Thinking

User-centred innovation - fad or the future?

By Rob Anderson

Does the integration of users in the innovation process impede innovation?

User-centred innovation has become the talk of the town in recent years as a certain amount of hype has been generated around the notion of integrating users and stakeholders into the innovation process of developing products and services. Many businesses are now jumping on the user-centred innovation bandwagon and have begun to put the customer at the heart of their innovation strategy. Whilst this kind of approach can produce great opportunities, companies need to be cautious when employing this strategy as the value of user-centred innovation may not be as high as it first appears, and may not deliver the kind of innovation and competitive advantage that is being sought. Worse, customer involvement in the product and service development process may produce potentially less innovative products and consequently make it difficult for a company to harness its full innovation capability. 

 

What is user-centred innovation?

User-centred innovation is a process in which users influence how an innovation takes shape. Companies consult users at various stages of the design process in order to identify their needs and involve them in requirement gathering and product testing. 

Typically, companies use traditional market research methods, such as customer interviews, focus groups and surveys to identify their users’ behaviour and attitudes to understand better their needs and to evaluate their propositions. Strategies and innovation tools, such as Co-creation and Open Innovation, have emerged, in which companies actively involve users in their innovation process. The result is that companies no longer create value entirely inside their company but increasingly collaborate with their customers. 

 

The benefits of user-centred innovation

Integrating users into the development of new products and services has a variety of benefits. Most importantly, it allows companies to gain insight into their users’ demands and needs and enables them to test products and gather feedback to improve their propositions. This, in return, gives companies tools to estimate market reaction and consequently reduce the risk of potential market failure and large-scale loss. Especially as an innovation begins to evolve, higher levels of financial investment in customer research can provide necessary evidence for a strong business case. For this reason, the integration of users into the innovation process has become a fundamental element of many innovation strategies and has gained significant importance in strategic decision making processes. 

 

Issues with user-centred innovation

The main issue with user centred innovation is that users are unable to articulate their needs because their ability to comment on products or services is limited by their prior experience. When confronted with an innovation they are unfamiliar with, users often struggle to understand what need the innovation satisfies and are therefore unable to imagine using it. This is not just the case when users encounter an entirely new product or service. Many will also have difficulty identifying a new product or service opportunity, as users simply have too few reference points and too little understanding of the specific product ecology and its domain. As Henry Ford said, “If I had asked my customers what they wanted they would have said ‘a faster horse!’” Similarly, it is difficult to imagine people in the early 20th century praying for TV to be invented.

 

A more recent example can be found in the games industry. Whilst the arrival of the Nintendo Wii turned the regular games console industry on its head, Nintendo clearly developed its product with little or no customer input. Had user input been sought, responses could have been something like, “I want improved graphics and faster processing speed” and “I want to be able to fully immerse myself in a virtual world”. It would have left Nintendo with a console like Sony’s PS3 or Microsoft’s Xbox. Instead, Nintendo managed to develop a product that extended the virtual world into the living room without focussing on making a better performing gaming console like its rivals did. Nintendo also managed to address an entirely new market that its competitors were not targeting and found a gap where a user base still needed to evolve. While Sony and Microsoft were competing for a well-established target audience of die-hard gamers, Nintendo followed a strategy which INSEAD professors Kim & Mauborgne coined ‘blue ocean strategy’. Rather than competing head-to-head with other suppliers for known customers in an existing industry, Nintendo created a new market - an older generation of ‘non-gamers’ looking for simpler and more accessible video games. If Nintendo had involved any users in the development of this innovation, surely the outcome would have been a very different one. 

 

The above examples illustrate how user-centred innovation methods may not always be the best point from which to begin innovation. Market research, and especially the active involvement of users in the identification of their needs and development of an innovation opportunity, may prove problematic. Of course, innovation will have to meet a customer’s demand in an economical way. After all, if a new product or service does not meet a user’s need it is very unlikely that the innovation will be successful and demand will fail to appear. However, this does not automatically mean that the development of a product needs to be stimulated by traditional market research, or by users articulating their needs. Consequently, the way in which a need is identified and an opportunity developed and evaluated becomes crucial. 

 

Incremental innovation vs. radical innovation

If businesses want to become successful innovators then some caution is required when employing user-centred methods in order to avoid inventing ‘faster horses’. In the constant race to improve and develop products or services, user feedback and product testing provide the innovator with vital information and can also be used to mitigate risk. It allows companies to develop products and services that will be accepted by their customers and are more likely to meet their needs. However, as the users’ ability to comment on new products and services is limited to their prior experience, customer-led innovation strategies will most likely result in incremental innovation and product improvement. 

 

Kim & Mauborgne identified in their study ‘Value Innovation: the strategic logic of high growth’, that companies’ tendencies towards customer and demand driven innovation strategies resulted in them investing 86 percent of their work in incremental innovation. Further, they identified that these incremental innovations accounted for 62 percent of total revenue and 39 percent of total profits. On the other hand, radical innovation accounted for the remaining 14 percent of the launches, but generated 38 percent of total revenue and a staggering 61 percent of profits. If user-centred innovation results in merely incremental innovation, why is everyone making such a big deal out of it? 

As Harvard business professor and author Clayton Christensen argues, leadership in sustaining technologies, or improving products confers little competitive advantage. Rather, companies need to enter new networks enabled by radical innovation in order to succeed and sustain long-term growth. 

 

Obviously, radical innovation comes at a higher price and at higher risk, but what is the point of investing primarily in short-term, incremental innovation whilst ignoring long-term growth strategy and ways of sustaining competitive advantage? The answer seems to lie in focusing on new ways to introduce major new value propositions, as well as looking into how, not only users’ prevailing consumer habits and behaviours but also competitors’ go-to-market models, may be disrupted. To achieve this, innovators need to carefully analyse and interpret user behaviour and market developments and have a desire to create new markets, rather than simply integrate users in the process and expect them to provide all the answers. After all, user-centred innovation is not a ‘one-size-fits-all’ solution to innovation.  

 

Be sure to look out for part two of this series in the next issue of Innovation Quarterly.

Rob Anderson

Rob was a founding director of Edengene in 2000, having previously been head of the business growth practice at PA Consulting Group. A chartered accountant with strong finance skills, he has 20+ years’ consulting experience working with blue chip companies, designing and directing multi-year growth and innovation programmes. Rob is the author of Edengene's customer-led innovation methodology, which provides a structured approach to innovation to deliver revenue growth.