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Empathy may be the most valuable yet underrated attribute of a successful innovator. Steve Jobs—despite his well-deserved reputation for being surly and insensitive—had oodles of it. How else do you design and create so many products that people don’t realize they want until they see them? He understood his customers better than they understood themselves! That’s empathy. It’s being able to get inside people’s hearts and minds so deeply that you know their desires before they do.

The ability to see things through your customers’ eyes is definitely not something everyone can do. Clearly the financial industry has failed to recognize how infuriating its “gotcha” business models, with their hidden fees and inflated interest rates, are to its customers…or it just doesn’t care (which pretty much defines a lack of empathy). Add to that the we-should-be-bailed-out-but-you’re-on-your-own attitude and it’s no coincidence that the perception of the industry is so bad that people are literally marching in the streets in protest.

It’s not that you can’t bring a product to market without empathy. The software industry has been doing to for decades, with poorly designed interfaces that are anything but intuitive. And if that isn’t frustrating enough, we’ve had to endure jokes about how all of us poor buffoons can’t tell the different between a CD drive and cup holder. (Poking fun at your customers is another sure sign of a lack of empathy.) And then there’s the endless technical support phone tree that tells us—almost in so many words—that, “Your little problem isn’t really worth our time, so please take care of it online and stop bothering us.”

How empathic.

I suppose I’m undermining my own argument a little, since such practices are so widespread. They don’t seem to be putting anyone out of business. And yet, those companies that are most successful, (Again Apple comes to mind.) clearly empathize with the people they serve—and are repaid with exceptionally high levels of consumer loyalty…and profits.

We’ve recently seen a series of examples in which companies have failed miserably to show empathy for their customers—and paid a price. Netflix changed its business model and fee structure only to back pedal in the face of fierce customer resistance. Verizon did the same after announcing that it would begin charging fees for payments made with its phones. Major banks rescinded planned fees for debit cards when their customers immediately began to flee. All were cases of completely misreading consumer sentiment—a lack of empathy.

Empathy is a huge factor in entrepreneurial success. Without it, a start-up is unlikely to identify an appropriate customer, market niche or even business model. A deep understanding and empathy for the customer should guide virtually every decision an entrepreneur makes. It’s more important than product or technology or financing. When a new product or venture fails, it is almost certainly due primarily to a lack of empathy—an inability to accurately predict what the customer really wants and is willing to pay for.

How well do you really understand and empathize with your customers? How do you know? Do you buy and use your own product? Do you observe your customers as they use your product? Do you invite feedback from your customers? And when you find confusion or gaps or apathy (or outright anger), do you dismiss it? Do you blame it on customer ignorance or misunderstanding—or even accuse the customer of a lack of empathy for you? (Oh, us poor misunderstood hedge fund managers.) Or, do you genuinely strive to see the world as your customer sees it and fulfill the wants and needs that even your customers may not fully recognize.

Now that’s empathy.

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