On their way to earning the label of “disruptive,” breakthrough innovations may look like they lack the potential to earn big profits. But what’s critical, say finance executives at middle-market companies, is to start with, and follow, customer needs.
Such insights are among the revelations contained in a recent survey conducted by CFO Research, in collaboration with CPA firm Cherry Bekaert. The study, which is based on data from 161 finance executives at companies with revenues of up to $1 billion, found that even with the ascendancy of Big Data, half of respondents believe that developing new products and services to meet evolving customer needs will be the most important action their company can take to innovate successfully over the next five years.
In their written responses to questions, finance executives cite their awareness that “we had to understand our customers’ changing needs,” as one put it, adding that the business had to “change with—and in anticipation of—those needs.” Another respondent stresses the pressure to come up with “new product applications in anticipation of customer needs” and the value of “thinking as our customer does.”
While data analysis may be crucial in identifying hidden patterns and pinpointing correlations, finance executive don’t regard it as a substitute for staying close to customers. One respondent writes of the “need to sometimes look beyond traditional boundaries for different perspectives on how customers interact with your products.” Once they make a splash, wildly successful products like the iPod seem as if they materialized out of nowhere. But more frequently such innovations grow out of paying painstakingly close attention to what features customers liked—or didn’t—about more primitive iterations. By the time the consumer-friendly iPod made its market debut in 2001, rudimentary versions of MP3 players had been circulating for years.
Among finance executives who completed the survey, there’s a shared awareness that the kind of innovation that ultimately reconfigures markets requires that all of a company’s employees put their minds together, searching for the right combination of features that might delight their customers. The vast majority of survey respondents, 88 percent, say their companies still have work to do when it comes to getting employees at all levels more deeply engaged in innovation—a management challenge that will also test the creativity of finance executives.
For more surprising insights into how middle-market finance executives view their innovation efforts, see Cultivating a Creative Organizational Mindset.