Sense and Respond: How Successful Organizations Listen to Customers and Create New Products

But revolutions can be complex. They create volatility and uncertainty. Market conditions are now in continual flux, and people are using new products and services in unpredictable and surprising ways.

In this kind of environment, there are as many threats as there are opportunities. The challenge for anyone in business is to stay abreast of the changes taking place, and to respond to them as best they can. Perhaps the biggest threat of all comes from inertia. Clinging to outdated industrial-age business models is a recipe for disaster, and yet so many companies do.

Although the digital age is almost unrecognizable from the preceding industrial one, most of the management structures and practices we use today were born and developed in that industrial era. They were designed for the slower pace, and the planned, predictable, secretive nature of the manufacturing economy.

Standardization, control, hierarchy, and obedience were the watchwords then. But in the digital age we value flexibility, transparency, interdependence, and community. These values demand a fundamentally different approach to management. The question is, what should that new approach be, and how can it be delivered?

The authors of this book present a convincing way forward, which they call "sense and respond." It's a management and operational model for reading and reacting to the pace and uncertainty of the digital economy. It harnesses real-time information from customers, competitors and employees, and uses it to improve the quality of the offering. The authors argue that managers and leaders who adopt this approach will thrive within the new reality.

So, who's this book for? Well, it's a call-to-arms for managers and company leaders who are struggling to adapt to the digital economy. Those who are rooted in old-school leadership styles but know they need to shift up a gear will gain the most from reading it.

Both authors emerged from the lean startup movement. The lead author, Jeff Gothelf, describes himself as "a lean-thinking and design evangelist." He's an agile practitioner, a thought leader on the future of product design and development, and a sought-after public speaker.

Josh Seiden is a user-experience design leader and a consultant, who's helped companies from Wall Street to Silicon Valley to create new tech products and services. "Sense and Respond" is the authors' second book together, coming four years after the well-received "Lean UX." (UX is a short term for user experience.)

So, keep listening to find out how giants such as Kodak have fallen prey to digital change, why old management systems can't cope in a world of constant change, and how continuous learning can drive success, regardless of where you work.

"Sense and Respond" is divided into two parts, with four chapters apiece. Part one makes the argument for this new approach, explaining why it's so important, how it works, and when to use it. Part two focuses on adjusting teams and processes for the sense and respond approach.

So let's take a look at some of the authors' ideas, starting at the beginning. The introduction hits you straight away with two short case studies that illustrate the book's reason for being.

The first tells the painful story of Kodak, the company that for most of the 20th century was the dominant force in photographic film. We learn that Kodak built the world's first digital camera in 1975 and spent the next 14 years producing a commercially viable model.

But the company never put its full weight behind it, and as digital photography began to take off in the late 1990s, Kodak stuck to its existing products and processes. It sensed the digital threat to its business, but didn't – or couldn't – respond to it strongly enough. As a result, Kodak was effectively wiped off the map by younger, more innovative companies.

The second case study covers the demise of Borders, the bookstore giant. Its story is, in some ways, more tragic than Kodak's, because it did recognize the threat from online competitors and did try to respond to it. Borders' fatal mistakes, though, were to outsource its internet business to Amazon and to wait too long to embrace e-reader technology.

These two case studies ease you into the authors' style, based on providing examples to learn from. It's an approach they use throughout the book. And as short as they are, these case studies reveal the dangers of not listening and not responding. The point is simple and powerful. When companies the size of Kodak and Borders can sink because they didn't recognize, or couldn't react to, an external threat, the importance of being able to "sense and respond" to changes in the world around you becomes starkly evident.

In the first couple of chapters, we delve into the nuts and bolts of what "sense and respond" is.

One of its guiding principles is the focus on acquiring information, rather than on building products or services. That's all very well, you might say, but businesses do need to build something to sell, so they can generate revenue. So, how does that square with "sense and respond"? The difference is in the goals that you set.

In days gone by, businesses produced "outputs." Companies would devise product plans, commit to certain features, decide pricing strategies, and establish schedules. They decided what the value offering would be, and did so at the outset. Workers would then follow a predefined workflow to produce exactly what the decision-makers wanted.

In the modern age, though, things are different. "Value" is now defined by the customer, so ignoring the market and pressing blindly on is not an option. Companies now have to listen to what customers want to do, and then help them achieve it. In other words, they should enable outcomes, not outputs.

For this to happen, they must create continuous, two-way conversations with the market. They need to learn and gather evidence in real time, and understand what matters to customers. Only then can they reorient their work toward helping them to achieve it.

