Why people-centred?The short answer is that it helps make better products that people truly want. The long answer is...
Truth is stranger than fictionThe real-world is never clean and simple - it's much more interesting. People do strange things. They use products differently than the designers intended, and they use products in different places than designers expected. If they run into a problem, they invent creative solutions. They have strange rituals around everything from making coffee, to warming up the car. They have their own way of looking at the world, and getting a glimpse into how people actually use products - not the idealized view - is a great way to to inspire a design team, and bring fresh insight into old problems.
Reduce the RiskProduct development is inherently risky. Bringing the customer into the design process early is a cost-effective way to ensure that the right problem is being solved in an appropriate way. Their stories can reveal a need for a new product, a new direction for an existing product, or simply verify that a new product idea makes sense to the people you hope will buy it.
Stories and experiences from real people can also help you to explain and sell design ideas within a company, to get funding to continue on to the next milestone.
Connect the teamTo develop a new product, you need a diverse team of experts: Engineering, marketing, manufacturing, packaging, legal... Each department needs to be focused on their specific responsibilities, but they all need to think a bit like the customer. In a single day, legal might be thinking about how people could injure themselves with the product, while engineering might be working out reasonable tolerances for heat, moisture and shock. Packaging might be thinking about how make a point-of-sale display get noticed, and marketing is working on how to best explain the new product to the customer. Each of these activities requires knowledge of the customer and an awareness of the product's environment.
By exposing your design team to actual customers experiences and stories, it helps them to think more accurately like customers, and this helps them make more informed, better decisions. This grounding in the real world, also helps the design team to develop a common understanding of the customer, and reduces some of the tension when members of a design team have a completely different visions for who the customer is, and where the product will be used.