You may have heard that we are living in the Age of Customer Experience. Gartner projected that 89 percent of companies compete primarily on customer experience. You might ask why on Earth anyone would say, “Don’t listen to your customers!” when customer opinions matter the most.
Because your customers can’t tell you what they need. Listening to them will mislead you. Customers tend to use surveys to complain, or negotiate, or tell you what bothered them recently. While there is certainly value in hearing these unfiltered complaints and what they suggest about short-term perceptions, you cannot take customer inputs at face value.
The only way to really know your customers, what they desire, why they buy and what motivates them to stay loyal, is to observe their behavior like an anthropologist.
That is precisely what this article is about. How to start thinking like a business anthropologist and understanding your customer in a scientific way. This is the only way to avoid getting trapped in serving temporary needs and then finding yourself suddenly abandoned for the Next Big Thing.
Innovation is essential as a strategy for risk management, but it’s more than that. True innovation satisfies actual needs, not what consumers say that they need. True innovation brings more consumers into the market and grows the pie so that everyone can enjoy more.
People often refer to Kodak as a company that went bankrupt because it didn’t adapt fast enough to digital, but that’s not the true lesson here. In fact, Kodak did adapt and developed digital cameras as early as 1975. They actually held the No. 1 spot in digital camera sales as recently as 2001.
The real lesson is that Kodak lost their way because they lost sight of what people were buying. They thought customers were buying film, chemicals, inkjet cartridges, workflow software, and so on. Their customers were actually trying to hold onto memories. Kodak’s competition was not just other camera and printer companies, but entirely new innovations like social media. In any case, the full story of Kodak has not been written yet and there is still much to learn from their attempt at coming back to life.
When company leaders only prioritize profitability, and set up incentives around short term return on investment, the company will be exposed to blindsides from changing market conditions. You may remember the three innovation horizons from the last episode, but it’s worth reviewing them again for clarity.
The First Innovation Horizon is where you improve your existing core business and incrementally maximize revenues through greater efficiency and productivity.
The Second Innovation Horizon is where you develop ideas from the Third Innovation Horizon into practical competitive advantages as you experiment with new capabilities and new lines of business.
The Third Innovation Horizon is where you collaborate with external stakeholders and make small bets on emerging technology that could lay the groundwork for radical innovation in the years ahead.
To extend the lifespan of your company and reduce systemic risks, establish long-term investments in the Third Innovation Horizon, test out theories in the Second Innovation Horizon, and make money in the First Innovation Horizon.
With these horizons in mind, I’d like to test with nine thought experiments in not listening to your customers. These exercises have helped organizations and innovation teams in the real world become better at anthropology. They can help you gain deeper insights into what is going on in the customer’s internal world.
All of these thought experiments can be done with nothing more than a pen and paper or an app on your phone to record your observations.
In the coming 7 exercises, we are going to train how to become a better business anthropologist.