The great management guru Peter Drucker wrote about the need to observe how people work, identify their needs, and then translate that need into demand for something better. “The only purpose of business is to create and keep a customer.” 

Design firm IDEO and its CEO, Tim Brown, spent a career popularizing human-centered design and integrating it into corporate strategy—but what were the results? If it’s such a natural thing to do, why don’t we see more successes on the level of Uber, Airbnb, iPhone, Fitbit, eBay, and PayPal? The problem is that conventional research methods don’t uncover how people work and, importantly, how people work around problems to create jury-rigged solutions that satisfy them, at least for a time. So their needs may be obfuscated, obscured even, from them! 

For example, I would love to have a pair of lightweight running shoes to use when I travel. Most of the weight in my suitcase is from shoes, and the rubber in running shoes is a big culprit. I haven’t found a shoe that meets my needs, and the rental of shoes when you travel never really took off. I work around this by using an old pair of lightweight orange track shoes when I travel. I carry my orthotics in a separate pouch to distribute the weight. This method reduces my luggage weight by almost two pounds. 

If you surveyed me about running shoes, you might never know I need a better solution and would be willing to pay for it. Why? Because I consider my problem solved, even though it really isn’t. (These track shoes are on their last leg, no pun intended, so I need a solution in a hurry.) 

How do we identify the latent needs of people—needs they don’t even know they have, like Steve Jobs with the iPhone? Or going further back, recall Henry Ford’s famous (apocryphal) quote about the development of the automobile: “If I had asked people what they wanted, they would have said ‘faster horses.’ ” 

To truly identify need and convert it into demand, we must observe customers or people in the real world. In my first book [The Innovation Mindset], I said I demand one hundred customer interactions/interviews from my students and consulting clients, and I mean it. 

Observe what people do more than what they say

This is best done through what has come to be a buzzword, “ethnographic research,” which anthropologists use to learn about people and cultures. In the business world, it involves watching a customer at work—what they do and how they act. One of my favorite examples of an ethnographic researcher in action is Phil McKinney, the former CTO of Hewlett Packard, who spent his weekends at Circuit City, watching customers in the electronics aisles so he could learn what they liked and didn’t like by observing them pick up and handle devices. Many companies use a technique called “user experience testing,” where they give a participant a problem to solve and see what they do. At technology companies I’ve consulted with, we bring customers together at the office or the lab and let them play with our solutions and products, watching them but also getting their feedback on what they like and don’t like and why. 

Apply empathy when designing new solutions

Once we’ve observed the customer and how they work, we move on to the next step: empathy—connecting with people emotionally so we see the world through their eyes. Nitesh Bansal is bringing the Customer First experience he learned as senior vice president of the India-based software giant Infosys to R Systems, the global software company of which he is now CEO. “I spent the first three or four months in my new role meeting clients. I wanted to learn about their business needs, intuitively, first,” he says. “Don’t get me wrong. I looked at the numbers, so I know how much business they are doing with us. But I wanted to first understand their business from their point of view.” Nitesh believes empathy is one of the most important customer research tools because, as he says, “it helps us understand what clients really need, not what we think they want.” 

Nitesh is right. Inside-out thinking gets a lot of companies into trouble. In the fifty customer meetings he held, he says he learned what his customers do and what R Systems does for them. He answered questions: Are we core or peripheral to their business? Are we a support function? How important are we to them? 

Nitesh boiled those questions down to what he calls the Six W’s:

• Why does the customer want this? 
• What problem are they trying to solve? 
• Why do they have this problem? 
• Why hasn’t this problem already been fixed? 
• Why does this have to be solved now? 
• Why do they think we can help? 

Nitesh likes to share an example of this from his time at Infosys: a case study of a clothing retailer who wanted to install a store tracking system to discount their products at multiple stores at a specific time. The Infosys analyst who was assigned to the project couldn’t answer the “Why and What” questions listed above, so he called the customer and interviewed him. The client told him that a particular clothing item was not selling, and they wanted to discount it. The analyst asked why the customer thought discounting across the board would work. He offered to help select the right stores where the excess inventory warranted a price reduction. It took him thirty minutes to write the additional software code to discount in some stores and not others. It worked—as it turned out, only certain stores needed to discount. Nitesh says, “The client wrote to us praising this guy. They said, his solution saved us a million dollars in a set of stores where otherwise we would have made an across-the-board discount but didn’t.” Nitesh adds, “Now, that’s what we mean by understanding the customer, applying empathy. To me, that’s the heart of Customer First.”