A Challenging Question for Innovators

Image courtesy of Harvard Business Review Publishing Corp.

If you think your company is innovative, Michael Schrage has a question for you:

“Who do you want your customers to become?”

Schrage, a researcher affiliated with both the MIT Center for Digital Business and Imperial College’s Innovation and Entrepreneurship Group, has written a new e-book with that title, and he argues that this question distinguishes companies that have authentic innovation to offer from those that don’t. (If your answer is, in effect, “We want our customers to become people who buy more of the stuff we sell,” then you’re in sales, not innovation, Schrage asserts.)

I spoke recently with Schrage in Cambridge’s Kendall Square, and here’s a bit of what he told me about his question and his thinking about innovation these days.

• Successful innovations change the people that use them. Innovation is not just about adding new value, says Schrage, but about how you transform users. Consider, for example, how Google has transformed hundreds of millions of ordinary people into people who conduct information searches that, in turn, improve Google’s own algorithms and abilities at search. Or think about how your smartphone — or Facebook account — has changed you and the way you behave.Whether a successful innovation was from an earlier era, such as Henry Ford’s Model T, or involves contemporary technology, a common denominator is that successful innovation changes people’s perceptions and behaviors.
• Innovative companies can create customers who are more valuable to them.“I believe that a failure of modern microeconomics has been overweighting the importance of human capital within the organization — and underweighting its importance outside the organization,” Schrage said. In other words, he argues that traditional economic thought has conditioned us to think too often of the interactions between companies and their customers just as simple exchange transactions.In reality, the interaction between innovative companies and their customers is more complicated. Innovations aren’t just exchanges, they’re investments that make customers and clients more valuable.For instance, Schrage sees Starbucks as a company that has created customers who are coffee connoisseurs — and that change in consumers’ attitude toward coffee makes them more valuable customers to Starbucks. Innovative companies should think in terms of investing in customers, according to Schrage, and ask: How does our innovation transform our customers in ways that make them more valuable to us?
• One key challenge is aligning the way you’re seeking to change customer behavior with what customers themselves want. How you’re seeking to change behavior and what customers want don’t have to be precisely identical, but they do need to be aligned.For example, Schrage offers Southwest Airlines as an example of company that changed its customers’ behavior: Instead of expecting assigned seats, Southwest customers know that they will line up in groups and then board the plane by group. This change in behavior probably isn’t something Southwest customers sought for its own sake, but it enables quicker boarding and thus a more efficient use of planes — which contributes to the low-cost, high-reliability service Southwest customers do want.

Schrage is actively looking for comments on his innovation framework so he can incorporate that feedback into the next edition of his e-book.

What do you think of Schrage’s question “Who do you want your customers to become?” Do you think innovation is really an investment in your customer’s future? Or is it simply a better way to meet your customers’ needs? Share your thoughts and ideas by posting a comment below or e-mailing Schrage via smrfeedback@mit.edu.