Innovation and Customer Insight
In April, my old employer, the Boston Consulting Group (BCG), and BusinessWeek released a study indentifying the most innovative global companies. The report is based on a survey by BCG of 2,700 senior executives “representing all major markets and industries.” Of even more interest is the research report published by BCG detaling the survey’s complete findings . (I will provide links to both the BusinessWeek article and the BCG research report at end of the this blog post.) The research report gives considerable more depth on questions like why a company would want to be an innovator, what degree of importance enterprises ascribe to innovation, what the actual contributions are to operating performance of innovation, and what factors facilitate innovation?
First, why innovate? BCG found that companies that rank as innovative have stock market performance that is 30% higher over 10 years compared to companies that are not considered innovative. In this “big fish eats the smaller fish” world, a stock price premium of 30% can be tantamount to survival.
Second, how important is the need to innovate perceived to be? Two out of three senior executives rank innovation as one of their top three strategic priorities.
Third, how do senior executives measure the contribution of innovation? The key benefits of being an innovator were identified as: customer satisfaction and revenue growth. Innovation makes customers believe you are serving their needs better than the other guy and then they buy more from you. Now that’s a bottom line for you.
Fourth, what are the key drivers of innovation identified by the senior executives surveyed in the report? Here are the findings in order of significance:
- Executive level support
- Developing a deep understanding of customers
- Fostering a culture of innovation
- Partnering with suppliers and others for new ideas
- Earmarking sufficient funds
- Balancing risks, time frames, and returns across the portfolio of projects
- Enforcing project timelines and milestones
- Moving quickly from idea generation to initial sales
What I find interesting about this list is how high customer insight places. Senior executives around the world see developing a deep understanding of customers as the second most important strength to have to become an innovative company. (And, number one and number two on the list scored almost exactly the same – a statistical tie for first place.)
I would submit that one of the key mechanisms for facilitating innovation is having information systems that are effective at searching and interpreting research on customers, markets, competitors, and technologies. Such systems greatly lever the innovation process. Let’s call them “strategic research portals” to distinguish them from common-variety enterprise search engines.
What often makes strategic research portals so difficult to develop and operate is that they require integration of research content from external sources, where the most valuable strategic information about customers resides. IT departments are unprepared technically and culturally to deal with diverse content sets over which they have no control, produced by organizations they cannot influence, and provided via business models that are inconsistent with enterprise computing security conventions. The most innovative companies often solve this problem first, because without solving it, all subsequent efforts at innovation are handicapped from the start.
Meaning extraction has a key role to play here. Search engines of the common variety sold by enterprise computing companies like Microsoft and Google only produce lists of documents for users to wade into. Common-variety search engine applied to a market research database of rich customer information puts a great burden on the user to read enough of the reports to gain an overall understanding of a topic like, “What are my customer’s strategic priorities right now?” Let me illustrate how a meaning-extraction enabled search engine can help this process.
A market intelligence professional for an information technology company was assigned to work with a key account team that was planning an important sales call at a strategic client, a leading freight and package delivery company. The account team was preparing a presentation that dealt with long term information technology platform issues like enhancing “business agility” (whatever that means). The researcher was asked to suggest sales strategies to the account team that would give the team a competitive advantage in winning more business.
This was during the summer of 2008, right after oil prices had hit historic highs. The market intelligence professional searched for news and analyst commentary on the customer using Northern Light’s meaning extraction-enabled search engine. The researcher was presented with this actual search result from the automated analysis of hundreds of news articles and industry-authority blog posts concerning the customer:
<Customer> is being affected by the business issue Falling Profits
<Customer> is being affected by the business issue Oil Prices
<Customer> is being affected by the business issue Energy Costs
<Customer> is being affected by the business issue Falling Demand
Looking at the automated analysis of such a body of current information about the client, the research professional instantly realized that the client was in no mood to consider long-term, somewhat conceptual benefits of new technology solutions. Rather, the client was dealing with the present and immediate crisis of oil prices driving up costs and driving down demand for its delivery services — a double-whammy that was driving an earnings collapse.
The market intelligence professional suggested that the account team throw out its presentation on long-term conceptual benefits of new technology and replace it with a presentation showing how the innovative application of information solutions could help the client lower its fuel costs in the short run. This key piece of customer insight gave the account team an idea that could be a home run in the competition for new business.
Meaning extraction = more customer insight. More customer insight = more successful innovation. More successful innovation = more satisfied customers buying more. More satisfied customers buying more = higher stock price. Higher stock price = corporate survival.
Lastly, I was pleased that three of the top ten on the BCG list of most innovative companies are Northern Light SinglePoint strategic research portal clients. This is not an accident. Providing solutions that help develop deep understanding of customers is what we do.