By: Sam Herzing & Greg Heist
Product innovation may be replaced by experience which is becoming a key-differentiator for customers.
Companies are often built around creating the next new thing. Whether it’s Apple developing the iconic iPhone and iPad, Netflix pioneering video streaming or Tesla rethinking the electric vehicle, when it comes to innovation, our minds instinctively gravitate toward the realm of product innovation.
However, it’s becoming clear that building a better mousetrap isn’t the sure path to success that it once was. Lippincott’s study of more than 500 consumer brands shows that the stock price of companies identified as experience leaders increased an average of 8 percent per year over laggards, significantly outperforming the S&P 500.
To some degree, this shouldn’t come as a surprise. Focusing on experience isn’t new. Marketers, particularly those in high-end goods and services, have long seen experience as an extension of the brand. But as the pursuit for consumer attention and loyalty intensifies, it’s becoming clear experience is emerging from the role of “bench player” to key differentiator. As a result, experience is an increasing area of focus for companies seeking new ways to stand out and drive deeper engagement and stickiness with their brands.
In part, this explains why companies like Airbnb, Rent the Runway, and Peloton are darlings of the start-up community and have quickly gained staggering enterprise valuations. Quite simply, they have chosen to innovate by creating a better experience, not a better product. For these brands, the experience is paramount and any “product” is merely in service of the experience the brand engenders.
Making the Jump from Product Innovator to Experience Innovator While the case for focusing on experience innovation is compelling, it’s also somewhat daunting. To start with, the tenets of innovation are naturally oriented toward the tangible. From a corporate perspective, this ingrained mindset about what “innovation” is drives the creation of teams, structures, and processes focused on very concrete outcomes. With that kind of infrastructure in place, what happens when the “thing” being innovated isn’t tangible at all? And, more importantly, what can organizations do to set themselves apart as experience innovators?
Below are cases in point as to how organizations are successfully navigating this transition:
1. Leverage customer experience measurement to fuel innovation The increasing use of Customer Experience (CX) Voice of the Customer measurement has given companies more insight than ever into the various touchpoints customers have with their brand, products, services, and even employees. And while the focus of these measurements is typically to optimize the experience, CX insights can also drive the innovation of experiences, as well.
As an example, Pizza Hut in the UK had been experiencing dismal performance on its digital ordering website and its mobile app. Traditional ways of thinking about this would generally result in efforts to make incremental performance improvements in the hope that it would improve the overall experience.
Instead, in a bold move, Pizza Hut decided to insource all digital and ecommerce resources and integrate them into a startup called Pizza Hut Digital Ventures. The goal of this new initiative was to reinvent the Pizza Hut digital experience. By structuring this team as a semi-autonomous startup within Pizza Hut, it provided the freedom to innovate the entire digital experience.
The result was a website with zero downtime, 1.5 second faster load times, and a mobile app that increased its 1.5-star rating to 5 stars. Additionally, by creating a “deal bot” that matched orders with available discounts, the team also drove up conversion rates by 50%.
The key here is thinking beyond just measurement. Forward-thinking companies don’t look at metrics like NPS as an end in and of itself–rather they use what they’re learning to reimagine the experience altogether.
2. Widen your lens to see new possibilities If organizations want to move toward experience innovation, they must broaden their perspective and think about a much wider palette of possibilities. A practical model to help crystalize taking a wider lens on innovation opportunities is illustrated in the Doblin Ten Types of Innovation framework:
The premise of this model is that, for an innovation to be successful, any given type should not be comprehended in isolation. In fact, research based on this framework shows that the more types integrated into a single innovation, the more likely it is to ultimately succeed in the marketplace.
Let’s flesh this out by looking at the Quip toothbrush. While at first glance, Quip looks like a nicely designed powered toothbrush, it’s actually an excellent example of the Doblin Ten Types of Innovation framework in action. Here are the different types of innovation at play with Quip’s business.
