Mirror, Mirror on the Wall: When Innovativeness Becomes Attractive
By Kristina Heinonen, Seidali Kurtmollaiev, Line Lervik-Olsen
“Mirror, mirror on the wall, who is the fairest of them all?” In competitive markets, this is not a fairy‑tale question, but a business reality. A mirror does not evaluate underlying intentions or capabilities; it reflects how one appears. Similarly, customers do not assess the effort or capability behind a firm’s offerings, but evaluate how the firm is perceived relative to competing alternatives. This comparative evaluation is captured by the concept of relative attractiveness: a customer’s overall evaluation of a firm and its offerings compared with relevant alternatives, both in the present and in the future (Andreassen & L. Olsen, 2008).
Attractiveness becomes decisive under conditions where differences in objective performance are less visible or less meaningful to customers. Many firms meet established standards of quality and efficiency, and innovation efforts—while important—are no longer sufficient in themselves to create distinction. As a result, competitive advantage increasingly depends not on whether firms innovate, but on whether the outcomes of those innovations are noticed, understood, and valued by customers relative to competing alternatives.
Competition therefore unfolds through customer evaluation. Firms are not judged on absolute performance, but on how they are perceived in comparison to others. Because these evaluations are inherently comparative, relative attractiveness becomes the basis for key strategic outcomes, including premium pricing, stronger loyalty, increased market share, and long-term mutual value creation. The central managerial question therefore becomes:
Which company is perceived as the most attractive—in the eyes of the customer?
Innovativeness as a Driver of Relative Attractiveness
If relative attractiveness reflects how firms are evaluated in the marketplace, the next question is what drives these evaluations. Among the various factors shaping customer perceptions, innovativeness plays a central role. Firms that are perceived as capable of introducing meaningful improvements in their offerings, interactions, and delivery are more likely to be seen as relevant and superior relative to alternatives. Innovativeness contributes to competitive advantage only insofar as it is recognized and valued by customers. It is therefore not innovation as such, but perceived innovativeness that shapes relative attractiveness.
Research has consistently shown that perceived innovativeness is a critical driver of relative attractiveness and customer loyalty. For example, Kurtmollaiev et al. (2022) have demonstrated that customers’ perceptions of a firm’s capability to create valuable innovations have a strong positive effect on relative attractiveness. In turn, Keiningham et al. (2024) have revealed that perceived innovativeness is a significant predictor of future abnormal stock returns.
Managers and consumers often see innovation very differently. While managers treat innovations as clear, separate changes, consumers usually judge them through their effect on the overall brand experience. What matters most to customers is not the innovation itself, but whether it makes everyday tasks easier, better, or more meaningful in context. Consumer reactions to innovation are also emotional, varied, and shaped by personal and social circumstances. The same change—such as more self-service or a new digital interface—can be welcomed by some customers and rejected by others. These reactions may be intense at first and can influence brand reputation, financial performance, and even customer defection, although they often fade over time.
The key managerial implication is that innovation must be understood from an outside-in perspective. Firms cannot assume that what they launch will be seen as innovative or valuable by customers. To strengthen brand innovativeness, managers need to understand customers’ contexts, communicate in ways that resonate with customers, and introduce changes that improve the total brand experience rather than simply adding new features.
Moreover, research provides a critical managerial insight: innovative output alone does not guarantee attractiveness. If an innovation is perceived as irrelevant, cumbersome, or disconnected from customer needs, it may increase complexity without increasing value. In such cases, innovativeness fails to translate into competitive advantage.
Customer-perceived Innovativeness
This insight—that innovativeness only creates value when it is perceived as relevant in customers’ everyday lives—is captured by the concept of customer-perceived innovativeness. The concept reflects how customers evaluate firms holistically, rather than through isolated innovation features. Customers do not assess technological novelty, digital solutions, or social initiatives separately. Instead, they form an overall judgment of whether a firm’s innovations are relevant and meaningful in the context of everyday life. From the customer’s perspective, the evaluation is fundamentally comparative and practical, guided by a simple question:
Does this company make my life better—compared to others?
