Customer Preferences Shape Innovation Process Business Essay

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Introduction

Customers demand for goods and services have remained changing with the passage of time. These changes are due to trends, preferences, purchasing power and more crucially to an updated and latest product or service. Customers prefer those products or services which are easy in use and are cost efficient. Nowadays customers possess more information and they are more knowledgeable to assess the pros and cons of the goods and services. Most of the customers complain and some of them do give suggestions to the employees or owner of the business that where they are lacking. But the other side of picture is that not all the firms consider those suggestions, improve and maintain their competitive position in the market.

Term innovation is commonly used everywhere but most of the firms do not even know what it is. This doesn't mean that they do not innovate. They do but they are unaware of this terminology. They actually use the term ideas instead of innovation. Term innovation is defined as "Innovation is about change and the ability to manage change over time. Innovation can be about the successful exploitation of new ideas in the form of a new or improved product or service but it can also be about the way in which a product or service is delivered. Equally, innovation can be about creatively positioning an existing product in the same market" [1] .

Both of the terminologies "Demand and Innovation" are related with each other and are the driving forces. Some marketers consider that demand is the driving force while others considers that innovation is the driving force of demand. The later considers that supply creates its own demand. This statement is applicable in few industries such as high tech and fashion industry, but not applicable in all industries. Some firms only delivers what consumers are demanding and some provides those products and services which the firms thinks will be useful for the customers. Some firms have clearly defined the triggers of the innovation. These are, Suspected demand, Client Demand, Internal cost savings and Revenue generation.

Most of the firms have changed their philosophy. They say that customers are everything for us. We exist only for our customers. That's why now they take input from their customers whenever they are bringing something new in market. Companies invest heavily to get consumer insight. But majority of the past researches show that mostly ideas comes from employees and not from the customers. This is also true, because customers describe their unmet needs and desires whereas employees give shape to that need. Employees possess good knowledge about company and customers. This again shows that the origin of ideas comes from customers.

Purpose of the Research

This project set out to highlight current, not best, practice as a way of raising awareness of what organizations are currently doing to innovate in response to consumer preferences or ideas, and to provide lessons for policymakers. Our results can help to improve the effectiveness of their policies in stimulating demand-led innovation. The resulting framework should be seen as a way of increasing understanding and awareness of the way consumer preferences are influencing how organizations in the service sector innovate.

Research Problem

It is very crucial to understand that how information about the consumer needs and preferences is gathered and how much authentic that information is. Biasness and incorrect answers or choosing the wrong sample destroys the main purpose of the research. And how this information is used in innovation process?

Secondly, it is important to know that what results to demand and supply policies. Will the demand be adjusted automatically through increased supply or will there be any shortage or surplus of products.

Finally, are the companies fully utilizing these opportunities? Has the company gained potential benefit from the innovation or not.

So conclusively, we developed the following research questions,

1. How information about consumer preferences feeds into innovations within organizations.

2. The resulting likely impact of demand- oriented policies.

3. Any lessons from missed opportunities.

Research Methodology

Research that was conducted was a qualitative research in which the most suitable persons were selected on judgment. It was not feasible to conduct a quantitative research because we do not know impact of consumer preference on innovation to frame the right questions. And secondly, we do not know to whom we should interview.

Information Need

How do innovations occur in the organization?

Exploration of whether idea was externally or internally influenced.

How firms gather such ideas?

Who selects which ideas should be taken to further stages?

What obstacles does the innovator face in developing the proposed idea?

When in the innovation process interaction with the consumer was sought.

How they looked to understand consumer needs and preferences.

Where this information was then used throughout the innovation process.

Scope of Research

In order to gain a deeper understanding of how consumer needs and preferences are used within organizations, we looked at innovations within five organizations, which includes,

• A large financial firm, financial services.

• A large commercial retailer, retail services.

• A large professional services firm, business services.

• A large construction firm, business services.

• A small firm of architects, creative industry.

Data Collection Method

Data was collected through questionnaires. Questionnaire includes structured and semi-structured questions and open ended questions.

Measurement instrument

In each organization 5-10 interviews were conducted, which lasted an average of 1.5 hours each. On some occasions, interviews had two people from the participating organization present. The number of people and number of times each were interviewed differed across organizations depending on the time

Interviewees had available and the relevant knowledge they had. Researchers also collected written material from organizations, where available, as additional supporting evidence in our analyses of the innovation process or the particular innovation under consideration. The persons from whom we conducted the interview were senior member of staff responsible for change and innovation.

Sample

Data was collected from five different sectors. Sectors and organizations were identified based on their fit with the following criteria:

These sectors have actively conducted the researches and were willing to share the knowledge.

Sectors have focused on value added activities.

Organizations have remained involved in innovation activities.

A desirable match would operate in a different governmental policy context to the UK.

Selected organization should face competitive environment.

Findings

This framework reveals that consumer needs and preferences feed into organizations' innovations through a variety of mechanisms. In summary the research analysis revealed the following patterns:

• Incremental innovations responding directly to consumer needs and preferences occur as a result of explicit short-term consumer preferences fed into the organization through days on the shop floor, bespoke client interaction or customer feedback.

• Larger or radical innovations responding directly to consumer needs and preferences occur as a result of a focus on longer-term consumer trends that feed into the organization through market scanning (either of the consumer or competitors), blue-sky thinking or bespoke client interaction.

The case studies revealed that organizations appear to be missing out on opportunities to maximize their competitive advantage by neglecting systematically to scan consumer trends or involve users earlier in the innovation process. Equally, government and business users were engaging in transactional relationships with their suppliers, rather than adopting more open relationships, thus making innovations more difficult to achieve within specified briefs.

