Innovation and Customer Insight at Ericsson

A desire to act as a bridge builder between technology and people has taken him from Sweden to New Delhi where he now heads Ericsson ConsumerLab Asia Pacific, a unit within the Ericsson Group that gathers in, processes and analyses data on end consumer needs. Their surveys are based on a cross section of the world’s population in all parts of the world.

- Our job is to understand the context in which end consumers use telecoms on an everyday basis. The important thing in being able to point the company in the right direction is to get the balance right between understanding what they need today and then being able to translate this into what they will need in the future,” says Henrik Pålsson.

Pålsson started developing the Ericsson ConsumerLab 14 years ago and is now head of Ericsson ConsumerLab Asia Pacific. Pålsson and his team systematically and regularly gather in information and collate this to map billions of mobile phone subscribers to provide a picture of the entire population of the world.

-We try to understand the market from different perspectives and are very skilled at this. We do this with the help of data such as statistics that cover around a billion people in 25 countries each year. Altogether we interview around 50,000 people annually, from different markets and in different parts of the world to gain the best possible picture of the situation today.”

While stressing the importance of looking at consumer behaviour, Pålsson claims, the most important thing is to understand why they behave in the way they do.

-We focus on the why questions. Understanding why consumer do or do not use a certain product or service provides us with a key to looking forward in time. Without this we would have no idea how we should develop the next model or position ourselves on the market.

Ericsson also works with user communities to obtain input on innovation work.

-We work with them to a certain degree, but with caution, as we feel there are dangers attached to working too long and too closely with a certain community. The risk is then that they would become part of us and with the same limitations we have.”

However the opportunity to understand the everyday context for consumers is something Pålsson is happy to talk about.

Only when you have a world picture that is bigger than the business you are currently doing, can you genuinely come up with really good innovations.

-A smart supplier always takes a longer term view than its customers. For instance, if you supply machinery to the paper industry you need to be able to picture what the paper mill’s business will look like five years ahead. If you supply mobile phones you need to be able to understand the business opportunities for users ten to fifteen years ahead.

Pålsson feels that only when you have a world picture that is bigger than the business you are currently doing, can you genuinely come up with really good innovations. And then you really need to understand the everyday context for consumers. He comes back to the importance of making the map as complete as possible when drawing it.

-In order to draw this map, you also have to describe groups you are not interested in today, i.e. non-customers too. You also need to understand the everyday context. Take the situation in Africa for example, where many people live for the day without any fixed income. Certain people can work hard to save enough to buy a relatively expensive mobile handset. But they cannot, and in any case are not approved by the operators, to sign up for a monthly subscription as they cannot guarantee that they will be able to pay their bill each month.”

Pålsson does not however agree that customer insight work is the most important factor when it comes to making development and innovation work profitable.

-For me, the most important factor is technical expertise, that we are good at developing new technology that meets a need or an opportunity for the users. Ericsson is totally dependent on innovation to increase growth and become more profitable. We are a technology driven sector and we are dependent on technological development. Customer insight is a support function to the actual technology development itself.

Technology that makes a difference

The concept innovation often means different things to different people. When this question is put to Pålsson he gives the following answer:

-I am an engineer by training and for me innovation is technology that makes a difference. Technology for its own sake holds no special appeal for me. For me, innovation is something that should address a problem or provide an opportunity. I also think the simpler the more innovative. To my mind I see really good innovations as technology that is understandable and can be grasped by a large group of people and which people later think, “why didn’t we do it this way before?” For me, innovation is part of strategic work.

Pålsson sees the concept of innovation with creative inventor eyes. He does not think an innovation has to be profitably implemented to be defined as innovative.

-I think that is a narrow perspective. I understand that most finance people do want this, but I see it from more ways than this. For me, innovation is intimately connected to creativity and a great deal of creativity occurs outside the business world and often has nothing to do with profitability. But obviously, a company that invests money in research and development will want to see a return at the end of the day.”

Innovation management

How does he view the concept of innovation management?

-When you are talking of a business enterprise, the concept of profitability comes in and how you should position yourself on the market and in relation to competitors, current and future. It is a matter of managing your innovation in such a way that you incorporate profitability in it. Here you can also elect not to develop innovations yourself and choose to do business through the use of patents and protection. As you know, we do sell some of our patent rights, just as we buy others from other companies. Trading in innovations is a business in its own right, which in our case funds a large part of our research activities.

Pålsson is also enthusiastic about user driven innovation.

-This is very much in line with my belief that innovation should solve a problem or create new opportunities for people. Mobile telephony is definitely an innovation that has changed the world in a fundamental way.

Asked what he will be doing in five years, Pålsson replies:

-No idea – but I will probably still be working in the world’s most exciting and revolutionary sector – telecoms.

Customer Insight at Ericsson

Ericsson ConsumerLab uses different types of market surveys via questionnaires, focus groups, in depth interviews with individuals in their home and/or in the workplace, observational studies etc.

Data are collated via three platforms/levels.

Fundamentals – a regular and broad monitoring of the world market that looks at consumption patterns for e.g. telecoms, cars, cosmetics and cigarettes.

Infocom – looks at attitudes and relations to the consumption of telecoms, IT and media at an individual level.

Indepth – in depth study of a specific area within telecoms, IT or media and/or a specific group of users. For instance, an in depth study of the future for video telephony in rural Africa.

Ericsson also works with a segment model made up of eight different archetypes. Each archetype represents a so-called customer type characterised by certain values and attitudes. The MarketRealityMonitor is a tool that analyses these customer types based on their values and attitudes to technology in terms of two dimensions.

In simple terms, you could say that one dimension concerns an individual’s attitude to stability versus change and new experiences. The other dimension is about how an individual views long-term benefits versus the immediate meeting of a need.

One example of customer type is Mainstream Youth that view their mobiles as an important attribute to fit in with their friends.

Another customer type is the Basic Phoner who is somewhat sceptical about new technology and needs to be convinced of its functionality before adopting new technology.

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