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Where would
YouTube be today if not for its millions of
users? What good would Wikipedia be without
all of those contributors? And how
successful could IKEA possibly be if its
customers weren't willing to assemble their
own furniture?
Stephen Brown
says the answer is simple: If not for the
contributions of their customers, all three
of those remarkable business successes would
be anything but successful.
And there's a
lesson in that, says Brown, for companies of
all kinds.
"Our view is
that the customer has been a truly forgotten
component of innovation," says Brown, a
professor of
marketing and executive director of the W.
P. Carey School's Center for Services
Leadership. "We're not necessarily
saying that customers are completely
ignored. But we are advocating a much more
substantive effort on the part of companies
to get their customers involved in the
innovation process."
In a new paper
that challenges some long-standing theories
about both what innovation is and
how it's achieved, Brown and co-authors
Stefan Michel, an assistant professor of
marketing at the Thunderbird School of
Global Management and Andrew Gallan, an ASU
doctoral candidate, argue that the time has
come for companies to rethink the ways they
approach the innovation process.
Rethinking
the process
Innovation,
according to Brown, Michel and Gallan, is no
longer solely the domain of techies or
engineers working in isolation in a lab.
Innovation now includes the collaboration of
creative customers, who find ways to address
their own wants and needs in the product or
service.
In other
words, Brown and Michel say, just as
users were responsible for making
YouTube a global sensation, customers
have power to create value for any number of
other products and services.
"The premise
for this research is that when people
typically think about innovation they tend
to only think about products," Brown said.
"They think of something tangible, and
imagine a process that the company undergoes
that is somehow completely independent of
their customers. … But now, we are seeing
that innovations will not be successful
unless customers co-create value for it.
YouTube is a dramatic example, because
YouTube would be nothing if not for what its
customers did with it."
Added Michel:
"The major question we asked was this: Are
there some things out there that are truly
innovative, but cannot be explained by the
traditional innovation literature -- things
that were, for example, not developed by R&D
labs but nonetheless changed the lives of
millions of people?"
The answer to
that question is yes.
The
researchers say customer-based innovation
has played a role in the development of any
number of products, goods and services that,
today, people may take for granted.
IKEA, for
example, leveraged the power of its
customers to create an innovative,
completely new and remarkably successful
furniture retailing experience. The Swedish
company provides hip, exciting and
inexpensive furniture, presents those pieces
in their all-inclusive destination stores,
but then relies on their customers to both
transport the furniture home and put it
together.
In
Switzerland, the newspaper 20 Minuten
has changed the newspaper business by
crafting something specific to their
customer's daily lives. The short, easily
digestible newspaper takes just 20 minutes
to read -- about as long as the average
train commute.
According to
Michel, 20 Minuten harnessed customer
co-creation of value in a much broader way
than co-producing content (YouTube) or
assembling chairs (Ikea). 20 Minuten
changed the role of the user. Firtst, it
altered the anatomy of the transaction;
payers became non-payers, because 20
Minuten is free. And obtaining the paper
no longer depended on customers making a
decision to pick it up. Instead, it is
handed to them (a push) when they are
boarding the trains. As a result, many
non-readers became readers -- the ultimate
role transformation.
Another
example is the medical technology sector,
which has developed revolutionary glucose
monitoring systems that employ customers --
in this case, diabetes patients -- to
improve diabetes self-care and create
long-term value for a useful product.
"In the past,
these patients would rely totally on their
physicians to measure glucose levels," Brown
says. "Now, using this system, patients are
self-monitoring. The whole system, the value
of it, was co-produced and co-developed by
engaging the customers."
All of these
products, services and ideas, Michel, Brown
and Gallan argue, have enjoyed success --
and have derived much of their value --
because of the way customers used them. All
of them are also clearly innovative.
An expanded
perspective
According to
traditional models of innovation theory,
however, they wouldn't be recognized as
such.
The old
innovation theories, the researchers say,
are flawed because they have focused almost
solely on products and have ignored service
offerings. They've also recognized
firm-level innovation -- the work of R&D
departments, for example -- while ignoring
the value-added contributions of customers.
Brown, Michel
and Gallan’s approach breaks down that
long-standing wall separating product
innovation from service innovation, counting
the contributions of customers as every bit
as important as those of a company's R&D
experts.
"We are
basically asking companies to focus a lot
more on how customers are actually going to
use what they're offering," Brown said. "The
tendency of many companies has long been
transactional -- 'How can we get the
customer to buy this?' -- but we're saying
what you want to know is how the customer is
going to use the product. It's very
powerful for a software vendor to know, for
example, how their customers are going to
use their products."
The
researchers say their new approach to
innovation challenges firms "to take a
broader view of innovation," looking at
customers not just as "payers," as
traditional models do, but rather as
"payers, buyers and users."
"This expanded
perspective," Brown, Michel and Gallan
write, "enables managers to see more …
innovation opportunities that are not
related to the discoveries made in R&D
laboratories."
The idea is
not all that complicated, nor is it anything
new. Customers have been adding value to
products for years -- it's just that
companies haven't always recognized those
contributions as important to their bottom
line.
But that may
be changing.
"Think about
the way you use your PC," Brown says.
"Everyone has their own unique way of using
their PC, and a PC is basically as
innovative as the way a customer uses it.
There are millions of customers all over the
world using PCs, and they're all using those
PCs somewhat differently. … I guess the key
idea that we want to get across is that,
increasingly today, customers are the ones
co-creating the value in what companies and
firms offer."
Adds Michel:
"The thing that is important is that the
customer is not just the receiver of value.
But rather, the customer is always
co-creating value. The customer is not a
passive recipient of value."
Bottom
Line:
-
A new
paper from W.P. Carey's Stephen Brown
and Andrew Gallan and Thunderbird's
Stefan Michel, to be published in the
Journal of the Academy of Marketing
Science, proposes a new theoretical
model for looking at innovation -- a
model that takes into account the
contributions of customers in the
development of innovative products and
services.
-
This new
approach also eliminates the distinction
between innovative products and
innovative services. That distinction,
the researchers say, is artificial and
outdated.
-
Among the
products that have benefited from
customer contributions are YouTube,
Wikipedia and the Swiss newspaper 20
Minuten.
-
The
researchers say forward looking
companies would be smart to stop
thinking about innovation as something
that happens only in their R&D labs.
Customers, they say, can add value to a
product long after they've purchased it.
-
Companies
should not just focus on innovating
products; they need to focus on
innovating customers.
Published by
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Arizona Board of Regents at the
W. P. Carey School,
Arizona State University, and the
Wharton School of the
University of Pennsylvania,
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