Differentiating and Competing through Innovation

Innovation for a firm should be defined from the perspective of the ultimate stakeholder, the customer. The chapter presents findings from the American Innovation Index™, a national survey of U.S. consumers sponsored by Radius Global Market Research and the Responsible Business Center at Fordham University, which has measured customer-perceived innovation of nearly 200 firms in the U.S. since 2018. The study reveals surprises that the most innovative companies are not always associated with the tech sector or innovation; for example, Toyota, John Deere, and Louis Vuitton rate higher in innovation than Apple. A deeper dive of the findings demonstrates linkages of customer-perceived innovation to brand attractiveness, loyalty, Net Promoter Score, share of wallet, and stock returns. The chapter then discusses what innovation means to customers, revealing that consumers associate firm innovation with product excellence, doing business in a way that makes things easy and safe, effective customer service, outstanding value that includes rewarding loyalty, and an approach to business that shows leadership and caring. Finally, the chapter presents a framework for developing a customer-facing innovation strategy that allows a firm to differentiate itself in a competitive market. Using the hotel sector in the U.S. as a case study, the authors show that different features can be mapped by their impact on perceived innovativeness and loyalty, revealing areas that fall into a “disruption zone” (impacts innovation more than loyalty), “table stakes zone” (impacts loyalty more than innovation), and a “differentiators” zone (impacts both). The chapter concludes by demonstrating with data for actual hotel brands on how to identify innovation equities and set priorities for future strategy.