Volume 5, #1, January 2007
We're In This Together: Customers as Partners in the Quest for Value
by Sheila Mello
"You can't just ask customers what they want and then try to give that to them. By the time you get it built, they'll want something new." -- Steve Jobs
In the bad old days, consumers selected from small, medium, and large. They could choose basic black, white, and maybe red; two doors, four doors, or flat beds.
Now comes a world of product options: lattes in Tall, Grande, or Venti with a choice of milk; SUVs, mini-cars, and hybrids in every color of the rainbow. Some companies -- PC makers, for example -- invite customers to actively customize a product by selecting from various configuration choices. Others have changed their business models. Chip manufacturers, rather than selling chips, now sell software products so electronics manufacturers can design their own chips.
In the latest twist, new communication technologies give customers a say in defining options. The idea, explained in the new book Wikinomics, by Don Tapscott and Anthony Williams, is that new technology (e.g., blogs and collaborative sites such as Wikipedia) enables mass collaboration and profoundly changes how companies innovate. Because distributed communication is easier than ever, the field of ideas can extend far beyond the corporate walls. Innovation can be open, not closed. Companies that once delighted customers simply by offering a petite and extra large in addition to S-M-L find themselves deluged not just with information about customer problems but also with ideas about how to solve those problems.
These possibilities challenge product developers and portfolio managers. Can you move beyond traditional voice-of-the-customer (VOC) to include customers as collaborative partners in the design process -- without having the process devolve into chaos?
One thing is certain: you can't run and hide. The wave of customer collaboration is coming. This article looks at how customer collaboration has evolved and at ways you can adapt your innovation and portfolio processes so your company can ride the wave rather than drown in it.
The Starting Point: Options for Options
The ideal product would be a replicator like the one in Star Trek, a machine that can instantly produce anything anyone requests. In the absence of such a fantastical device, companies go to great lengths to determine what customer needs may be at some point in the future and to imagine and design products to meet those needs.
For almost all products, some degree of customization is desirable based on the product's target consumer. Traditionally, there have been several ways to increase the likelihood that customers get something other than one-size-fits-all.
Conduct conjoint analysis
Using tools such as Kano surveys, companies determine what functionality should appear in the base product and what should be optional. For example, if you were creating vacuum cleaners for both the European and American markets, you might look at differences in home and apartment size. You might configure the European vacuum cleaner to come standard with smaller attachments that make it easier to reach small spaces. Your American model might come with attachments for cleaning large areas efficiently. In some cases, the offerings themselves might be exactly the same but the marketing of the offering would change depending on the target customer.
Manufacture items to an individual consumer's spec
The classic example of this approach is a configurable computer. Consumers choose from a menu of options and the company assembles a computer to those specifications. However broad the range of options may be, they are still determined in advance by the company. Adidas, the maker of footwear for a variety of sports, brought the idea of user customization to a consumer product in 2001, launching its "Customization Experience" project, described on the Adidas Web site as "introducing a new business model in the industry giving consumers the opportunity to create their own unique footwear to their exact personal specifications in terms of function, fit and looks." Today, runners, soccer players, and tennis players can go to mi adidas locations worldwide to select and order custom shoes.
Sell configurable parts
This is a slightly different take on the previous approach. Customers may undertake the assembly themselves, but they still choose from a predetermined range of options. Toymaker Lego offers kids the opportunity to design their own Lego models using special software, and then order the Lego bricks necessary to build the models. The Lego Factory even lets kids create custom boxes.
These options all represent pretty much business as usual. Your company may be great at listening to the voice of the customer and creating offerings that fulfill a need. But the very idea of options is limited. The next step is getting customers involved in the innovation and creation process.
The New View: Beyond Voice-of-the-Customer to Design-of-the-Customer
There are a number of touch points for customer involvement along the continuum of portfolio creation and product development. We have always advocated early involvement through VOC work done at the portfolio and product definition stage, as well as continued involvement throughout the product life cycle. Now, there are more ways to do this than ever. Here we look at four different ways companies have opened the door to customers (or had it opened by customers) and invite you to reflect on how you might apply their experiences to your company.
Let Customers Do What They Will With Your Product
Eric Von Hippel of MIT has looked at the idea of democratizing innovation in his book of the same name (available for download from his Web site). No matter what a company produces, a certain small subset of users will take the product beyond its intended use to invent something new based on the product. Von Hippel uses the example of windsurfing enthusiasts in Hawaii who, in the late 1970s, created a board with foot straps, solving their own need and at the same time essentially launching the sport of high-performance windsurfing. The involvement of these customers went far beyond voicing a need to actually solving the problem themselves. Even if the surfboard companies were able to eventually commercialize the new problem-solving approach, they were behind the customer-need curve when they did.
