By Brent Banda
A company designs its products and services around its understanding of the customer’s situation. A new perspective can provide insights that drive innovation.
Most innovation emerges from people who see the world through their customers’ eyes. The professions of those who foster innovation are irrelevant. A welder is just as likely to see the need for something new in the world as a scientist, electrician, or hair stylist. Empathy drives innovation. Innovators relate to their customers.
Hundreds of people working on a mine site would see the impact of unscheduled downtime due to unreliable supplier delivery. A handful of those people might consider what caused the supplier to be late. One or two can imagine entirely new ways to approach the situation. The empathetic entrepreneur takes it a step further and begins to ask a crucial question: How can I build a business around that?
The Apple of Your Customer’s Eye
Let’s use a simple example to illustrate the point. In the early 2000s, a cellular phone was an awkward mix of a phone and some novelty features. It promised functionality beyond a basic phone conversation but consumers saw almost no true benefit. The small screen meant email was extremely difficult to use productively on any manufacturer’s device. Synching an email account or calendar between a personal computer and a phone was a new concept and only moderately effective. Although you might be able to open the occasional email attachment, there was no ability to edit any form of document.
Then Apple Computers launched the iPhone in 2007. It replaced the need to carry multiple devices, such as a cellular phone, a camera, and an iPod. Physically, it was a radical departure from the trends of the day. In an attempt at convenience, manufacturers had pursued the concept of smaller is better, producing a variety of miniature phones that could easily be mistaken for toys. The iPhone was larger. It replaced the physical keyboard that other cellphones had with a touch screen that covered the entire face of the device. The device had significant processing power and software applications that resembled the functionality of a desktop computer. Consumers experienced the benefits of carrying a single mobile device for the first time.
As Apple’s CEO, Steve Jobs marshalled his company’s resources around the consumer’s problem. Jobs was certainly not the only person to understand that the technologies of the day were not being used in a way that provided consumers with the functionality they required, but he was one of the few with a vision for an entirely different approach. Apple launched a highly successful product around that opportunity. How did Jobs do this? He looked beyond the natural iteration of technology. He did not launch a phone with a touch screen. He launched an entirely new device.
Although it was called a phone, it was a computer that happed to have a telephone feature. And it was built around an innovative business model with an entirely new economic structure. Jobs originally wanted third-party services to be delivered through Apple’s browser, Safari. When app developers didn’t respond, Apple created the App Store and radically reshaped how revenue was generated in the cellular phone industry. Apple receives a royalty from apps, subscriptions, renewals, and advertisements sold through the iPhone. The importance of this cannot be overstated. This was the first time a hardware manufacturer was able to generate revenue directly from the consumer. Apple, not just the cellular carrier, maintained an ongoing economic relationship with the customer.
Jobs saw the situation differently than his competitors. He had access to the same facts. He just chose to look at them through a different lens.
Reframing a Problem
How you perceive your customer’s problem is based on your assumptions about your customer and your company, suppliers, competitors, and industry peers. You subconsciously evaluate the way customers experience the situation and the available solutions, as well as the costs and implications of that specific problem. Despite the fact that you are evaluating the situation from your own point of view, your understanding of it is almost certainly similar to the way your competitors perceive the situation. That’s why it is industry outsiders who often bring radically new solutions to a systemic problem.
Reframing is a technique of viewing a situation differently by changing its meaning. Imagine you are looking at a set of facts through a picture frame. When you move the frame to a new position, you change the perspective from which you view the facts.
This is more than just putting some “spin” on your marketing message and telling potential customers a story you want them to believe. Reframing is a fundamental examination of the situation you face. It changes how you see your customer and provides a new foundation for making business decisions.
Most people struggle with reframing in business because they are unable or unwilling to see a situation from their customer’s point of view. In our example, Jobs’s original vision for the iPhone was to have third-party software delivered through Safari. This approach aligned with Jobs’s vision of ensuring a favourable user experience by integrating Apple’s own software and hardware. The software developer community believed this was restrictive and felt controlled by Apple. They began hacking into Apple’s operating system and creating their own third-party apps anyway.
