Innovations don't work! No jokes...
...Well, for some companies at least; presenting a customer approach

No matter how hard companies try, their approaches to innovation oft en don't grow the top line in the sustained, profitable way investors expect. This growth gap springs from the fact that companies are pouring money into their research and development labs instead of working to understand what the customer wants and then using that understanding to drive innovation. Having worked with senior executives of hundreds of companies all over the world and in all kinds of industries, we have developed a process for making innovation deliver results that meet or exceed market expectations. We call this process customer centric innovation.

Cementing Your Innovation Advantage

Companies cannot successfully innovate and grow unless they systematically focus on investing in customer research and development. In doing so, they must clearly take both an offensive and a defensive approach. The offensive strategy has three phases:

Phase 1: Establish and develop the core. The first step in conducting customer research and development is to identify core customer segments and develop value propositions that exceed the buyers' expectations. The value proposition represents the complete customer experience, including every interaction with the company.

Having identified this core, the customer research and development team should then systematically identify subsegments, sharpening the alignment between customers' desires and the company's offerings. At the same time, the company needs to build the capabilities (the organisational infrastructure, customer insight, technology, communications, and field sales operations and logistics support) to create, communicate and then deliver the new value propositions to the targeted segments.

Phase 2: Extend. In this next phase, companies enlarge the business beyond the core segment in two ways.

Phase 2a: Extend capabilities. Customers use or experience products and services within a variety of distinct "life capsules." For example, a company that sells products to business travelers knows that business travelers' lives aren't just about traveling from plane to hotel to plane to home; these people have at-work capsules, at-home capsules, on-vacation capsules and so on. Even within each capsule, a customer's needs evolve - so a business traveler may have different needs as he or she gets older or moves up the corporate ladder. The goal is to extend product capabilities to address these different and changing needs.

Phase 2b: Extend segments. Companies can extend the customer base by discovering potential "halo" customer segments, whose needs are similar to those of existing customers. Here, the goal is to understand the differences in their needs, modify the value proposition to target these groups and then tailor products for them based on the existing capabilities of the firm.

Phase 3: Stretch. Once a company has extended its business, it can begin to hunt for opportunities to stretch, again in two directions.

Phase 3a: Stretch capabilities. To fulfill the needs of existing segments or new subsegments, a company identifies new capabilities to be developed, as well as new offerings and delivery mechanisms.

Phase 3b: Stretch segments. In this phase, the company identifies completely new segments - unrelated to the core - where the corporation can deploy current capabilities.

Maintain Defensiveness

During all these phases, companies must pay close attention to disruption threats from competitors. Here, the customer research and development team aggressively scans for early indications of shifts in customers' needs, which can precipitate a need for new value propositions and capabilities. Customer research and development's mission is to know more about the company's existing customers than anyone else on the planet, and to ensure that the company is prepared to preempt any competitor's move.

For example, when Netflix launched a mail-driven movie rental business, effectively eliminating the need for late-return fees, Blockbuster had to respond defensively by eliminating its own late fees. Knowing that customers disliked late fees, Blockbuster should have done away with them before Netflix made its move. In defensive mode, the company also scans for shift s in technology. A firm may not yet be able to meet certain customer needs because no technically viable solution exists, but a disruptive alternative may be emerging.

The Field Imperative

Our experience shows that the only way to sustain customer research and development is by putting customer-facing employees behind the wheel. The benefit is twofold: Companies exponentially expand their knowledge of their patrons, and employees become engaged as they contribute their insight and energy. As part of its customer research and development strategy, consumer electronics retailer Best Buy Co. Inc. set out to test proposed value propositions for a number of specific customer segments, measuring the incremental impact of each value proposition on customer profitability and satisfaction over time.

Best Buy's initial lab consisted of four existing stores in the northeastern United States. Best Buy trained the stores' employees in customer profitability management, segment identification, communication and execution. For example, employees experimented with the product assortment, end-cap displays and a variety of signage. The results in the Northeast labs were encouraging, and today, more than 200 of Best Buy's 750 US outlets have been transformed into what the company calls its Customer Centricity stores. The company has reported that they have generated sales growth nearly double that of the balance of the chain. The detailed knowledge of customers that companies accumulate through their field learning labs confers a significant advantage over competitors.

