A Challenging Question for Innovators

Image courtesy of Harvard Business Review Publishing Corp.

If you think your company is innovative, Michael Schrage has a question for you:

“Who do you want your customers to become?”

Schrage, a researcher affiliated with both the MIT Center for Digital Business and Imperial College’s Innovation and Entrepreneurship Group, has written a new e-book with that title, and he argues that this question distinguishes companies that have authentic innovation to offer from those that don’t. (If your answer is, in effect, “We want our customers to become people who buy more of the stuff we sell,” then you’re in sales, not innovation, Schrage asserts.)

I spoke recently with Schrage in Cambridge’s Kendall Square, and here’s a bit of what he told me about his question and his thinking about innovation these days.

• Successful innovations change the people that use them. Innovation is not just about adding new value, says Schrage, but about how you transform users. Consider, for example, how Google has transformed hundreds of millions of ordinary people into people who conduct information searches that, in turn, improve Google’s own algorithms and abilities at search. Or think about how your smartphone — or Facebook account — has changed you and the way you behave.Whether a successful innovation was from an earlier era, such as Henry Ford’s Model T, or involves contemporary technology, a common denominator is that successful innovation changes people’s perceptions and behaviors.
• Innovative companies can create customers who are more valuable to them.“I believe that a failure of modern microeconomics has been overweighting the importance of human capital within the organization — and underweighting its importance outside the organization,” Schrage said. In other words, he argues that traditional economic thought has conditioned us to think too often of the interactions between companies and their customers just as simple exchange transactions.In reality, the interaction between innovative companies and their customers is more complicated. Innovations aren’t just exchanges, they’re investments that make customers and clients more valuable.For instance, Schrage sees Starbucks as a company that has created customers who are coffee connoisseurs — and that change in consumers’ attitude toward coffee makes them more valuable customers to Starbucks.