Customers Should Help Create Major Innovation

While conventional wisdom might suggest that customers shouldn't be involved in new product development and innovation and that new product development (NPD) should proceed in defined stages, research from the American Marketing Association finds otherwise.

According to Nicole Coviello, a marketing and entrepreneurship professor at Wilfrid Laurier University in Waterloo, Ontario, Canada, and one of the authors of the study report, companies with the greatest new product development success broke the traditional textbook rules. "There are a presumed set of stages with regard to new product development, and those [firms] that failed followed it to the letter. Those that succeeded often flew by the seat of their pants," she says.

For the study, which involved six communications hardware manufacturers in New Zealand, success in new product development was measured in terms of sales, profitability, and speed to market.

Coviello maintains that the successful innovators pursued an atypical process: "almost ready, fire, do a bit more, re-fire." They had no conventional market assessment and made very early sales of a not-nearly-ready technology. They were not customer-centered, but instead treated customers as co-innovators, mobilizing a mix of present and potential downstream customers for trial-and-error learning. Customers were sometimes lead-users, but often, they were simply keen to play with new technology.

Successful companies share in knowledge generation and share technology early. This entrepreneurial approach to co-creation helps mitigate risk through early buy-in to the innovation, early market access, and rapid development of a market position. "they sold their ideas early, and customers were anxious to get involved because they had a stake in the outcome," Coviello says.

The successful companies, she adds, involved customers in every stage of the process, including idea generation, customer-generated funding, development and testing, commercialization, and feedback.

"What really did strike me was how flexible and nimble the successful companies were," Coviello says. "They knew they needed to take risks and share their knowledge."

In contrast, where new product development efforts failed, the companies "only saw customers in certain roles and never really used them," Coviello says. "The companies that didn't have success stuck with everything in house and didn't want to share."

Though the firms involved in the study were small, Coviello says even larger firms can benefit from the research, "if they are willing to break-out of the step-by-step and risk-averse models learned in business school.

"Based on the fact that entrepreneurship is needed in any company, the results can transfer to any size company in any science and technology  industry," she adds.

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