Beyond Customer Research and Development

True customer-centric innovation includes two additional efforts: One of the most important first steps a company should take, even before embarking on customer research and development, is to measure customer profitability. Discern which customers are profitable and which aren't, by fully allocating all invested capital and expenses to individual customers. Do this analysis regularly, and make customer return on invested capital a central metric for business performance. This helps firms get a solid idea of who their customers are and where and why they make a profit or don't.

Finally, the company should institutionalize customer centricity. This is accomplished by making the customer segments the basic business units of the company; that is, organising by customer segment rather than by product, geography or function. Customer-centric innovation allows firms to offer increasingly tempting value propositions, helping them to avoid the trap of competing on price. The superior returns allow the customer-centric innovator to continually reinvest in the customer knowledge base. The result: A truly virtuous learning cycle and a never-ending source of competitive advantage.

Stick 'em up! Not hands, your...
Knowledge of biometrics is not enough; security companies must invest in offering a wider portfolio

(column by Akansha Pradhan)

The next time when you are paying a bill at the local grocers, just show your finger. And it'll work; you'd not get thrown out! Well, that's IF you are paying through biometric systems that might be in place. Yes, there's actually a system that scans and verifies one's fingerprint and then automatically authenticates the requested debit/credit charge. But such applications are just the tip of the iceberg.

Biometric technology actually dates back to the 14th century when the Chinese used hand and feet prints of their off spring to identify them. It's a method that, just like the computer reads binary code, measures physical attributes. Even one's passport carries biometric data. The hair, face, eyes are all visible on the card. However, these can be altered. The hairstyle will change with fashion, eye colour can be faked with coloured contact lenses and going to extremes, the face can be altered with cosmetic surgery. The fingerprints provided, though, are non-replicable biometric data. However, this April, the Singapore government has started issuing a more secure & reliable BioPass. Norway and Sweden walked this path in 2005; the EU has set an August 28, 2006 deadline for its members to switch to biometric passports. So what is a BioPass? These passports have a polycarbonate plastic page with a contactless microchip set inside. Embedded within is the passport holder's personal data, facial images and fingerprints.

There are other methods that biometric technology affords. Like Fujitsu's Palm- Secure - it non-intrusively scans the vein pattern with infrared when a person holds his/her palm over it. Alladin, an Israeli IT firm, has come out with a device that captures electronic pulses sent out by the body. "These BioDynamic Signatures include both genetic and physiological components, and are as unique to an individual as fingerprints and retinal patterns," says Shlomi Yanai, VP, e-Token Business, Aladdin. Iris and voice scans have become common knowledge due to spy movies. In real life, too, the market is huge. "Financial transactions could benefit from biometrics, e.g., voice verification for phone banking, fingerprint validation for eCommerce," points Somen Ghosh, Director, Network Programs India. "Even the Pentagon, which experimented with biometrics in Iraq to identify enemy combatants, has recommended a permanent place for this technology in US military practice," confirms Sourav Chatterjee, Director, Planman ITES. Late April, Kenneth Krieg, US Under Secretary of Defense, thumped, "DOD must develop a plan of action to institutionalise biometrics as a vital element of the department's identity management capability."

The commercial uses of biometrics are especially bright for unmanned checks. For example, there is a prototype built for frequent flyers - an iris scan identifies the passenger and updates miles earned per flight without requiring the frequent flyer ID card. Employee attendance can also be easily taken care of through biometrics; eliminating 'buddy punch-in' tactics. Statistically, the global market for biometrics is poised to hit $3.6 billion in 2008 (Frost & Sullivan). "Security companies should invest in biometric technologies to offer more comprehensive product portfolio," says Sapna Capoor, Frost & Sullivan...

(End of Akansha Pradhan column)