Does Innovation Kill Customer Certainty?
How do you strike the right balance between new product or feature development and maintaining the status quo?
The question is fundamental to many start-up businesses because it comes down to whether it is better to focus scarce resources on running and improving operations or on new development and generating customer excitement? And it could be a multi-million dollar question if you get the answer right and a killer if you’re wrong.
But it’s not always an easy call: Your tech team is bursting with ideas for the new features and functions and desperate to build them and release them onto unsuspecting users. Grown-up questions about system stability and testing can be met with heaven raised eyes and pitying looks.
And the last thing you want to do is stifle enthusiasm, innovation and creativity.
Then there is the feedback from sales and marketing people: Every day your sales team comes back brimming with a new story about major customer deals about to close ‘just as soon as we have the new gizmo, gadget or improvement the tech guys are talking about building.’
Meanwhile, when you talk about your customers your CFO insists on calling them potential customers. It seems just because users haven’t actually bought anything yet, and are perfectly happy using the FREE part of your freemium offer, he/she doesn’t see them as real customers yet.
To be fair the CFO is responsible for the bottom line and keeping the business solvent so probably spends sleepless nights wondering when all the marketing dollars will pay-off and why on earth anyone ever thought free was a sensible business proposition. Every new request for yet more resources to build the next big thing just adds to the pressure.
So what’s the right approach?
Experimenting with new ideas
Really it depends on who your customers are. If they are defined by a ‘B’ as in B2B or B2C then they are most likely to put service and operational stability way above innovation. For many who rely on technology in their business, it truly is mission critical particularly with the growth in cloud-based services. For example there is little point in having a mobile payment system that works some of the time.
As note by Oesterman Research:
“..for those charged with managing these capabilities in the cloud, an almost quantum leap increase in the level of trust is required of the providers offering these services for the simple reason that data is now in the hands of a distant third party.”
Unsurprisingly the issues that concern business customers are mostly geared around stability and security with a capital S. And they are more than likely to choose their suppliers based on ‘boring factors’ the strength of a balance sheet, availability of skilled people, geographic location, customer service record and case histories rather than innovation.
For this reason companies like Microsoft and IBM that are trusted by businesses the world over are hard to compete against and Telcos like BT have retained their business customers even though disruptive competitors like Skype offered low cost or even free solutions.
It is a fact is that most businesses of any size are simply not structured to be innovative as a brief look at the Huffington Post’s 56 reasons why most corporate initiatives fail shows.
Despite the lack of corporate willingness to experiment with new ideas internally, a new breed of companies like Huddle are emerging, offering cloud-based services and attracting significant funding – $40M+in their case. And they are winning significant business the Public and Private sectors against the big boys in core business solutions.
Plug-and-play cloud-hosted solutions like Huddle in fact offer low risk way to test new ideas when compared for example with the resources required for a major Microsoft internal software implementation. Not only do they not require CapEx but can be started small and expanded to meet demand. However, as Huddles Co-Founder and CEO Alastair Mitchell cautions, many Corporates still don’t really get Cloud Computing and view The Cloud as another data centre to stick things rather than an extended and collaborative part of their business. So there is likely to be some way to go to convince many that smaller companies focussed on making good software and running it remotely can be trusted to deliver mission critical services.
Other mainstream companies like salesforce.com and Linked-in have built up credibility over a number of years by adopting a different approach to innovation choosing to retain their core service but creating a platform for others to develop on and offer solutions. This gives customers the perception of continuous improvement and innovation with the additional benefit of letting others pay for it.
But what do consumers want?
Consumers however are motivated by whole different set of values. If you are competing in the C market then the opposite can be true. Consumers want to be excited and are more likely to adopt something that is less than reliable because of ‘the cool factor’ than go for the safe (boring) option.
Witness how loyal Apple users are, forgiving of high prices and even hardware failure because it is a cool brand.
Where the line becomes blurred is when technology or services adopted and championed by consumers crosses the line into business and the sheer popularity of a product drives it from being a consumer only to a core business product – Facebook being a good example.
Then there are businesses that add value to an existing consumer service or offer. Often these require a big partner who has the customer channel, has the service operation but lacks the imagination or entrepreneurial skills to see a gap in the market and go for it. On such rapidly growing company is Alertme.com which provides Smart Home technology enabling consumers to control of their energy use and control a range of devices in the home. The business started in the UK and now has a rapidly growing international reputation being named recently in the prestigious Red Herring Top 100.
Pilgrim Beart, AlertMe.com founder and CEO:
‘We recognize that major players around the world – government, consumers, large retailers and utility companies – have a strong interest in working together to reduce domestic energy consumption as quickly and efficiently as possible.’
Since mid-2012 Alertme has partnered with Energy Supplier British Gas to offer their UK customers smarter solutions and is a good example of how a small, agile company can be working alongside a major business to deliver innovative products to consumers that offer real value.
In Alertme’s case, the coming together of major corporate and small innovator is undoubtedly proving a winner; – a win for the company and its investors; a win for its partner British Gas; a win for the consumer and win for the future of energy consumption and a reduction in greenhouse gases.
So should you be looking at selling direct to business or consumers or is a channel partner, with a strong service culture and the resources to run it a better option. If you want to focus on innovation then a strong partner with a good service culture can offer the freedom to focus limited resources on development.
The real answer to the question is to know your potential customers, know what their priorities are and work towards meeting their criteria however that is best achieved to the financial benefit of the business.
If you are offering a cloud hosted solution for business customers, then the resources are probably best spent on ensuring operational stability getting the right partners in place and developing strong case histories. By investing in working closely with customers not only will the business be stronger but the spin-off benefit is learning most about what innovations customers would really value.
If your market is consumer then staying ahead of the market, offering innovation and excitement and building a cool brand could well be the difference between major success and failure. Consumers are also far more price sensitive – after all they are spending their own money –and it is becoming ever easier to shop around and compare offers.
Whatever the focus of your business though –direct or channel, business or consumer, there is no substitute for good service and reliability – B2B, B2C or just C.
According to a BIG research survey 17% of customers will leave after a single instance of bad service, 40% will jump ship after two instances and 28% will leave after three. So three strikes, and 85% of your customers will have gone elsewhere.
One thing is certain; if your technology continuously fails, or your product is unreliable, or your customers aren’t receiving good service then sooner or later, no matter how cool your business, a competitor will eat your lunch. Innovate by all means but be sure you value and maintain what you have.