Tenet of Innovation #5: Realize that innovation is not always customer driven

Some of the most spectacular innovations were not the result of carefully studied “voice of the customer” processes. Of course, for any business, it’s essential to keep listening to customers and to understand their needs, both spoken and unspoken, as well as to understand their applications, both current and future. But investing all of your resources in products within the vision of your current customers is likely to result in incremental gains rather than breakthroughs. As Clayton M. Christensen demonstrates wonderfully in The Innovator’s Dilemma (Harper, 1997), while you are loyally following the instructions of your customers in your new product development, some young company with little to lose can take a larger risk (one that you would consider outside your charter of serving your customers’ needs) and create a disruptive (or game-changing) innovation.

I can offer no better examples than the ones Christensen provides in his books. So let me just point out one that he discusses, and one with which I have some personal connection. This is the story of the creation of a new product category by Hewlett-Packard. Turn back the clock to a time when inkjet printers didn’t exist. Laser printers had been invented in 1969 by Xerox (actually using a laser to project the image on an electrically charged rotating drum and xerographic technology to place the image on paper) and soon after were sold in low quantities by IBM and others. By the early eighties, they were used by business customers who were driving vendors to improve the resolution, the speed, and the networkability. In 1984, HP released the first laser printer intended for the mass market, the HP LaserJet (selling for $3500 and using a Canon xerography engine).

But in the early eighties at HP Labs, engineers were working on a practical implementation of the thermal inkjet; its underlying principle was first discovered by Canon engineer Ichiro Endo in the late seventies. This was not driven by a customer request but by an interest in extending beyond the known printer technologies. By the mid-eighties, it was clear that the technology had promise. Many companies may have charged their current printer division (i.e., their laser printer division) with exploring the technology further and making a business call with regard to the value of the technology. If HP had done this, it is likely that the company would have missed a golden opportunity, and may have potentially been undercut by a competitor. The laser printer division would have undoubtedly declared that this low-resolution, slow, restrictive technology solved none of the problems its customers were screaming about. It didn’t improve speed or resolution. And any price advantage it might offer was highly theoretical. There would have been an immune response, and the technology would have been developed no further.

Instead, HP set up a new division in a new geography, charged with creating a new business, monitored by its own P/L with early “forgiveness” as the business started up. The first products were ThinkJet printers with GPIB interfaces for easy connection to HP’s test and measurement instruments. They might have been dismissed by some pundits as “toy” printers. They were slow, had low resolution, and got clogged with ink frequently. But the unique price point and lightweight product found a small market and generated revenue while the technology improved. The result was the birth of the lower-cost thermal inkjet printers we use today. If you have paid for any of their special printer cartridges lately, you wouldn’t be surprised about the very high revenue and margins these “toy” printers can generate. I don’t know if my 10-year-old data would still be considered confidential, so I won’t give you real numbers. Let’s just say you would be impressed.

So, what is the solution to this “innovator’s dilemma”? In short, you can’t always assume your most significant innovations will be customer driven. Wise product-development leaders always devote a portion of their investment to areas not directly tied to the demands of current customers and the currently served and narrowly defined market segments. Allow your product-development teams some level of creative play (apart from your customer-driven road maps), and you might be surprised by a breakthrough innovation. For a more complete description, pick up Christensen’s book.