A Viewpoint article posted on the Design Management Institute website by Peter H. Jones, had one of the best sentences to describe the importantance of contextual inquiry: "the opportunity for designing from understanding the user’s authentic experience. Innovation emerges from truly understanding the fit between product and person."
I have never been able to describe the importance of getting early user data to help design the right product, even if the user doesn't know what that is yet. Read the article. It is worth your time!