Who Should You Listen To: Customers Or Competitors?

Last Updated Jan 14, 2010 4:06 AM EST

In a well-illustrated piece in Forbes last week, Adam Hartung argues that listening to customers, especially the big ones, can be damaging, because they don't know what they're going to want in the future.

All they will ask for is more of what they're already getting, but with lower prices and better quality. Adam illustrates this with an apocryphal Henry Ford quote "If I had asked my customers what they wanted, they would have told me -- a faster horse."

Using examples from publishing and IT, he proposes that watching competitors, particularly those on the fringe, is a much better way to spot emerging consumer trends, and the only way to survive when markets shift.

Some of Adam's examples may be a little stretched, but the underlying point is well made. Indeed I've blogged on this in the past elsewhere, specifically on the value to bigger players of using M&A to harvest innovations from smaller, more entrepreneurial competitors.

So does this mean that we don't need to listen to customers? I'd argue we certainly do, but it's a case of using the right tools for the right job.
Your business is defined in the customer's mind, by the things you currently do for them, and that's a very tight box for them to try and think outside of. Only the "right kind of customer" in the "right kind of environment" is likely to add much value to strategic innovation.

On the whole, customers are much better at identifying flaws, comparing quality, feeding back initial impressions, and testing out prototypes, than they are at predicting their own, let alone others', future behaviour.

So what about competitors? Simply watching established industry players is a pretty narrow lens through which to identify future innovations and trends. Apple didn't establish their music-download business by watching their established competitors. They saw data compression technology being used for media sharing and bootlegging.

They legitimised it, packaged it, built a commercial model around it and marketed it extremely successfully, to create a completely new, vertically integrated industry.

The innovators and entrepreneurs that will create the "next big wave" are unlikely to come through an area already occupied by Apple, or one of their major competitors. Rather they will emerge in an area that is currently untapped, and their inventions will ultimately attract consumers away from traditional markets, establishing new ones. These guys aren't "on the fringe" of Apple's industry -- they're beyond it.

So back to the question - who should we listen to for new business ideas? The answer is as broad, and diverse a group as possible - including those innovating beyond the fringe. To paraphrase Tom Peters: never waste a lunch by eating with people like you.

But ultimately, who you watch and who you listen to, is not the most important factor in whether you fail or thrive when the next big wave hits.

In the Forbes article, one of the examples of business failure is Tribune corp. a newspaper business that invested in on-line sites, but refused to move away from its heritage in print. Their narrow view of their industry simply filtered out the likely end-result of these new game-changing ideas, of which they were clearly well aware.

And this is the most important factor of all: do not restrict your own horizons to the boundaries of your current business. The good news though, is that the more time you spend with people beyond the fringe, the more your own horizons will expand.

(Pic: keela84 cc2.0)