Monday, January 5, 2015

Relationship Age Innovation

The path for innovation has changed over the past several hundred years.  Industry competition has evolved from the Industrial Age to the Information Age and is now entering the Relationship Age.  With this evolution, the focus of innovation is also changing.  Let’s take a look at the business environment during the past few hundred years.

Industrial Age Innovation

By the early 1800s we were into the industrial age.  Steam power was transforming industry and economies.  Instead of individual artisans and master craftsman, factories were springing up that used steam power.  Steam power magnified what men and animals could do.  With the industrial age innovation, machinery and products were invented that could do things faster, stronger, longer and more reliably than the manual methods.

By the middle of the 19th century, steam was on the move.  Innovation placed steam power into locomotives and steamboats.  These connected markets with safe reliable transportation.  Now a product designed and built in one location could be quickly and easily transported hundreds, or even thousands, of miles away and put into use.

At the dawn of the 20th century there was the advent of mass production and now the industrial age was in full swing.  Products of ever increasing complexity and performance could be designed and built reliably and at a low cost.  They could then be delivered to distant customers.  The speed and efficiency of the manufacturing and logistics process were the innovative keys to success.

Information Age Innovation 

By the middle of the 20th century several innovative products were bridging the gap from the industrial age to the information age.  The telephone made instantaneous communication inexpensive and reliable.  The airline industry brought people face-to-face across whole continents in just hours instead of days or weeks.  Finally television transformed the news and communication of current events and entertainment.  All of these led to people expecting instant reliable communication.

The information age began to grow beyond the consumer segment.  Customers wanted the industrial age products, but they also wanted real-time information about those products.  Products had to undergo a digital transformation so they could communicate with each other and provide real-time status.  The collection and distribution of data and information created multiple innovtive industries.  

For instance there are now communications satellites that enable global communications, weather satellites collect and analyze global weather data, and the global positioning satellites have created an industry and functionality for numerous products. 

The microprocessor and the World Wide Web have made this information instantaneously available to customers and businesses everywhere.  So every product is becoming digitized and the interconnection of systems and databases is a key product or service component. Whether it is personal computers, production line equipment, airplanes or cell phones, if your product or service is not connected, you are not visible in the market.

As we approached the end of the 20th century, information age functionality was no longer enough.  Whether it was the B2C or B2B environment, customers were overwhelmed with data.  In addition, some of the data and information was biased or filtered by the information provider.  While there was a steadily growing demand for more data, there was a steadily diminishing trust and confidence in the data.  And this has spawned the birth of the relationship age.

Relationship Age Innovation

In most cases, the product is now a commodity.  There are numerous global competitors with essentially similar products.  These products are at the peak of their industry from both and industrial age and information age functionality.  What the customers now wanted was two things. 

The first was to get data and product performance just the way they wanted it.  They wanted it when they were ready to consume the data.  They only wanted the data they were interested in.  They wanted it in a format that was easy for them.  They wanted the product to be configured for their unique application.  

Secondly, they wanted to connect with a network of others that have similar interests or concerns to compare findings and share experiences and best practices. 

To meet these two customer wants, relationships are needed.  A relationship between the customer and the seller to customize the product or service offering in such a way that it is convenient and meets all the customer data and functionality needs.  And a relationship between the product or service providers and users or those who are like-minded to co-create and encourage one another.

The companies that have understood the dynamics of the relationship age are now flourishing.  Companies like Amazon, Apple, and Facebook.  On Amazon, every customer’s page is different based upon the interests they have shown in the past and their current requests.  Amazon customers can choose their products, payment methods, and delivery.  In addition, there are customer reviews including likes and dislikes available for every product or service; and a customer can quickly and easily enter their own review.  The innovation is in the customized order entry and delivery process.

Apple smart phones have thousands of apps available.  The phone itself is a commodity - the value-add for the customer is in the apps.  Each customer can pick and choose which apps they want and when to use them.  Some of these apps provide ways to further connect with other users.  The innovation is the easy enablement of tens of thousands of apps.

And Facebook allows the user to decide who is in their network and what content they wish to share.  Their Facebook page can be customized to filter what they see from others.  The innovation was the creation of a relationship platform that is robust and customizable.

Innovation Must Build and Leverage Relationships

Keep in mind, the industrial age and information age product characteristics don’t go away in the relationship age.  It’s just that those characteristics are now assumed to be there.  They have become the commodity portion of a product.  The differentiator, and therefore the value creation element, is in the enablement of relationships.  This is where the innovation must now occur. 

Innovation that ekes out another 2% increase in performance does not create a significant market impact like an innovation that creates relationship capabilities.  Customers now want innovation which allows total customization while maintaining high levels of quality and performance.  And customers want innovation which enables real-time communication with the manufacturer, the seller, and other users.  Those companies that recognize this shift in the direction of innovation will create tremendous value; value for both their customers and themselves.

1 comment:

  1. Thanks for taking the time to discuss this, I feel strongly about it and love learning more on this topic. If possible, as you gain expertise, would you mind updating your blog with more information? It is extremely helpful for me.