The Imperatives of Customer-Centric Innovation

At Amazon, the focus on our customers isn’t an idle tenet; it is the very root of our approach to innovation. Amazon’s mission is to be Earth’s most customer-centric company, and the very first of our 16 Leadership Principles—Customer Obsession—states that, “Leaders start with the customer and work backwards. They work vigorously to earn and keep customer trust. Although leaders pay attention to competitors, they obsess over customers.”

There are a few core concepts in this Leadership Principle that help Amazon drive and sustain its customer-centric culture. The first concept of “working backwards” is both a mental model and an innovation mechanism that keeps customers at the center of everything we do. Working backwards involves starting the innovation process by thinking deeply about your customer, about the persistent problems they face, and what their long term needs are.

We believe that centering innovation efforts on our customers ensures we aren’t innovating in isolation or building technology or services for their own sake. We remain close to customers, and focus on elements we know they will value over the long-term (e.g. price, selection, and convenience in our retail businesses; performance, security, breadth and depth of features and functionality, and cost performance of AWS’s cloud services). And by diving deep into the context and situation behind those needs, we are better able to react and anticipate what will surprise and delight customers as we invent on their behalf.

By way of example, 90% of what we build at AWS is driven by what customers tell us matters to them. One example is Amazon SageMaker, the most comprehensive machine learning (ML) service that helps prepare, build, train, and quickly deploy high quality ML models. Tens of thousands of customers—such as the NFL, 3M, General Electric, T-Mobile, and Vanguard—love Amazon SageMaker’s integrated capabilities for ML development, making it one of the fastest growing services in AWS history. They also love how quickly it iterates. Last year marks the second year in a row where we added over 50 new features in twelve months. We did this by actively soliciting our customers’ feedback and what we can build for them.

A frequent request was helping to make data preparation for ML easier. This is hard for customers, who need to collect the right data from different sources and across myriad formats; normalize data to incorporate it correctly into ML models; select and transform the most relevant features for predictive model algorithms—even combining different features—all of which is difficult and takes a lot of time. You then need to look for missing data or outliers to see if your feature engineering works before you apply transformations across your data set.

Customers asked us if there was a better way. Based upon that feedback, last year we launched Amazon SageMaker Data Wrangler, the fastest way to prep data for ML. Customers can simply point Data Wrangler at their AWS or third party data stores, and DataWrangler has over 300 conversions and transformations that automatically recognizes the data coming in, suggests the right transformations to apply, makes it easy to combine or create composite features in a simple console, allows you to preview and validate the transformation easily in SageMaker studio, then effortlessly apply it easily across your entire data set. This was a game changer for customers in terms of the amount of time saved in data preparation for machine learning.

While 90% of products, features and services come from customer request, the other 10% of our innovations arise from needs that customers may not be articulating, but by remaining close to our customers and relentlessly focused on their needs, we are able to read between the lines and invent on their behalf.

No one, for example, asked us for Echo, which launched in 2014. But we had a vision of how an intelligent, voice-controlled device that allowed you to get information, weather, news, listen to music, be a control hub compatible with a wide array of smart home devices and more—all completely hands-free—would be a valuable personal assistant for the home and simply make life easier for users. Flash forward seven years later, and in addition to releasing multiple generations of the Echo device, Echo Show with smart displays, Echo Auto for your car, wearables such as Echo Loop and Echo Frames, and a host of accessories, the Echo family of devices is one of the most popular products on Amazon.

Having a customer-centric approach isn’t unique to just Amazon and AWS. We are not the only company who state the importance of putting the customer first. What has sustained Amazon’s customer-centric innovation isn’t just an obsessive focus on customers and working backwards from their needs. Good intentions of focusing on customers only produces meaningful, consistent business outcomes if you’ve built up a culture of customer-centric innovation, with the right mechanisms to maintain that customer focus at the center of everything you do.