Most innovation emerges from people who see the world through their customer’s Eyes.
Facing failure, Jobs listened to his critics and the many others within Apple who opposed his strategy. He embraced the concept of the phone’s users interacting directly with third-party developer apps. However, Apple took the time to examine how customers used apps and examined the various touch points the consumer had with Apple and also with the third-party software developers. Apple realized there was an inherent disconnect between software developers and the customer. Software developers at that time would have to advertise to attract potential customers, convince them to purchase their app from the developer’s own website, and then steer them through installing that app on the consumer’s device. It was cumbersome and few consumers had the ability or patience to complete the process.
Apple sold phones directly to the end-user consumer, but most were sold through telephone companies that resold the phones in a package with long-term voice and data contracts. Apple’s innovation with the App Store focused on the end user of the iPhone as its ultimate customer and did not directly affect resellers of its phone. However, Apple also addressed the needs of a peer in the industry, the software developer. The software developer needed access to consumers. The consumers needed a convenient way to purchase and install apps. The solution was to turn the software developer into a supplier.
Apple reframed the situation. It was more than just looking at third-party app development with a positive mindset. Reframing meant they had to perceive the situation in a new way. Empathy is at the core of reframing a situation in business.
A fundamental principle in business is that every decision should connect to the needs of your customers. This is referred to as marketing concept. A company has to act in its own best interest. However, decisions must also align with the needs of customers.
Marketing is more than advertising. It’s the broad collection of decisions that influence your ability to serve your customer.
In 2008 Apple launched the App Store, integrating it directly into the iPhone device. This service fundamentally changed how consumers interact with manufacturers of technology. Nothing like it had existed until that time. Software developers now had direct access to hundreds of millions of customers. Consumers had direct access to many software developers.
The App Store opened with 500 apps. Ten years later, two million apps were available to consumers. Revenue topped $46 billion with expectations for roughly 15% annual growth. As a business owner, the seed of innovation in your own business will come from your insight into your customer’s situation. What problem is your customer really trying to solve? Are current products really getting to the root issue?
Innovation can emerge in all decisions that touch your customer. Marketing is more than advertising. It’s the broad collection of decisions that influence your ability to serve your customer. Most people immediately consider innovation in terms of changes to their product or service, and rightfully so. These are the features that define what you are selling. But make sure to consider all aspects of how your company serves its customers. For example, the price you charge is more than just a number. You have the flexibility to structure pricing in a way that’s more meaningful to the customer, such as offering the option to lease rather than purchase equipment.
The point is not to make a change for the sake of being different from your competitors. Your decisions must be coordinated and must enhance the value you provide. This is the essence of a discipline in business referred to as strategic marketing.
The App Store launched by Apple was an entirely new product, so there were many decisions made related to product features. There were also decisions around the pricing structure (the percentage of an app’s revenue that Apple would retain, for example). The App Store itself was a complete restructuring of the distribution channel for apps, with consumers buying directly from a hardware manufacturer rather than the software developer. Promotional decisions were also made, with the memorable campaign slogan “There’s an app for that.”
Perhaps the most significant take-away for entrepreneurial companies is that innovation occurs in all areas of business, not just in products or services. New approaches can structurally change how revenue and profit are generated within your company.
How does your company identify these opportunities? Start by looking at what is not working in your industry or company. Keep in mind that Steve Jobs was not an advocate of what became the App Store. This visionary simply did not foresee the potential. He was blinded by his own dedication to the concept of hardware and software integration. Jobs had to face the realities of his situation, that his intent to provide third-party access through Safari was not acceptable to software developers. Once conscious of this reality, Jobs put his head back up and considered the most important question entrepreneurs can ask themselves when facing a customer’s problem: How can I build a business around that?
First published in the September 2019 edition of The Business Advisor.