Article | 7 min read

The Imperatives of Customer-Centric Innovation

Keen demands of customers

The ever-increasing velocity of the pace of business, constant advances in technology, and sudden shifts and upheavals in market segments—expected and unforeseen—create an acute need to innovate ahead of constantly changing customer needs and demands.

In his 2017 Letter to Shareholders, Jeff Bezos called out the underlying nature of customers’ ever-increasing expectations. “One thing I love about customers,” Jeff wrote, “is that they are divinely discontent…People have a voracious appetite for a better way, and yesterday’s ‘wow’ quickly becomes today’s ‘ordinary.’”

Acute need for innovation

AWS re:Invent 2020 - Keynote with Andy Jassy

Andy Jassy also touched upon the need to stay ahead of fast-changing business environments and customer needs in his re:Invent 2020 keynote speech, stating that, “Speed disproportionately matters at every stage of your business, and in every sized company…Speed is not preordained. Speed is a choice. You can make this choice. And you’ve got to set up a culture that has urgency.”

Watch Andy Jassy's keynote at AWS re:Invent

Meeting customer needs during company growth

As companies grow and scale, maintaining focus on meeting customers’ requirements at speed becomes more difficult as other business imperatives and pressures (e.g. cost, infrastructure, competition) arise. But the necessity of understanding your customers’ needs and desires, and rapidly inventing solutions that meet those needs, is more critical than ever for companies looking to remain innovative in an increasingly uncompromising business environment.

It is not enough to simply react to what your customers are telling you they need. This may address prominent pain points or the highest priority issues in the short term, but does not guarantee that that you will proactively stay ahead of those needs. They will inevitably shift over time, and there is a likely chance you won’t even know when this shift occurs.

Meeting customer needs during company growth

Jeff Bezos, 2016 Letter to Shareholders:

"Customers are always beautifully, wonderfully dissatisfied, even when they report being happy and business is great. Even when they don’t yet know it, customers want something better, and your desire to delight customers will drive you to invent on their behalf."

Putting the customer at the center of everything you do, and going beyond simply knowing what customers want but deeply understanding them and the context of their needs, has many advantages. One is that it will provide endless ideas and inspiration to innovate, opening you up to explore and invent in many more areas than you may have otherwise. Another benefit is that by getting ahead of your customers’ needs, you stay relevant in providing continuous value for them. If you aren’t meeting customer needs today, they will quickly find someone else who can

Customers have more choice than ever before in quickly finding another product, service, or offering that better meets their demands. In addition to existing competitors, there is no shortage of companies rushing in to fill identified gaps and opportunities to serve customers better. US Census Business Formation Statistics shows that the total number of new startup business applications per year grew 74% in the ten years between 2010 and 2020. The first 5 months of 2021 alone saw an increase of 72% in new business applications over the same period last year. Total startup applications in 2021 were 24% higher than 2019 compared to a yearly growth average of 4% since 2010.

While the COVID pandemic undoubtedly was a driver of new business launches, it also underscores that business environments change rapidly, often unexpectedly and disruptively. And in today’s digitally-enabled age, there can be less cost and lower barriers for competitors to rapidly form and launch services and offerings that may better meet your customers’ needs.

One way to stay ahead is to empower a culture that relentlessly focuses on customers and strives to earn and keep customer trust—each day and every day. To do so requires purposefully building an organizational capacity, and a culture of customer-centric innovation, that can proactively invent on customers’ behalf.

Focusing on the durable needs your customers have—not just the ones they have today but will continue to have into the future—enables long-term, sustainable innovation around the things that matter most to your customers.

An example from Amazon’s own retail business experience illustrates how we focus on long term customer needs. We built a sustainable flywheel around durable customer needs like price, selection, and convenience—things we knew would be important to customers both now and 10 years from now. We start by obsessing over the customer experience, constantly scrutinizing ways we can improve value for customers, and introducing new features or services that surprise and delight them.

Constant focus on improving the end-to-end customer experience and making it faster, easier, and more convenient to find, buy and receive products leads to more traffic—from new and existing customers, and by millions of third party sellers who can reach millions of Amazon customers globally. This in turn increases the selection available to customers on Amazon, further improving their experience. At the same time, it helps us achieve additional scale and a lower cost structure, which we can pass on to customers in the form of lower prices. This creates a closed loop, self-sustaining flywheel.

These core, durable values—of price, selection, and convenience—led us to innovate services like Prime. We knew customers would value faster two-day delivery across millions of items with no minimum purchase requirement. While Prime was a success with customers, we didn’t stop innovating there, relentlessly looking for ways to continuously add value for Prime members. In addition to expanding the selection that qualified for Prime delivery over time, we also added benefits for subscribers such as Prime Video, Amazon Music, Amazon Photos, Prime Gaming, Prime Reading, Amazon Fresh, Prime Wardrobe, Amazon Pharmacy, and more.

At first glance, these appear to be wildly disconnected businesses—across digital media, consumables, hard and soft retail goods, and more. They may not make sense to all be together from a traditional program or product portfolio management perspective. However, they made a lot of sense to use as we stayed close to Prime subscribers and evolved our thinking about them as customers. Prime was predicated on delivery benefits that were made to customers at their homes. And in thinking about our Prime customer as a household as opposed to an individual shopper ordering online, and the things you do with friends and family within your home—listen to music, watch TV, stock a pantry for family meals, etc. —these disparate benefits simply made sense to offer to a household together.

And of course, we remained obsessively focused on improving the core shipping benefit to customers, adding free One-Day Delivery on 10 million items and Same-Day Delivery on over 3 million items for qualifying orders of $35.

By building a closed-looped flywheel around customers’ durable needs in our retail space, and by staying close to our customers and continuing to think about how their needs evolve, Amazon drives continuous innovation that delights customers and helps fuel our retail growth.

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 h