"But what if the firm was driven, not by the goal of short-term profitability, but by the goal of continuous innovation in service of finding new ways of delighting customers? The new bottom line of this kind of organization becomes whether the customer is delighted. Conventional financial measures such as maximizing shareholder value are subordinated to the new bottom line. Profit is a result, not a goal."
Writing for Forbes, Steve Denning elucidates the work of Clayton Christensen, whose book The Innovator’s Dilemma (first chapter here) continues to redefine business success in the 21st century. After studying many industries over several decades, Christensen concludes that a relentless focus on the user experience, not profit, is what is driving today’s best companies like Amazon, Apple, and Salesforce. Instead of squeezing every last drop out of the existing business (milking the cash cow), these companies are constantly searching for better ways to delight their customers, even if it cannibalizes their existing businesses. Consider that Apple’s greatest competitor for the iPod was not a product from another company, but their own next product, the iPhone.
The Innovator’s Dilemma starts with a brilliant question: “How can great firms fail?” Instead of assuming that firms become incompetent, Christensen assumes they are acting rationally even as they get upended in the marketplace. Instead of asking “How did they get so dumb so quickly?” Christensen asks “Why do leading companies with extremely smart leaders still get disrupted?”. Most armchair analysis generally assumes that leaders become incompetent…and of course incompetence can be used to explain anything.
Christensen, a Harvard business professor, is not a designer and did not intend to get into the game of user experience…nor did he focus much on design when investigating why leading companies tended to be disrupted by smaller companies with seemingly different goals. The importance of user experience wasn’t Christensen’s initial focus…but it was the end result of listening to what the data had to say.
And the data shows that user experience is a key differentiator. But why? Easy. Customer happiness is a leading indicator of the future health of any company. If you are making people happy, and continually invest and innovate to make people happy, then they will keep giving you their money for your product or service. It’s such a simple equation that it goes without saying…and because it goes without saying it is often forgotten. When you’re looking at spreadsheets with dollar signs on them all day it is very easy to lose sight of the happiness of your customers.
In the same way that tweaking a design can lead one to get stuck in a local maximum for that screen, optimizing your existing business around the current product line can get your entire company stuck in a local maximum…so that by the time you realize it’s not working anymore it’s already too late.
So what are the changes this leads to? Here are several:
- Customer Happiness becomes the #1 Metric.To continually innovate and produce designs that make people happy, profit cannot be the #1 metric of a company. Instead, it’s an indirect play for customer happiness. To solve for customer happiness, now and going forward, is to continually innovate and look for opportunities to delight. One way to measure customer happiness is with Net Promoter Score, or NPS. NPS is a customer loyalty survey given out to customers that asks a simple question “How likely is it that you would recommend our company to a friend or colleague?”. If people are likely to recommend you to a friend you can be confident that they’re happy as a customer. Apple uses NPS to gather customer feedback…it is said their managers call unhappy customers within 24 hours based on this approach. (see my notes in Metrics Driven Design for more)
- Design is never Done. You don’t release and forget. You release and renew. If the goal is continuous innovation then product teams are responsible for the designs they release and continually improving those designs. Obviously after release a product won’t be pushed on as hard, but its likely that it’s not perfect. Look at Apple’s iLife software…very small improvements every year but enough to keep the software at or near the top…and then a feature like Faces (one of my all-time favorite features of any software) keeps them there for several more years. If a product is successful then it moves the bar higher for everyone, including itself.
- Experimentation is the new Normal. In addition to continually improving what you have, experimenting with new stuff becomes critical. Experimentation in design is still relatively new for many people. But those companies who are known for experimenting…Amazon, Facebook, Google, Twitter, are finding that it is a key to long-term profitability. It took Twitter years of experimentation to find the right advertising play, but now they have a model that really works for their customers.
And those experiments should be simple, following Gall’s Law. Continually create simple things and launch them to figure out where the next big breakthrough will happen. The end result of this experimentation is that you compete with yourself. It’s so much better to be your own competitor than to have it be someone else.
Most designers and product people have known for a long time that a great user experience is important for long term success. But when business people start talking design it’s a good indicator that the playing field has changed.