Innovation is the key to revenue growth and a healthy stock price, right? Firms with innovative products and services can crush the competition with unique, market-leading offerings that command premium prices and develop an early market lead. So unleash those product developers and software engineers to innovate away! Not so fast, warns experts from MIT’s Center for Information Systems Research. Siloed innovation can create complexity, increase costs and leave the customer with a dizzying array of salespeople and systems to deal with.

I totally agree. The winning firm is not the one that innovates the fastest, rather the one that creates products customers can use to improve their business results. Better yet, the firm that acts as an integrated organization to drive customer business value - getting ahead of the curve to anticipate areas of customer improvement to drive future growth.

How do you adopt that outside-in customer focus? Here are a few guidelines:

• Know how your customer runs their business. Get away from solutions selling and pushing products to understanding how you deliver business value to your customers today and what market opportunities you can open for them in the future. This is the #1 way to get out of the commodity box and shut down the demands for discounts.
• De-silo innovation and product delivery. Create cross-functional teams that understand how customers experience your offerings. Do they need to log into multiple systems or enter data multiple times? Does customer service know the customer’s business as well as the sales person in addressing a service problem? Innovations that create complexity - for your organization or for the customer - are value-killers. Instead, embed your solutions into your customer’s business process by making their job easier.
• Know what you do uniquely well. The authors describe this as directing innovation via a corporate vision. Simply said, focus on your core strengths and assets and on customers that can leverage your assets to go to market faster, address new market segments, reduce costs or mitigate risks. Together, you’ll both make more money

Innovation is key to growth, but smart innovation is essential for profitable growth. When customers trust that you know their business, anticipate their needs, and deliver results to improve their go-to-market results, they no longer ask for discounts. Instead they ask, “What’s next?”

From: “The Problem with Product Proliferation” www.hbr.org