The framework is based on in-depth insights from how consumer preferences really influence innovation in organizations. As noted at the outset, the findings are not intended to offer any generalizations, but to capture the detailed nature of how consumer needs and preferences can influence the ability and willingness of organizations to innovate. Some factors, including the origins of the demand (consumer, business, or government), size and sector of an organization, formality of processes for innovation and type of innovation, emerged from the case studies as potentially differentiating factors in the way in which consumer needs and preference influence innovation in organizations. It should be noted that due to the nature of the methodology no firm conclusions can be made about the nature or direction of their influence. These factors have been presented in the discussion of the framework above, but the data are not suitable to test conclusively specific hypotheses about their influence.

Based on these findings, the following framework was developed.

Focus on long-term trends

External or internal need/

Internal origin of idea

Radical innovation

Long-term trends

(External or internal need)

Internal origin of idea

Radical innovation

Explicit short-term preferences

(Internal or external need)

Internal or external origin of idea Radical or incremental innovation

Explicit short-term preferences

(External need)

Internal or external origin of idea

Incremental innovation

Explicit short-term preferences

(Internal or external need)

Internal origin of idea/Incremental innovation

This framework identified the five sources through which the information about consumer needs and preferences is collected. And then it requires the organization willingness and ability to innovate. These five sources are,

Days on the shop floor

This activity involves the employees to remain near to the customers. They consistently for a shorter period of time remain on the shop floor where from customer purchases goods and services. Employees usually help them in purchasing the products and they get feedback about the new things that they want in that product or the ways through which it can be improved. This activity provides sufficient data to the employee, and these employees are able to give shape those needs. It also helps them to better position their product or service in the market.

Bespoke Client Interaction

In this activity, management decides to remain in touch and collect information from few and selected customers rather than the mass customers. Mostly the organization selects big and loyal customers. They get input from those customers and try to bring innovation in the product. But this kind of interaction has also some demerits. Our researched organizations mentioned that the briefs that were collected were too difficult to innovate and sometimes those briefs or specifications contained conflicting elements. But nevertheless, this activity was quite successful as it pushed the customers to think in a creative way and provide some ideas which could be further innovated.

Customer Feedback

This method is much common and is used by many organizations. This actually involves two types of feedback. First, it invites entire customer to give feedback about the product or service. Mostly we have seen drop box in stores where we can leave our feedback or a feedback card mostly seen in restaurants on the dining table, which inquires about how u liked the food and services. Second, it also collects the feedback from customer when a product is tested in the market. That feedback carries much importance because the new product decision to continue or discontinue completely depends on this customer feedback.

Market Scanning

It is a systematic way to collect the information about the ongoing trends in the market. It also collects competitors information about what they are doing and what they are about to launch in the market. Data is mostly collected through the secondary source customer who includes the published work by competitors, Government agencies about trends and other concerned works.

Some organization also collects information from their customers asking them about the ongoing trends and preferences or about the demographics.

Blue Sky Thinking

This activity is concerned with developing the idea by employees for their customers. These ideas were mainly focused on what will the customers like in the future. It is actually anticipating the consumer demand. Top leaders from the organization get together on some place to think and work on idea. This usually happened once in a year and certain budget was allocated to work out on idea.

Recommendations

This research was an exploratory research in which we wanted to understand the relationship between demand and innovation and how the consumer preferences shape them. That is why qualitative samples were collected to develop a base or framework on which further researches can be done. This research work has suggested three main recommendations,

Establish and proactively manage relationship interaction to allow more opportunity for innovation within the procurement process, and through better education of purchasers and suppliers of the potential for user-driven innovation.

This recommendation emphasizes on developing a strong relationship with supplier, professional bodies and others in which everyone can discuss about potential innovations through two way information flows. Public and private organizations should therefore examine the way they interact with and gain ideas from their consumers and suppliers. Policymakers should educate organizations on how to use relationships to encourage innovation in their procurement and support the sharing of best practice.

Organizations should do more to uncover hidden customer preferences and ideas to stimulate innovative responses.

Organizations should understand the importance of the users and maximize ways to reflect their own needs and preferences. Our research reveals that organizations do not fully appreciate the creative potential of the consumer, often only obtaining consumer feedback to test products at late stages of development. Most consumer feedback reflects existing preferences. Organizations must construct conduits through which positive and negative feedback can be fed into the innovation process as without mediation or structure.

Embed opportunities for interaction with consumers into our business culture so that it feeds the innovation process.

Creating the interactions with consumers and understanding hidden preferences is not enough. Businesses and other organizations must embed the search for this interaction and information within their processes and culture. Innovation champions must work to ensure employees see early consumer input as an essential and good part of the criteria for successful innovation. Opportunities for interaction with consumers must be systematically created, and their insights passed to all those involved in all stages of the innovation process. One way for public policymakers to facilitate this change is to encourage organizations to develop and articulate their innovation process, and for this to be part of their market offer. It could be a part of companies' annual reporting requirement.

Conclusion

This research provides the basic framework about how consumer preferences shape the innovation processes. This research was a qualitative research in which expert opinions were taken from the five selected organizations. Sample unit was also randomly selected because in those organizations there was not any concerned person who looks after the innovation process. Therefore this research has lacking that we cannot generalize it. This research was actually an exploratory research whose main purpose was to develop the basic framework and this research has successfully developed that framework. Findings from the research show that there was hidden innovation in these organizations. Apart from that, these organizations were to collect to complete information from their customers and build a long lasting relationship with them which could develop the sense of responsibility and loyalty. It is also suggested that the government should take the active role to regulate them and bring every organization to be innovative.

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