Consequently, perceived innovativeness is most effective when it contributes to a coherent overall impression of relevance in daily use. This perspective highlights why assessing innovativeness in a composite manner is managerially important: only innovations that resonate with customers’ everyday priorities strengthen perceived firm attractiveness and competitive position.
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Within the broader evaluation of firm innovativeness, digital transformation plays a central role. Digital innovation is increasingly critical for maintaining relative attractiveness, particularly as firms adopt artificial intelligence and smart systems to enable personalization and automation (Frank, 2026). These developments can reshape value creation and improve consumer experiences.
Yet, evidence points to an important caveat: digitality alone does not generate value. The mere presence of an app, platform, or AI-powered interface does not automatically enhance attractiveness. What matters is whether digital solutions meaningfully improve everyday experiences—for instance by reducing friction, saving time, or increasing users’ sense of control. Digital innovation should therefore be assessed not by its sophistication, but by its perceived usefulness in practice.
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The overall perception of innovativeness is increasingly shaped by a firm’s broader societal impact. Research highlights the role of social innovation seen as the creation of novel, scalable, and sustainable market-based service offerings that address systemic societal challenges (Aksoy et al., 2018; van Riel et al., 2021). When integrated into firm strategy, such innovation can enhance relative attractiveness (van Riel et al., 2021), as customers tend to value efforts that contribute to societal well-being and foster trust. By moving beyond standard service offerings to engage with societal challenges, firms can differentiate themselves from competitors and strengthen their competitive position.
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Findings also point to systematic generational differences in what drives perceived attractiveness. Senior consumers tend to prioritize everyday convenience, reliability, and seamless service delivery. For them, innovation is attractive when it simplifies routines and reduces effort. Younger consumers, by contrast, place greater value on flexibility, digital-first businessmodels, and social innovation. They are more willing to embrace new formats and platforms, provided these innovations align with their values and lifestyles. Despite these differences, one common denominator remains: innovation must deliver real value in everyday life. Regardless of age, innovativeness that lacks relevance fails to enhance attractiveness.
What Attractiveness Ultimately Reveals
The strategic implication is clear. Innovativeness is necessary—but not sufficient. Firms must prioritize not only how innovative they are, but how attractive that innovativeness appears to customers. In the end, customer perceptions reflect a simple truth:
The fairest of them all is not the most technologically sophisticated or operationally advanced firm—but the one whose innovation customers find most valuable and relevant.
These insights highlight the need to assess innovativeness and perceived firm attractiveness jointly rather than in isolation. Perceived innovativeness reflects a firm's capability to introduce new solutions, whereas perceived firm attractiveness captures whether customers evaluate those solutions as more relevant, useful, and valuable than competing alternatives. A firm may be highly innovative, yet fail to strengthen its competitive position if customers do not perceive its innovations as meaningful in everyday life.
The key link between innovation and attractiveness lies in customer-perceived innovativeness. Customers do not evaluate innovations solely on their novelty or technical sophistication. Rather, they form an overall perception of whether a firm's innovations improve their lives in ways that matter to them. This highlights the importance of aligning innovation priorities with the needs, preferences, and everyday realities of different consumer groups.
Competitive advantage therefore arises not from innovation alone, but from innovation that customers recognize, value, and prefer relative to competing alternatives. When innovative capabilities translate into customer-perceived value, they strengthen perceived firm attractiveness and become a sustained source of competitive advantage.
This article draws on research from the Norwegian Innovation Index, a research project that examines how consumers perceive firms’ innovativeness and attractiveness across industries. The research is part of the Innovation Index Coalition, an international research collaboration focused on advancing the measurement of customer‑perceived innovation and value creation. This article builds on research conducted by the Norwegian Innovation Index research team, including Kristina Heinonen, Seidali Kurtmollaiev, Line Lervik‑Olsen, and Tor W. Andreassen.