Using Customer Feedback to Reinvent Your Business

Learn more about what Peter Drucker details in Innovation and Entrepreneurship.

Way back in the 1950s, in his groundbreaking book Innovation and Entrepreneurship, legendary business thinker Peter Drucker pointed out that many profitable innovations result from accidental or unexpected breakthroughs. He meant the kind of thing that occurs when you set out to develop a better variety of easy-to-remove packaging tape and end up inventing a revolutionary kind of wallpaper that both sticks tight and is easy to peel off the moment you get sick of it. What's so special about Drucker's insight? After all, from the discoveries of penicillin and saccharin to the inventions of nylon and Velcro, it's obvious that chance plays a significant role in finding new ways to do things.

Drucker really gets interesting with a second and more telling point: When businesses accidentally stumble onto a hot new product or service, even one that could give them a more competitive advantage, they often fail to recognize it or even actively suppress it. That is, they keep fooling around with the tape and stick the wallpaper in the trash.

EXAMPLE: Leo and Stan are longtime partners in the Arrow Glass Co., a nothing-special glass supplier. It sells hundreds of types of glass to contractors for use in residential and small commercial construction projects, and also caters to do-it-yourselfers. A few years ago, more and more people began asking Arrow for several types of plastic, particularly for newer, unbreakable burglar-deterring types that could be substituted for window glass. At first, Arrow sent these people elsewhere. Finally, after turning away more and more business, Leo and Stan began stocking a few of the most commonly requested types of window plastic, keeping them in an unused area behind the stairs they not-so-privately referred to as the Plastic Hole.

When plastic sales immediately turned out to be solidly profitable, helping Arrow to have its best ever year, Leo and Stan were delighted that they finally had the financial wherewithal to expand and improve their facility. They bought and remodeled the next-door warehouse, which let them more than double their selection of glass. Despite the huge increase in floor space, they left the Plastic Hole in its same dingy spot.

Were Leo and Stan obtuse? No question. Unfortunately, they were also typical. The were't paying attention to what their customers were asking for, and like most business owners, they were slow to recognize and even slower to embrace an accidental business breakthrough. Doing so would have meant fundamentally changing their original mindset, which is never easy.

Think about the small enterprises you patronize. How often does your drycleaner, plant nursery, or hair salon change the way it does business? If the answer is somewhere between "rarely" and "never," you can safely bet that the business is guilty of ignoring and probably even suppressing new information, and as a result is sailing so aimlessly through the recessionary storm it is in danger of sinking. A more nimble competitor will surely appear, embrace the new concepts, and quickly grab market share.

Here are several more examples of businesses that are ignoring information from their customers that they should be embracing to improve their competitive position:

  • A struggling small-animal veterinarian who frequently gets calls from concerned pet owners after regular business hours, but doesn't look into hiring another vet to run an evening clinic.
  • A certified public accountant specializing in income taxes, who, despite being asked questions almost daily about planning to limit estate tax, never reorganizes his business to provide customers helpful information and nonlegal services on this topic.
  • A copy shop on a congested street that doesn't institute a free pickup and delivery service or otherwise improve access despite the fact its high-volume customers constantly complain about parking and ticket hassles.
  • A consultant who helps city and county governments plan police, fire, and other public safety buildings but turns down requests to help plan newly popular disaster-response centers because they are outside her area of expertise.
  • A haircutting salon, in a city that is fast becoming the home for thousands of Southeast Asian immigrants, that doesn't seek out haircutters who speak one or more of the newly common languages.
  • A store selling teak garden furniture and expensive knickknacks for house and garden that is repeatedly asked where tools can be sharpened, but fails to start a sharpening service.

By not gathering and acting on the information their customers are thrusting upon them, these businesses—all of which surely have lots of competitors—are turning their backs on ways to improve their profitability.

But if a successful business you know has recently made positive changes to the way it looks, what it sells, or how it interacts with its customers, chances are its owner has learned to make smart use of new information and customer feedback—and to constantly improve the company's competitive position.

EXAMPLE: Madge opened a gift shop, Something Special, in a small university city in the Midwest. Selling a wide variety of items, she barely broke even her first year. Then when the economy tanked and sales dropped, Madge, a single mother with two teenagers to raise, decided to put up a going-out-of-business sign. But while the sign was on order, a customer came in and bought almost $1,000 worth of Native American crafts that were displayed on a couple of shelves at the back of the store. When the customer also asked to be alerted when the next shipment came in, Madge reflected that sales of such artwork had been fairly profitable from the start and other people had made similar requests.

After checking to be sure no one else in the area had captured this niche, Madge decided to store her going-out-of-business sign for a few months while she converted half of the store to North American Indian arts and crafts. She helped her new emphasis along with a marketing campaign featuring programs and workshops hosted by many of the Native American artists and a website built by her tech-savvy son. Soon, Something Special was special enough to succeed despite the recession.

In the big business world, innovation is often the product of many years of expensive research—that's what it takes to produce new drugs, computer chips, and more powerful, longer-lasting batteries. Fortunately, the information necessary to innovate in the small business world is usually far more available. Indeed, for the business owner with an open mind, good ideas that can be implemented at a reasonable cost are available everywhere. Just by keeping your eyes open and listening closely to what customers are asking for can be very fruitful.

A great example of how to improve a business by paying attention to unexpected information involves the Holiday Inn in Cumberland, Maryland. As reported by Associated Press writer David Dishman, for years this motel bore the heavy burden of being built hard against a railroad line. When the hotel wasn't full, desk clerks, fearing that guests would be bothered by the 65 noisy trains that clattered past each day, assigned guests to the quieter rooms closer to the unpleasant highway. Then one day a train enthusiast contacted Sales Director Karen Twigg to ask how much extra it would cost to book a room facing the tracks. Twigg could have politely said they were the same price, accommodated the man's request and gone on with her routine. Instead, she quizzed the caller about why he wanted to overlook the trains and found out that he was a train freak. Realizing that he wasn't the world's only train enthusiast, Twigg decided to see whether the Holiday Inn could profit from her new knowledge. She did this by starting a promotional campaign aimed at train buffs: "Make tracks to stay with us." This message was a big hit, and train-loving travelers from all over the world booked track-side rooms with a view of all those locomotives pulling their loads in and out of the CSX switching yard and maintenance shops.

Now take a moment to think about your business. Especially at a time when every sale is precious, do you have the innovative mindset to recognize and profit from valuable new information? Tempted to answer "Yes"? No problem, as long as you can name three trends in your field and what you are doing to raise your profits (or stem your losses) by taking full advantage of them.

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