Interviewer: How do you assess how well a B2B firm’s ability to innovate and grow?
Adams: It’s a tricky question. If you interrogate your sales team a couple of times a year, then bombard the marketplace with new “solutions” to customer problems, you might assume the answer is yes. After all, you are giving your company’s product developers a real workout. But if you’re merely practicing the R&D equivalent of what the military calls “spray and pray,” you’re wasting time and money. That’s poor B2B customer engagement for sure.
Interviewer: Is there a litmus test?
Adams: You’d ultimately like to know how well a company is structured for true B2B customer engagement. Too many companies fail to factor the customer into their innovation efforts.
Interviewer: Don’t all companies stay engaged with customers?
Adams: Oh, they may half-heartedly solicit customer input—in a ‘You do need this product, right?’ kind of way—but they don’t really listen to it. They don’t let customers drive the process. And that’s too bad, because if they don’t engage customers directly, aggressively, and objectively, they’re going to get sluggish results.
Interviewer: But what about R&D spending. Wouldn’t that create the innovation success that companies desire?
Adams: A recent study, “The Global Innovation 1000,” by Booz Allen Hamilton, looked deeper into this question. They studied 84 percent of the planet’s corporate R&D spending. The researchers identified several distinct innovation strategies, but uncovered one universal factor that led to success: “Companies that directly engage their customers had superior results regardless of innovation strategy.”
Adams: Not just a little bit. Vastly superior. Those companies that used direct customer engagement while innovating—vs. indirect customer insight—enjoyed the following financial gains:
1) Profit Growth: Operating income growth rate that was three times higher.
2) Shareholder Return: Total shareholder return that was 65 percent higher.
3) Return on Assets: Return on assets that was two times higher.
* “The Customer Connection: The Global Innovation 1000,” Booz Allen Hamilton, 2007.
Interviewer: How should companies act upon this information?
Adams: If you’re in a conversation about your company’s innovation and nobody’s talking about the customer, realize something might be very wrong. Again, poor B2B customer engagement.
Interviewer: Please explain.
Adams: To put it in terms of this study, your company might be practicing ‘indirect customer insight’ instead of ‘direct customer engagement,’” he explains. “This is a kind way of saying, ‘We’ve lost track of who our innovation is supposed to help.’” I’ve noticed that B2B firms, in particular can be grouped into six levels of B2B customer engagement.
Interviewer: What are these levels?
Adams: Let’s begin with Level 1: The Conference Roomers. If you’re innovating at the lowest level, you decide what customers want around your conference room table. Internal opinions determine the design of your next new product. As you might guess, this isn’t very effective.
Next, we have Level 2: The Expert Askers: At the next level, you poll your sales force, tech service dept., and other internal experts to determine customer needs. This is better than Level 1—because more voices are heard—but still too “internal.”
A bit better, we have Level 3: The Customer Surveyors: Companies at this level use surveys and polls to ask customers what they want. This begins to shake out internal biases… but doesn’t deliver much in the way of deep insight.
Getting better still, we have Level 4: The Qualitative VOC-ers: If you’re at this level, you send out interview teams that meet with customers to learn what they want. This is a quantum leap from VOO (voice of ourselves) to VOC (voice of the customer).
And yet better still, Level 5: The Quantitative VOC-ers: The problem with just qualitative VOC is that people hear what they want to hear. Companies that move beyond it to Level 5 get far more objective customer input. Yes, quantitative feedback drives out assumptions, bias, and wishful thinking.
Finally, we have an advanced group. The firms that excel at B2B customer engagement. It’s Level 6: The B2B VOC-ers.
Companies at this level really, truly get it. They know that unlike end-consumers, B2B customers are knowledgeable, rational, and interested. B2B-optimized interview methodology fully engages them to take advantage of this reality. Not happy with your level? Don’t fret, says Adams. You can move up the ladder and start directly engaging your customers—and you can do it more quickly and easily than you ever thought possible.
Interviewer: Practically speaking, how much can companies move to higher levels?
Adams: I’ve seen businesses leap from Level 1 to Level 6 in the space of a year. B2B customer engagement requires training and committed leadership. There really is a formula for getting inside your customers’ heads, asking the right questions in the right way, and shoring up your relationship with them in the process. Once you understand the very real, very profitable benefits of changing the way you innovate, nothing will hold you back.
The AIM Institute now provides a growth capability diagnostic tool. If beginning the journey to become a better innovator, and improve B2B customer engagement, this would be the ideal starting point.