The Truth About Who Can Win with Customer-centric Innovation

Supply boat from overhead.

“Customer-centric innovation” was recently cited as a key tenant of digital transformation by Forrester.

Which got us thinking:

  • What does customer-centric innovation actually mean for suppliers?
  • How can OEM/OBM suppliers turn customer-centric innovation into a reality?

We’re going to answer those questions today.

What is customer-centric innovation?

Customer-centric innovation is pretty much what it sounds like: it’s product innovation where the customer is the heart of the process.

This means innovation is driven by customer feedback, and organizations seek to put customer needs at the centre of what they do.

Generally speaking, product innovation is driven by market need. A company will notice that there’s a gap that they think a new product can fill. For instance, Ford might make a new pickup truck, knowing that every year there’s space for a new Ford truck on the market.

Likewise, Apple might produce a new phone in part, at least, because they know there’s space in the market for it.

How customer-centric innovation is different: design thinking

NN Design Thinking Diagram

Customer-centric innovation is focused on what the customer wants rather than what the market will support. It’s a result of asking people:

  • What don’t you like about our product?
  • How do you think we can do better?
  • What do you wish it did or didn’t do?
  • What sucks about our product?

Designers, of course, will be familiar with this way of thinking. And all innovation is driven by this exercise. Even if you’re only looking at the market opportunity, taking to the people in the market helps verify its existence.

For example, let’s say you’re a cellphone manufacturer. You notice you’re losing customers to providers who make phones with better cameras. So you might decide to make your camera better on your next version.

It’s the same basic principle as customer-centricity.

But where customer-centric innovation differs is the degree that it leads the company. Customer-centric innovation isn’t just market research: it’s a strategic approach to changing how organizations operate.

What customer-centric innovation means for manufacturers

For suppliers and manufacturers, who are often several steps away from end-users, customer-centric innovation can feel a little superfluous.

But it’s not.

Supply chains are increasingly complicated. More specialist suppliers contribute to products that end up in the hands of consumers.

Those who build and those who sell are no longer the same people.

As a result, the gap between builders and buyers is increasing.

Second, manufacturers are facing pressure to innovate quickly or be left behind. Lower barriers to entry, more opportunity for niche suppliers, and more aggressive bottom lines means competition is fierce for OEM/OBM attention.

The more suppliers know about what the end user (and thus their OEM or OBM clients) wants, and the sooner they know it, the better/more competitive their product offering can be.

3 ways suppliers can action customer-centric innovation

How can suppliers actually live the lofty goal of listening to users?

1. Integrate your data

Suppliers have a huge amount of data, both archived and active, spread across disparate business systems. In order to gain true insights, they need to create a shared version of truth and robust version control, integrate it with new and existing data imports, and work out a way to effectively display and analyze that data at a glance. According to Forrester:

Analytics and data visualization technologies, coupled with legacy PLM data stores and integrations with other business technology systems, offer up opportunities to look critically at the product development cycle.

2. Leverage user feedback

One of the most significant changes to how the supply chain works is that it’s a two-way street.

Traditionally, goods flowed one way and cash flows another.

But now, data and process information is flowing along with those goods (to help combat increasingly complicated products/supply chains) and critically, end-user data is beginning to flow back.

The Internet of Things (IoT) technology and model-based enterprise frameworks will usher in a new era of data availability on how products are actually used, and as OEMs and OBMs capture that data, it’s going to be essential for them to share it down the supply chain. Customer-centric strategies are going to be easier to realize.

Likewise, suppliers need to be ready to receive and quickly act on that feedback, which means having a process to accept and analyze end-user data early in the product development cycle.

3. Supply chain collaboration

To truly become customer-centric innovators, suppliers need to collaborate more up and down the value chain. This means:

  • Sharing things like CAD data with other supply specialists
  • Sharing parts or all of BOMs so other suppliers can plan accordingly.

In a perfect world, different specialist suppliers (say, electronics and software) would be working together to solve customer problems. Because remember:

customers feedback rarely comes in an innovation-ready form. More often, it comes as a problem, and it’s up to suppliers to solve it.

The more collaboration that can happen at a very early design stage of the product innovation process, the better-positioned suppliers will be to deliver products ahead of the competition.

Key takeaways

  • Product innovation is traditionally driven by market forces but increasingly needs to be driven by direct consumer feedback.
  • OEMs and OBMs need to provide user data and feedback up the value chain, which in turn needs processes and systems to incorporate that feedback early in the product innovation process.
  • Suppliers should be leveraging existing archived and active data via analytics and dashboards to speed up the innovation process in order to meet rising customer demands.
  • Suppliers need to be collaborating across the value chain to deliver products more effectively for their clients.