The responses to a recent poll Accenture ran on LinkedIn revealed that people have very different ideas about the key ingredients for successful innovation. A full half of the respondents believe that understanding customer challenges is the key, while another third believe it is essential to embed innovation in an organisation. Industry foresight and speed to market came in equal third, while 4% opted for smart commercialization.

The truth is of course that all of these play a role in successful innovation. And even these don’t give you a full picture of what is needed for continuous successful innovation. But is there one element that is so crucial that without it successful innovation would be impossible?

It’s pretty much agreed among innovation specialists that any real innovation has to be based on understanding customer challenges. After all, a truly innovative product or service introduces new benefits that offer a superior way to solve your customers’ challenges. And if this solution is fundamentally new and so much better than the current market offering, it can even become a game-changer, just as Amazon reinvented book-selling, and Southwest changed the airline game with their low-cost, no-frill offerings.

Successful innovations help solve challenge customers face in their daily life and the current compromises they have to make in fulfilling their needs with inadequate existing solutions. This can even be needs customers may not even be fully aware of: the so-called unarticulated needs. The key to this is in-depth customer insight. You need  a fresh understanding of your clients and the notso-obvious challenges they face to give you a competitive advantage. As Henry Ford famously said: “if I’d asked my customers what they needed, they’d have replied ‘a faster horse”. Ford recognized that their real need was getting from A to B more quickly, their compromise was using a not fast-enough horse. They simply could not imagine a totally new and better solution at that time.

In other words, consumers don’t or can’t always see the full potential of new technologies. They can imagine incremental improvements to what they have (a faster horse), but they can’t usually imagine something entirely different that solves their problems in a totally different way (a car, or an airplane), even though it would be orders of magnitude better. A company that is aware of the challenges their customers face and understand the future potential of new technologies, can come up with the right innovative solutions to those challenges . Their own model T-Ford, so to speak.

So the ultimate question companies should be asking is: “How can I solve this customer’s challenge better than my competitors?”

Again, to do that you really have to understand your customers and proximity is key to understanding your customers This is a lot easier for a company like Apple, as its employees are its own most discerning customers. But it’s a lot harder for, say, a financial services company. Of course, their employees also buy financial products, but that doesn’t mean they understand the challenges faced by specific target groups, such as doctors or entrepreneurs. One global electronics group has taken this particular bull by the horns and organizes ‘consumer safaris’ for its employees, where marketing and R&D people spend time in its customers’ homes. There they observe the actual challenges that their customers face on a daily basis to uncover opportunities for innovations that really do matter.

Combining customer insights you gain from such safaris with deep technological insight, gives you a powerful innovation driver. Certainly if you master to understand how current and emerging technology can be applied to meet future needs. That is industry foresight, the ability to foresee or prepare consciously for the future. You have to ask and be able to answer the questions “where is our industry going and how can we solve our customers’ current and future challenges”.

And this is where smart commercialization and speed to market become very important. The better the product and the more quickly you can launch it, the greater the lead you will have on your competitors and the longer you’ll be able to dominate the market. Or rather: timing to market is a crucial capability. After all, if you’re launching a new range of ice creams, it’s probably best not to do this in the winter. Just as you need to determine when customers will be ready to embrace a new technology (tablets anyone?).

The most successful innovative companies do this repeatedly, which is only possible because they have indeed embedded innovation in their organization, or systemized innovation.

This requires a comprehensive  innovation operating model such as Accenture’s Innovation Engine, which we specifically designed for our clients to systematically identify, develop and select more valuable innovation projects and scale these faster with a higher rate of success. We believe that systemizing innovation means embedding a customer-centric innovation and culture and process that enables first time right and fast. These processes will push out successful innovation with a higher degree of predictability and a higher correlation between input (R&D budget, investments) and output (demand-led profit growth).  In other words, it helps companies to come up with better solutions to real customer challenges, not on a random basis, but consistently and continuously.

So in short, innovation is about identifying your target audience and growth markets, combining customer insights and market foresight to come up with game-changing innovations that meet your customers’ ultimate needs. Only if you have systemized innovation in your organisation, you will consistently and profitably help and excite your customers again and again.

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