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Executive need to listen

ARTICLE | November 4, 2022 | 6 min read

Executives need to listen

Companies that don’t pay attention to customers and employees are missing out.

By Evan Ramzipoor, Workflow contributor

Editor’s note: This story originally appeared in the Unleashing Digital Value issue of Workflow Quarterly.

In 1968, 3M bosses asked a company chemist named Spencer Silver to create “bigger, stronger, tougher” adhesives. Instead, he created something that had none of those qualities: an adhesive that could temporarily stick to paper without damaging it.

Although Silver insisted his adhesive had value, 3M didn’t see it—until over a decade later, when his colleague Art Fry, who’d heard Silver extolling the virtues of his invention at a seminar, stuck the adhesive onto a piece of paper. Armed with this sticky-paper prototype, Fry and Silver asked the company to conduct consumer testing on their invention. As it turned out, people loved the Post-it note.

As innumerable business school case studies have noted, the Post-it note worked because people in power listened—eventually, in 3M’s case—to what their customers wanted and what their employees knew.

Similarly, during the height of the pandemic, companies that were tuned into their customers’ and employees’ evolving needs and demands quickly thought up new products and services to stay afloat.

Yet when it comes to making fundamental decisions around innovation and digital transformation—reworking the core processes and systems upon which they run—most companies do a terrible job listening to the needs of their customers and employees, according to new research from ThoughtLab and ServiceNow (the publisher of Workflow Quarterly).

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A global survey of 1,000 C-level executives revealed that just 10% of companies put customers at the center of their decision-making around innovation. Only 5% take the time to consult their employees before launching a transformation project.

Nicole Chiala isn’t surprised. Chiala, a senior manager in ServiceNow’s Workflow Design Studio, has focused on user experience for more than a decade. She currently runs design-thinking workshops for ServiceNow customers who want to get the most value and impact from their technology investments.

Although analysts and research firms often tout the benefits of being customer-centric, business executives are more focused on internal priorities than their customers’ needs. The majority of Chiala’s clients have never actually talked to the end users of their systems, whether they be customers or employees. “Even people who are selling a product all day long don’t understand what it takes to develop something people want to use,” she says. “You have to talk to the end user.”

Marketing scholar Anna Cui agrees with Chiala’s assessment. “The question really is not whether companies should be customer-centric or not, but how to be customer-centric,” says Cui, an associate professor of marketing at the University of Illinois at Chicago who focuses on new product development.

Customer-centric strategies deliver concrete benefits. Companies that innovate with the customer in mind dramatically outperform their competitors. According to the 2020 Global State of XM from customer-experience-focused software company Qualtrics, customers are willing to pay more for products and services when they feel connected and engaged with a brand. If businesses can deliver a great experience, customers will accept price hikes up to 16%, according to PwC research.

Some businesses are getting it right. The manufacturing sector is outperforming other industries on customer experience, according to the ServiceNow/ThoughtLab survey, with just under half of firms incorporating customer feedback directly into product design.

The sector’s success is partially attributable to the slow pace at which it innovates, argues Forrest Morgeson, assistant professor of marketing at Michigan State University’s Broad College of of Business. Software companies are expected to ship new products constantly, but customers don’t expect physical product manufacturers to innovate at the same breakneck pace. As a result, traditional manufacturers have more time to speak with customers and incorporate their input.

When customers come to the Workflow Design Studio for help, they usually believe they have a technology problem, Chiala says. If customers aren’t buying a new app or if teams aren’t submitting help tickets, executives often assume there must be something wrong with the app or the ticketing system. However, in most of these cases, the company actually has a people problem—as in people simply don’t want or need the new tech.

Chiala’s team uses design-thinking approaches to build empathy with end users. Design thinking provides a structured approach for companies to study the end users of a new product or service, and then design it with them in mind.

Jeremy LaCroix, principal UX design strategist at the Workflow Design Studio, leads regular design-thinking workshops with customers. “We ask the users questions,” says LaCroix. “‘What do you want to do? When you need help, who do you go to? What does your day look like?’ That’s building empathy.”

These workshops aim to help teams understand people as people, not as abstract personae. This is an important distinction, says Hayagreeva Rao, a professor of organizational behavior and human resources at Stanford University’s Graduate School of Business who writes and teaches about customer-centric innovation. “We should never un-person a customer,” says Rao. “They’re not a segment. They’re not a profile or a persona. They’re a person.”

The question really is not whether companies should be customer-centric or not, but how to be customer-centric.

Although many companies have formal “voice of the customer” programs to capture feedback, they tend to be less interested in how customers actually live their lives, says Rao. Employees typically aren’t given the tools they need to empathize with the people they serve.

Rao offers an example of an Indian supermarket chain that wanted to reach more customers by emulating American supermarket best practices, such as putting fruit into plastic packaging. But the Indian supermarket was innovating for the wrong market. “Unlike American customers, Indian customers want to actually touch the fruit,” he says. “If I want to help you, I need to understand your life, not someone else’s.”

Business leaders need better ways to understand their customers as they innovate, but many still rely on outdated methods because they fear the alternative is too difficult and expensive, says Jim Van Over, a field innovation officer at ServiceNow.

Part of the problem is that customers often struggle to communicate their own needs. Customer-led product creation can sometimes hamper innovation when the company doesn’t ask the right questions. “Companies need to be aware of customers’ limitations in recognizing and communicating their needs,” says UIC’s Cui. “They need to ensure innovation incorporates, but is not constrained by, customer insights.”

Nowadays, most companies can use AI to listen to customers in real time, says Van Over. AI can evaluate or even anticipate customers’ needs based on their behavior. Some companies are already starting to invest in these scalable solutions. About a third of businesses have adopted AI and related technologies to quickly innovate in response to customer preferences, according to the ServiceNow/ThoughtLab survey.

5%

Percentage of surveyed companies that consulted employees before launching a transformation project

The telecommunications and financial services industries are leading the charge, according to the same research. The most successful businesses are investing in data storage solutions and leveraging AI and machine learning to extract meaning and value from that data.

Unlike surveys, focus groups, and similar market research tools, this AI-driven method for gathering feedback is also unobtrusive. While surveys require customers to take time and opt in, AI and machine learning can work in the background while a customer is using a product. Businesses don’t even need to mine all their customer data to see clear benefits.

Simply put, knowing beats guessing. Says Van Over: “Even if you look at 20% of the data from 20% of your customers, you can still get a better understanding of what customers want than if you try to imagine it yourself.”

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Author

Evan Ramzipoor is a writer based in California.

Articles by Evan Ramzipoor