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(originally published by Booz & Company)


Making the Most of Customers

Most companies are unable to gain customer advantage the way Netflix has, or, indeed, the way Apple has with its growing line of iPod products and services. The problem is that although many companies listen to customers, that in itself is not sufficient. As Henry Ford once acidly noted, “If I had asked customers what they wanted, they would have told me they wanted a faster horse.” Even the most efficiently run focus groups and customer surveys are contrived circumstances, tending to elicit results that don’t translate nearly as well as they should into the real lives of the people who might do business with your company in the future.

All too often, marvelous insights gained about what the people who buy particular products do and how they live become quickly absorbed into a corporate mind-set already well-furnished with knowledge of existing product lines, innovations in the works, and competitors’ market positions. Most critical, the link between customer experience and existing company context is never broken — managers never let go of their own context of products, services, and capabilities. In practice, as opposed to theory, most companies’ best attempts to learn from customers’ experiences result in little more than incremental improvements.

I have been studying companies’ connections and disconnections with consumers for more than 25 years, and have also worked inside a huge number of firms. I have researched innovation practices within organizations ranging from the Allianz Group to Zara, from General Electric to Unilever, and from BMW to Frito Lay. Across all of this research, a common theme has emerged and intensified. If a company is truly to innovate time and again, and is to achieve profitable growth and create customer advantage, it must do three things:

  1. Understand the people it is trying to serve as individuals, apart from any connection or interaction with the company. That is, the company must be able to temporarily let go of its current business strategies, products, and brands as it observes how people (not just customers and potential customers) go about their daily routines.
  2. Know how to go beyond its own perimeters of product, markets, and competencies; let go of and challenge the assumptions, common practices, and golden rules of doing business still held today and go beyond what it has learned from consumers. Only then can the company conceive of entirely new opportunities by innovating across customer behavior. It must know how to define the spaces of greatest opportunity that others have yet to imagine.
  3. See itself from the outside in and formulate strategies around people’s behaviors, not just seek to satisfy consumer needs and desires or customer requirements. The company must execute activation plans that engage consumers and seamlessly fit innovations into their behaviors so that they absorb and assimilate them. It must create transformational life experiences, not just communicate features and benefits.

Only by doing these things can companies consistently and successfully bring to market winning innovations, achieve profitable new growth, and reinvent their business for the future.

Reprinted and adapted by permission of Harvard Business School Press. Copyright © 2007 Erich Joachimsthaler; all rights reserved.

Author Profile:

Erich Joachimsthaler ([email protected]) is the founder and chief executive of Vivaldi Partners, a marketing strategy firm. This article is excerpted from his latest book, Hidden in Plain Sight: How to Find and Execute Your Company’s Next Big Growth Strategy (Harvard Business School Press, 2007). 
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  1. David A. Aaker, “The Innovator’s Prescription: The Relevance of Brand Relevance,” s+b, Summer 2004: A brand in decline is often in trouble not because of an intrinsic problem, but because the product category with which it is associated is fading — undermined, augmented, replaced, or subsumed by a new, faster-growing category. Click here.
  2. David Aaker and Erich Joachimsthaler, Brand Leadership: The Next Level of the Brand Revolution (Free Press, 2000): An influential treatise on brand equity. Click here.
  3. Nikhil Bahadur, Edward Landry, and Steven Treppo, “How to Slim Down a Brand Portfolio,” s+b, Autumn 2006: The objective is not merely to divest brands, but to achieve higher rates of growth for the brands that remain. Click here.
  4. Theodore Levitt, The Marketing Imagination (Free Press, 1986): The marketer’s bible, from the Harvard professor who invented the term marketing myopia. Click here.
  5. Richard Miniter, The Myth of Market Share: Why Market Share Is the Fool’s Gold of Business (Crown Business, 2002): Debunking the conventional wisdom, the author argues that many companies maximize market share only to minimize profits. Click here.
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