Magazine article CRM Magazine

Evolution from Without: The Innovation You Seek May Come from Your Customers

Magazine article CRM Magazine

Evolution from Without: The Innovation You Seek May Come from Your Customers

Article excerpt

EVOLUTION is really a simple process, an algorithm that can be brought down to four steps: Create diversity; test the diverse entities in the real world; let the best reproduce; and repeat. I think about it a lot in business, where it's just as prevalent as it is in nature but where it attracts few headlines.

Of course, reproduction has a variable definition. In the natural world it's unambiguous, but in the business world--especially the software business--it can be equated with capital. Capital is the reward the market gives to good designs (along with a bit of notoriety, such as the notice given to companies in this awards issue of CRM magazine).

Interestingly, though, the nature of capital changes over the course of a company's lifecycle. Early on, a company's capital is tied up in cash and the visions of its founders--but later, capital can be equated with what some economists have termed "know-how." In classical economics, the necessary economic inputs for production are land, labor, and capital, but know-how--the sum total of an organization's ideas, plans, and production capabilities--eventually replaces all of them as the economic driver in a modern company.

A big part of know-how is derived from customers. Having bought and used a product or service, the customer develops not just an understanding of that offering but, more important, the know-how for what its next iteration ought to be. To capture and leverage know-how, companies must find better ways to understand what their customers know.

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In market after market today that's what I see: innovative products and services coming to market and establishing themselves--and then customers are expecting the next iteration. That is why so many of the award-winning and leading companies in this issue are focused on CRM 2.0.

CRM 2.0 is an attempt to provide the tools to help companies derive know-how from their customers so that they can lead their respective markets. At its heart, CRM 2.0 is a loose federation of solutions designed in one way or another to capture know-how from customers--and, more generally, the world outside the company--so that a company can leverage it in the design of products, services, messages, and experiences. …

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