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Innovation that works – for the customer and the business

Innovation that works for the customer and the business

Organisations that are integrated across Customer and Operational teams are better positioned to create innovative, leading edge experiences that can be delivered with confidence and set them apart from competitors.

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Partner, Operations Advisory

KPMG Australia

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In today’s competitive environment, organisations need to continually innovate new products and services to excite and delight their customers – leveraging every insight possible to pre-empt their needs.

“New competitors are always looking to identify a niche which the larger organisations have been unable to, or are not flexible enough, to respond to,” says Curtis Davies, National Partner in Charge, Operations Advisory, KPMG. “In this era of innovation, if you can’t develop a unique service for your customers that is aligned to what your operational teams can deliver, someone else will.”

Davies says the key is taking a holistic approach to innovation – ensuring that everyone, from front to back office, is involved and equipped to identify and contribute to innovation opportunities.

“Innovative products need to be Desirable, Feasible and Viable – the magical triangle of Design Thinking. Desirable is understanding the customer need; Feasible is ensuring it can be delivered; Viable ensures there is a value to be generated. It requires deep collaboration between the front office (Customer), the middle office (Operations) and the back office (Finance) – an integrated team.”

An integrated approach

Taking this whole-of-organisation approach to designing customer experiences means there is a better chance of offering something unique that keeps it ahead of competitors. However, Davies warns that there are countless examples of innovations that have not succeeded due to ‘silo thinking’.

“The customer side of an organisation can design the optimal customer experience, but it may be too expensive to be viable. Equally, the operations team may have control over procurement and supply chains, but the metrics they’re judged on may be efficiency and cost – not necessarily reliability or quality.”

When Davies worked at a major airline, he encountered an example of when a silo approach to innovation led to a great customer product, but it had operational challenges that negatively impacted the overall experience.
“One team designed an extremely comfortable and versatile passenger seat; while the engineers designed motors for it to operate fantastically well.

“However, we didn’t think sufficiently about how to efficiently maintain the seat in the high utilisation environment, which caused some delays when the seats needed adhoc repairs. We realised that the customer people were thinking about it from a comfort and aesthetic perspective, while the engineering people were focused on building it to be mechanically sophisticated. Instead, we needed an integrated way of thinking to optimise the overall value to both customer and airline.”

Segmented supply chain

When a business has an integrated approach to innovation, they are well positioned to harness their supply chain to offer differentiation, Davies explains.

“Understanding the different segments of your customer base, their needs, and what they are looking for – and seeing the different price points they will pay – is critical to optimise business performance. Some customers will want a low price point; others may want faster delivery; others a particular aesthetic. Each one potentially has a different supply chain.”

This approach is akin to tiered airline travel – offering first class, business class, premium economy and economy.
“Each has to be delivered to meet a brand promise, but each promise has to be fulfilled in the most efficient manner, often with its own supply chain.”

Data analytics technology is a great tool to understand your customer segments. KPMG’s 2017 Global Consumer Executive Top of Mind Survey found that 84 percent of high-growth companies say data analytics is at the heart of their customer segmentation strategy.

“You need to leverage your operational experts to identify the most efficient manner in which these segments can be clustered and serviced. The effort can add significant financial and brand value.”

Leadership matters

To ensure everyone is equipped to identify innovation opportunities, leaders need to be set up well to collaborate, Davies explains.

“Culture is so important. People have to be willing to share insights, problems and ideas, and to work together to solve that challenge.”

For example, the operations function may have control over the supply chain, but they may not have access to the metrics of customer segmentation. It that was shared, they could learn that different groups are willing to pay different prices for tiered services, and they could innovate new delivery models to match.

“Without collaborative leadership you aren’t going to become an aligned organisation that provides a clear service to your customers, that is aligned to your production line,” he says.

Embracing technology

Much innovation in customer products will be enabled from new technology, Davies says.

“Technology led innovation in fulfilment and production means that a lot of innovative ideas will come from these operational breakthroughs.”

Harnessing the Internet of Things (IoT), Artificial Intelligence (AI), Robotics and Augmented Reality (AR) could lead to the design of completely unique customer experiences.

“IoT, AI and AR were not created as ‘products’. They were developed through scientists pushing boundaries to solve operational problems. Now they are being translated into new products and experiences in ways the original creators never dreamed,” Davies says.

The 2017 KPMG 2017 Global Consumer Executive Top of Mind Survey revealed that many organisations are using these technologies in an attempt to surprise and delight their customers. It found 33 percent had invested in IoT, 33 percent in 3D printing, and 32 percent have installed robots to perform basic repetitive tasks.

Test and learn

If an organisation is working holistically to innovate new products and services, it is possible that the next idea could come from anyone, in any department. Davies emphasises that it is vital to remember the magic triangle – Desirable, Feasible and Viable – to ensure an innovation aligns to strategy and customer needs, and has commercial potential.

“There is a lot of innovation on production lines and within operational services which can create leading products that wouldn’t otherwise have existed. It’s a case of whether the different parts of the business can be open to each other, to try and test new things,” Davies says.

Further reading

Many organisations are working hard to understand their customers, but it is those that can develop empathy that will truly innovate to customer needs. Find out more in Empathy is power when it comes to customers.

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