition of innovation that characterizes it as a new technology immediately adopted by the market. This implies that enough of the market "gets it", and that nothing similar fulfills the need (perhaps at a given price).

So, you can put together creation nets till the cows come home, but the only way you're really going to innovate is to have someone around the table (or in the net) say, "We know customers really want this, whether they know it or not."

The problem is that innovations generally address a latent customer need. By definition, customers don't yet fully understand that they have this need. And I wouldn't always give innovators credit for their clairvoyance -- sometimes an innovation sticks in the marketplace by chance. Lots of new technologies, products and services just fall by the wayside.

So how do you engage customers (and your partner and supplier networks) to come up with innovations?

I'll leave the answer to another posting. BUT ... here's a more important point:

You've got to do this. You've just got to engage your entire network.

The reason is simple. We are on the cusp of a new kind of economy: one that is transitioning from an information economy (post-industrial, founded on information and knowledge sharing via computer technology) and a digital network economy (post-information, founded on the ability for all players to act on and improve knowledge and process outputs).

This is why the customer experience is an interaction (both you and the customer are players), and why you must enable interactions so they can improve. That is, if customer experiences are what you want to manage, they must reveal actionable information to you (and probably to the customer). If you don’t manage customer experiences this way, you’re stuck in the information age at the very least – and perhaps in the industrial age at worst, where marketing and public relations were all broadcast from the top down.