21st Century Drivers for Innovation and Collaboration

At the turn of the 21st Century, converging social, technological and political changes demand profound changes in how organizations relate to their customers. These changes question many of the assumptions on which 20th Century businesses are built. To turn this situation to their advantage, executives need to approach how they create value for their customers, quickly and proactively. They must build a collaborative network of partners to discover, design and deliver differentiated experience to customers.

The new meaning of customer experience

  • Pervasive e-business and global sourcing are creating new centers of excellence for knowledge, services and manufacturing around the world—these clusters of people and companies are technology-enabled, well educated and highly motivated. They will impact incumbents in several ways: 1) they represent new collaborative resources that can add significantly to the enterprise expertise network; 2) they are developing into high-growth consumer markets; 3) they will create new offerings that may change the rules of your business since their companies do not have legacy organizations and cost structures.
  • Web 2.0 is mobilizing customers in high-value mature markets—”Web 2.0″ technologies are user-friendly, collaborative tools and work processes that enable customers to connect with each other and collaborate spontaneously. Examples are weblogs, meetups, mashups, and free global phone applications with integrated chat/video. Yesterday, Amazonites reviewed books and music; today, they discuss in detail the performance and relevance of everything sold by Wal-mart, exchanging information about their experiences and advising each other on what to buy. Yesterday, the simple workaround to pick the vaunted kryptonite lock was first shown on a weblog; increasingly, product shortcomings are demonstrated in full-motion video.
  • Customer mobilization pressures the barely-adequate new product/service development processes—customers discover irrelevant new offerings and vapid product extensions overnight and pervasively. Most companies already have lackluster new product development track records, and they will perform far worse in this environment. There’s nowhere to hide.
  • Emerging market customers are technology-enabled by default—for example, in Chinese consumers’ practice of tuangou (“team purchase”), people meet on-line, collaborate on learning about a product’s strengths and weaknesses, pricing performance and availability. Then they approach the vendor as a large group and strike deals. Think of them as ad-hoc buying cooperatives. Practices like this will change the rules for entry into these ultra high-growth markets.
  • Consumer offerings will be forcibly unbundled through 2015, wreaking havoc with business models—As ultra-wired consumers grow in buying power, they recommend an ever-increasing array of products to each other. They will demand product and service componentization, so they can create their own products and services collaboratively. Yesterday’s music package was the “album.” Today, consumers buy songs, publish playlists and shuffle their songs at will. How much longer before book chapters go this way? Cameras? Amplifiers? Autos? Cosmetics? Consumers will specify components and force mass customization.
  • B2B markets follow B2C innovation—all B2B executives are consumers, and their expectations are set by their individual experiences. B2C innovation is extremely relevant in your ability to create rewarding experience for your B2B customers.
  • Emerging leaders will dominate by providing incomparable customer experience—Apple, Starbucks and Nordstrom create breakaway value by tuning into the experience a customer has; in fact, their “products” and “services” serve props in creating experience. Further, customers increasingly create collective experience; they describe their experiences and define how products and services are relevant to their experience. This will shorten product life cycles even more and pressure business models.
  • Increased collective consumption will drive further commoditization—As the portion of on-line consumers continues to increase, the commoditization of mediocre products and services (those that do not provide differentiated experience) will accelerate.
  • By 2015, 25-40%of enterprise business will be executed by global partner networks—The stand-alone computers of the 1980s are all but gone, and the enterprise will follow a similar path. It will be inseparable from its partner network, which will have redundant providers so that the enterprise will not be dependent on any node. And much innovation will come from the network. Outsourcing is a transitionary practice that enables companies to build collaborative practices while moving non value-add processes outside.
  • India and China will emerge as innovation and intellectual property leaders by 2020—Making the world’s products, services and living standards available in radically different means and social contexts will demand unprecedented innovation, and these countries’ talent, motivation and need will create the perfect storm for an explosion of creativity and IP.

The new importance of innovation and collaboration

  • Innovation is a repeatable process that creates discontinuous new value—it breaks the mold by: 1) catalyzing new thinking about customer experience; 2) structuring new thinking into actionable ideas and solutions; 3) testing the solutions’ ability to create the desired experience; 4) scaling and delivering the experience. Information sharing makes or breaks the process, and new collaborative Web applications and work processes can speed them up and increase accuracy.
  • Collaboration is a style of interaction in which diverse parties work together to innovate—enterprises can collaborate by assembling cross-boundary networks of value chain partners and customers to operate short-cycle innovation projects that address all aspects of customer experience: design, service, disposal, collateral products/services vital to the experience, etc.
  • Innovation is widely seen as the means to drive the top line, the traditional model fails consistently—innovation has rarely been practiced as a core competency due to the Industrial Economy’s long product life cycles. 96% of corporate innovation fails* because companies have practiced it as a secret process conducted by specialized experts, in internal “labs.” These experts too often did not understand customer experience.
  • Customers demand true insight into their experience—marketing’s focus groups and database analysis take too long and are too error-prone because they don’t deliver a holistic view of experience. They are product-focused, not experience-focused. There are too many layers of management involved in “product development,” which, like technology commercialization, consistently fails because the process is too ponderous and do not invoke real customer insight.
  • Leaders will engage customers to design their own products and services—and this process will attract customers to participate in innovation networks, which will pair diverse customers with various experts. The knowledge of each participant is vital, but the secret sauce will be orchestrating the knowledge to produce short-cycle, actionable results consistently.

The bottom line is that mobilized customers accelerate success and failure, and leaders will thrive by creating collaborative innovation processes.

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