A few of the ways Amazon has built a culture of customer-centricity include:

1. Bold, top-down leadership—Daring, visionary leadership starts at the top and imbues everyone at a company with the same spirit. Innovation can be led by example—being willing to take bold bets arising from ideas driven by customer needs; having the courage to make calculated risks and invent outside of your company’s core-competencies; planting many seeds and having the requisite patience to nurture them. Part of this patience is accepting that many of those experiments will fail—that is simply the nature of experimentation. But the learnings you capture from failure will, if shared and re-applied to future customer-centric invention, help better inform future ideas and helps set subsequent innovation up for more success.
2. A widely distributed customer-centric belief system—To truly unlock customer-centric innovation at the edges of your company, you need to build a culture of customer obsession. This requires fostering autonomy at the team and front-line level for builders to stay close to their customers, allowing them freedom to experiment rapidly to meet customers’ needs. A culture of customer-centric innovation decentralizes access to technology, tools, data, and insights that fuel ideation. It empowers anyone across the company with an innovative idea to be able to articulate it, share it with stakeholders, and refine it based on feedback and experimentation. Teams need to have the explicit permission to fail fast, and the rigor to document, share, and incorporate learnings into their next innovative experiment.
3. Practical mechanisms for customer-centric innovation—Builders need to have the right tools to test and scale innovative ideas. At Amazon, mechanisms—complete, closed-loop processes that turn inputs into outputs, and good intentions into meaningful action and results—help us make high value, high velocity decisions at speed while keeping the customer at the center of our innovation efforts. Examples of these mechanisms are our Leadership Principles, which serve as decision-making guideposts and ensure we are remaining customer obsessed. Other mechanisms, like our narrative culture and our use of PRFAQ docs (including a one-page Press Release of the intended solution, Frequently Asked Questions we expect from both customers and internal stakeholders, and visuals to provide an overview of the end-to-end customer experience) help democratize the access to innovation—anyone, at any level, can use a PRFAQ doc to bring an idea forward. These, among many other mechanisms at Amazon, help empower builders to move quickly to innovate for customers with consistency and a constantly experimental approach.
   

Another core element of a customer-centric culture of innovation is ensuring your builders have access to the right instrumentation to collect, analyze, and utilize customer data. This will help you capture customer feedback to inform innovation, recognize and analyze trends in real time, and more deeply understand your customers so you can invent on their behalf.

There are a few vectors to consider—including capturing a wide, diverse breadth of data to represent your customers’ end-to-end experiences, ensuring data quality and hygiene, and having the right tools and analytics to help separate signal from noise. The most challenging part for many enterprises is often the last element—generating the most impactful analytical insight to inform what is most important to customers, and what you as an organization should prioritize for focus and funding.

Building a data-driven organization that treats data as a differentiating asset is one key to unlocking customer-centric innovation. With the right data, you can identify and improve processes and performance to drive better customer experiences, deepen customer engagement, and create greater business efficiency with faster decision-making. This helps builders move from idea to innovative experimentation more rapidly.

The “right” input metrics and KPIs to measure are naturally dependent upon the unique nature of your customers, business, and offerings. But two suggestions based on our own experience at Amazon are 1) ensuring you are capturing data around both the inputs and outputs of your business; and 2) supplementing quantitative data with qualitative anecdote and feedback.

You want to measure and track data pertaining to the outputs of your business (e.g. sales, revenue, margin, production, subscription, sell-through, NPS, etc.). But you should have as much if not more focus on the input data that provides strategic insight into the underlying drivers of your business (e.g. efficiency, productivity, customer behavior and engagement, conversion, etc.). These input metrics are the more controllable aspects of your operations and business, and understanding how they are impacting your outputs can help drive better decisions.

As important as input and output data are, it’s also crucial to capture customer anecdote and feedback. Qualitative feedback is often harder to instrument. But it provides a balanced diversity and breadth of data, and a check on trends and areas of improvement that aggregate metrics may hide. For example, looking at quarterly sales data, you might see continued steady growth rates. A few recent customer anecdotes about experiencing frustration with your order process might be dismissed as outliers given continued quarterly growth. But a customer-obsessed approach would look at where data and anecdote diverge, and dive deep into the anecdote to validate it. Doing so could point out deficiencies you need to fix before they impact a much larger customer base. It may even unearth new use cases or customer segments around which you can drive new business innovation and growth.

Becoming a data-driven organization—one that captures and analyzes a broad range of the most important inputs and outputs of your business—and building a robust “Voice of the Customer” data set will inform faster decision-making. It will maintain focus on the right metrics and trends that impact your customers, and help you build customer-centric data and analytic capabilities that better inform innovation decisions.

Developing a Voice of the Customer for your business—a purposeful analytical approach that puts the customer at the heart of everything you do—allows you to obsessively and relentlessly monitor, iterate, and continuously improve the customer experience. It enables a customer-centric culture of innovation, one that is more agile and performant to respond to your customers’ needs, and better helps you proactively invent on their behalf.