Visions - December 2007

V I S I O N S

Donald Comer

2007 OCI Co-winner

How FedEx uses insight and

invention to innovate

Donald Comer, Director of New Product Development, FedEx Services ( dwcomer@fedex.com)

FedEx Corporation (FedEx) is widely acknowledged for having sparked a revolution in just-in-time delivery in the 1970s. In fact, the company created a wholly new industry that’s been an important enabler in global supply chain management. But how does this 2007 co-winner of PDMA’s Outstanding Corporate Innovator Award maintain its innovation leadership? Author Donald Comer talks about FedEx’s new product development process, explaining how this requires a delicate balance between and art and science.

In the early 1970s Fred Smith set out on a mission to found a transportation company called Federal Express. Today, FedEx Corporation is nationally and internationally recognized to have formulated the right mix of art and science as a successful service innovator. Finding new applications for innovations is something FedEx does particularly well. In fact, FedEx has been recognized by Information Week as one of the Top 100 Most Innovative Users of Technology. For example, FedEx didn’t invent the Internet, barcode scanning, or Wi-Fi. But, FedEx was among the very first to imagine how the Internet could become a tool for tracking and conveying shipment information. This is a big deal because tracking has made supply chain management fast and reliable on a global basis. And that’s changed the way the world does business.

“ FedEx was among the very first to imagine how the Internet could become a tool for tracking and conveying shipment information.”

Shift in the economy

If companies want to thrive—or even survive— innovation is critical. Those

that fail to continue to raise the bar and deliver new customer value soon find that it’s difficult to stay in the game.

Service innovators face challenges that are uniquely theirs. W. Earl Sasser, in his book Management of Service Operations, identified services as having four characteristics distinctly different from products:

• Intangibility—Services have no physical form.

• Heterogeneity—No two service delivery experiences are exactly alike.

• Inseparability—The act of supplying a service is inseparable from the act of consuming it.

• Perishability—Services cannot be inventoried.

When FedEx came on the scene there were not a lot of recognized service innovators, so FedEx learned to adapt marketing strategies applied by product innovators to become adept at delivering game-changing services in light of the unique characteristics of service innovation. Over time, there has been a shift in composition of U.S. economic output. In the late 1980s, the majority of the U.S. economic output shifted from products to services. Today there is a thriving community of thought around the principles that W. Earl Sasser laid out in theory and that FedEx

12 December 2007

put into practical application more than a decade ahead of this economic shift.

Customer experience is the superior way to compete

FedEx has created an innovative culture and has been recognized for this with national and international awards. But more important than the accolades is the value delivered to customers. When FedEx asked its customers what they wanted, they said they want FedEx to help them grow, to collaborate with them, and to expand their markets. FedEx innovations help customers grow their businesses. This is true customer-driven innovation. When your customers grow, you grow. That’s the bottom line and FedEx knows this to be true.

FedEx realizes that customer touch points abound and is committed to making every FedEx experience outstanding. This is the mantra of every FedEx employee. Seeing customers as active co-innovators, FedEx captures qualitative customer insights at the start of every new service development effort. By involving the customer early, it is able to unearth customer needs early and devise strategies to address them. (See Exhibit 1 on this page.)

FedEx has processes for making sure that customers are heard at other levels as well. Because local solutions are often best, FedEx developed market councils where FedEx executives participate