Product Performance: One of the most immediately striking features of the Quip toothbrush is its design. It touts itself as the slimmest powered toothbrush on the market. Barely wider than a AAA battery in diameter, its modern design is coupled with a colored metallic handle that offers a substantial feel with an elegant appearance.
Product System: Not surprisingly, Quip comes with a replaceable bristle unit. But it also has a uniquely designed travel cover that doubles as a toothbrush holder that can be fastened to any smooth surface. Additionally, Quip offers toothpaste that is delivered in both a regular size for daily use and travel size to get through TSA security lanes.
Profit Model | Service: In using a subscription model, Quip drives ongoing profit via sales of its brush heads and toothpaste. By automatically sending customers a new brush, battery, and toothpaste every three months, it addresses the pain point of replacement frequency, which reduces the efficacy of the brush itself.
Channel: Quip is only sold online through the firm’s website, which is radically different than the typical model of toothbrush sales at retail. And, while this approach might appear to have drawbacks, it also allows Quip to leverage its website to reinforce its market differentiators.
Customer Engagement: Ever hear of a toothbrush company having a blog? Me neither. But Quip does and uses its direct-to-customer relationship to share interesting and informative content about oral care in a way that is distinctly different.
In the case of Quip, it’s clear that in widening the lens of innovation to more than a product, they ultimately created an experience that can’t be easily replicated.
3. Embrace agility to reinvent experiences Successful innovation is more than just identifying and responding to opportunities. Organizations must bring solutions to the market in a timely manner. Too often, however, rigid structures and processes get in the way of making good ideas happen.
Zappos overcame this hurdle through a widespread culture of employee empowerment. Its holacratic structure allows employees to form teams based on specific workstreams and initiatives, organically and regularly restructuring around opportunities without the friction of a more hierarchical organization.
In this case, a single customer service call spurred a Zappos team member to advocate for a dedicated customer loyalty team trained to assist customers with special needs. This agility enabled the launch of Zappos Adaptive, an extension of the Zappos online experience that serves the unmet needs of consumers with disabilities.
When agile innovation becomes the norm, customer insights can fuel all kinds of opportunities–from enhancing the customer experience, to launching new products that extend the brand experience, to reimagining the very business model itself.
With customer experience soon to take over product and service as a key brand differentiator for companies, it should come as no surprise that Gartner predicts that this year more than 50% of organizations will redirect their investments to customer experience innovation. With that being the case, the next better mousetrap might not be a mousetrap at all. Rather the experience frontier will enable organizations to espouse fresh thinking that creates new value—our favorite definition of innovation—through the enduring power of experience.
About the authors: Sam Herzing & Greg Heist
Strategy & Implementation Lead, Gongos, Inc.
As a lead in Gongos’ Strategy & Implementation practice, Sam partners with client organizations to align cross-functional teams on a shared vision and path to success on complex business challenges. Her passion for the art and science of empathy in business is at the core of her audience-centric approach to effectively managing change. She works alongside client teams to navigate interorganizational dynamics, crafting clear communications that drive lasting impact. Her B.A. in Marketing is from Michigan State University where she acted as a Research Assistant and member of MSU Students Consulting for Non-Profit Organizations.
Chief Innovation Officer, Gongos, Inc.
As Chief Innovation Officer of Gongos, Inc., Greg is charged with accelerating the future of everything—from trends and foresights, to product innovation and development, to the company’s growth and performance. He thrives on exploring societal and technological shifts that point to disruptive ways to create value for consumers and resilience for organizations. A former research practitioner with over 20 years of experience under his belt, Greg is a visionary at heart. He believes our industry is in the midst of a revolution, and plans to help pave the way. Greg is co-founder of The Future Stir, a podcast about “the future of everything” and how relates to societal and consumer issues, technology advancements, intelligence and the world of insights. He holds a M.A. in Humanistic and Clinical Psychology from the Michigan School of Professional Psychology, and a B.S. in Industrial Administration, Marketing and Finance Concentrations from Kettering University.