11 May 2012

From product innovation to experience innovation: Advice that still rings true

Competitive advantage in the world of products has historically been linked to differentiators such as features and functions, and metrics such as cost and performance. Break free of that mindset, and focus on experience instead, argue the authors of this compelling paper from the MIT Sloan School of Management.

The crux of their observation: “While most companies and managers have been indoctrinated in the product-centric view of innovation, many have made significant inroads into the next phase, that of providing customer solutions. But few have totally embraced the experience space and the new experience-centric view of innovation.

C.K. Prahalad and Venkatram Ramaswamy propose that the future source of value for consumers and companies should be in co-creation and the introduction of “experience environments”. And rather than innovation being focused on incremental improvements in products and services, it should aim to facilitate the creation of value by the consumer.

Using examples of a networked pacemaker, an on-board network service for automobiles, and LEGO products, they encourage businesses to embrace a new source of innovation, and allow technology to facilitate it, not drive it. And this innovation is found in the formation of personalized interactions with experience environments. How are these arrived at?

“First, the infrastructure for personalized interactions requires a nodal company that pulls together a large number of suppliers, partners and consumer communities to form an experience network. Second, it is futile for either the nodal company or the network to try to manage individuals’ experiences. The heterogeneity of individuals and their contexts will dictate the experience. The challenge for innovating companies is to figure out how to accommodate that heterogeneity. The concept of creating products and services will not disappear; neither will the importance of channels. Rather, they will be subsumed into the larger concept of creating experience environments supported by an experience network.”

And this “experience environment” sounds just like the totality of customer experience that we aim to influence, starting with service design. Here’s their definition of the term:

“An experience environment can be thought of as a robust, networked combination of company capabilities (including technical and social capabilities) and consumer interaction channels (including devices and employees), flexible enough to accommodate a wide range of individual context-and-time-specific needs and preferences.”

The examples may have aged slightly, although the thinking here is remarkably fresh. And underscoring the value of the piece is the authors’ statement alongside: “This article is not about best practices or current practices. It is about next practices.”

Those next practices should already be today’s standard practices, considering when this was published. But have faith, what was written in 2003 (yes, 2003) still has lessons for us today.

Source: The New Frontier of Experience Innovation (C.K. Prahalad and Venkatram Ramaswamy)

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