Embrace Open Innovation and Make Your Money in Other Ways
Companies such as Red Hat Software have embraced the idea of open-source innovation on the premise that it is better to intentionally pursue customer-initiated innovation than to be surprised by what customers end up doing with a product. Rather than closely guarding patents as a path to value, Red Hat bet that opening up the community of ideas -- in ways now made ever easier by the Internet -- will result in great innovations. Red Hat and other such companies make money not by selling proprietary software but by enhancing the value of open-source software with support and services.
Extend VOC Research Beyond Observation
Procter & Gamble committed itself to transforming its approach to design and innovation with the appointment of Claudia Kotchka as vice president for design innovation and strategy. To create the new Mr. Clean Magic Reach, P&G, working with IDEO, went beyond the recommended customer visit that allowed designers to observe customer problems and ask probing questions. The design team not only followed a professional cleaner and four guys in an apartment, watching and carefully listening. The team also immediately created a prototype out of duct tape and pipe cleaners in response to the problems it saw, enabling customers to begin using, responding to, and tweaking the product. The dialog created by customers' use of the prototype influenced the final -- and very successful -- design.
Create Your Own Collaborative Communities
Hallmark, Inc., the greeting card company, has opened the door to customers in another way with the intentional creation of communities under the Hallmark banner. The Hallmark IdeaExchange, initiated in 2000, was an effort to bring customers into the product definition and design process. Recognizing the value of customer participation, Hallmark invited 250 customers to provide input (in a secure online environment) on product and promotion development. The project was so successful that Hallmark expanded it into an ongoing focus on cultivating communities of various kinds. By doing this, the company gets access to consumers in a way that it never had before. It not only asks specific questions of its communities, but gathers contextual information to help paint the kind of intimate picture of customers' daily lives that is so key to a deep understanding of customer needs.
Why You Must Embrace Customer Collaboration -- And How to Take the First Steps
There can be tremendous resistance to bringing customers so intimately into the product design and development process. Companies worry about losing control. They worry about how they will systematize, sort through, and prioritize solutions customers will find valuable.
The best defense against being blindsided by a customer-initiated innovation is to steep yourself in the world of the customer. New technologies such as blogs, wikis, and online collaboration tools can help you do this to a degree not possible when your only chance to observe the customer was to send a team out on a plane trip. Customers are forming communities, whether you are involved or not. You need to decide how you will participate: as a casual observer, an active observer, or, as in the case of a company such as Hallmark, as an initiator.
For example, if your company makes equipment for lab technicians, find the blogs frequented by lab techs. You can gain valuable insights simply by hearing what real lab technicians have to say about their jobs and their lives. Find out who are the lead users by paying attention to who is talking. Then you might move from casual to active observation: You can contact the lead users and invite them to participate (under non-disclosure) in innovation sessions. Going further still, you could work with customers to actually design the products that meet the requirements you discovered through the product definition process. And finally, you could create your own community, as Hallmark Inc. has done, to begin drawing other potential customers and users in your direction.
The permutations of customer involvement in design and innovation are myriad. The one thing we can say for sure is that the barriers once separating the "inside" of the company from the "outside" are disintegrating. Companies that don't examine the best way of turning customers into partners will have the process happen to them instead of initiating it in a way that makes sense. Wherever your company happens to be along the continuum of customer collaboration, look ahead to the next step and take it yourself before your customers take it for you.
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LINKS
http://web.mit.edu/evhippel/www/books.htm - Eric Von Hippel downloadable books
http://www.ideawicket.com - an online service that seeks to bring innovators and corporations together
http://www.wikinomics.com - New book about customer collaboration
http://www.hlb.com/inovlog/2006/11/open_innovation_1.html - Comments on open innovation
http://www.firstmonday.org/issues/issue8_1/schweik/#s2 - Article on open source programming
http://mass-customization.blogs.com/ - Mass customization/open innovation blog
http://jcmc.indiana.edu/vol10/issue4/piller.html - Article on Overcoming Mass Confusion in collaborative online customer design
http://www.businessweek.com/magazine/content/06_25/b3989431.htm - BusinessWeek article about P&G's open innovation
http://www.fastcompany.com/magazine/95/open_design-kotchka.html - Fast Company article on P&G
http://opensource.mit.edu/papers/chanlee.pdf - PDF of article researching different types of user communities and how they affect product development
http://www.roundtable.com/Publications/OI-Report.html - Report ($$$) from MRT on open innovation practices