We like this idea of a conversation with the marketplace, but some people might struggle with it. Starting the process of generating value, when you don't yet know what "value" is, creates uncertainty. It requires humility, and when you're used to projects starting with plans, budgets and schedules in place, it can feel reckless and risky.

But, however seismic a change this is from the way that many companies are used to working, it is a crucial one. Without knowing whether your ideas truly resonate with people, you risk developing products that only you will find valuable. With hindsight, this seems obvious, but it's only in recent times that technology has made it possible to sense what your customers want.

Chapter four delivers another sharp wake-up call. Here, we're told, "you're in the software business." Now, if your business happens to be knitting supplies, farming, or even healthcare, you'd be forgiven for wondering if you've misheard. But we'd all do well to listen to what the authors have to say here.

It's so ubiquitous that it barely registers with us anymore, but software has crept into every corner of business. Chances are, whatever your job, you use digital technology in some capacity. And if you don't, software will be involved in the way your company's products are sold and marketed, and in the way that staff are paid and trained. Whether you see it or not, software is there somewhere, and you are in the software business.

The problem is that in a lot of companies, IT departments cling to knowledge, managers guard their functional silos, and outdated systems linger on past their sell-by dates. The "light-bulb moments" in this chapter come from realizing that what people do with technology matters as much as the technology itself. Empowering people to use it to its full potential is vital.

We think this is an important reminder. In this day and age, it's so tempting to see technology as a cure-all solution in itself, but people remain a critical part of the equation. Employees need to be given the freedom to explore what technology can do, and to use it in unplanned ways. If not, it will be difficult for any company to realize its potential in the digital era.

Chapter eight is one of the most interesting chapters in the book. It's also one of the most ambitious, because it acknowledges that sense and respond isn't just about making changes to processes and procedures. It's about changing culture.

Perhaps the dominant company culture throughout the industrial age was "command and control" – a style that rewarded you for following orders, for sticking to the task at hand and not asking questions. Cultures like this are outdated, but they persist in many companies today.

By contrast, the sense and respond approach advocates a culture of continuous learning and distributed decision-making, where initiatives from the bottom up are embraced. This kind of environment allows people to develop products and services in response to what they learn from customers, to value success more than delivery, and to continuously optimize the customer experience.

So how exactly can a culture be changed from one thing to another? It's not an easy question, and the authors don't pretend to have a universal answer. But they do claim that culture can be shaped by the way you ask people to work.

For example, if you ask people to focus on building features, they'll value the processes and procedures that make it possible to deliver them, even if the features themselves don't generate any great business success. But if you ask people to focus on success, they need to go away and find out what would count as success, and they may end up working in a completely different way.

Cultural change like this needs to be nurtured and supported. To that end, the authors insist that it should also be actively led, and they offer a list of key strategies to consider. One of these is the need to have a bias toward action, which tackles one of the features of sense and respond head-on.

When teams adopt a sense and respond approach, it's not hard to see how they might get bogged down in debate and analysis, endlessly going around in theoretical and hypothetical circles. A bias toward action is the answer to this inbuilt tendency toward inaction. By testing and probing new ideas, conducting experiments, building prototypes, and conducting interviews, you can prioritize making over analysis.

This bias toward action is key, simply because it keeps things moving. Sense and respond may be a process of continuous learning, but action matters too, and it's important to stay in constant motion, getting closer and closer to delivering what your customers want.

So, what's our last word on "Sense and Respond"? Well, we think it's a great read, for several reasons.

Firstly, the authors deliver exactly what they promise – an understanding of how organizations can find success through sensing customers' requirements and responding to their specific needs. It vividly makes the case that in the modern world, companies who want to be successful must place their customers at the front and center of their thinking.

The text is a little long-winded in places, but it's still an easy and enjoyable read. The authors do a masterful job of making the theory accessible and the case studies compelling, and their takeaways at the end of the chapters are helpful. This book isn't a technical manual or a process document. Rather, it's a collection of guiding principles, wise counsel, and a look-and-learn tour of what others are doing. It condenses the experiences of a range of companies into valuable, applicable lessons.

So, if you want your business to thrive in the modern economy, there's much to consider here. You can learn from these lessons, and use them as a starting point for creating a custom "sense and respond" approach for your own organization. We have absolutely no trouble in recommending this book.

"Sense and Respond," by Jeff Gothelf and Josh Seiden is published by Harvard Business Review Press.

That's the end of this episode of Book Insights. Thanks for listening.