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  • What is Outside Innovation?
    It’s when customers lead the design of your business processes, products, services, and business models. It’s when customers roll up their sleeves to co-design their products and your business. It’s when customers attract other customers to build a vital customer-centric ecosystem around your products and services. The good news is that customer-led innovation is one of the most predictably successful innovation processes. The bad news is that many managers and executives don’t yet believe in it. Today, that’s their loss. Ultimately, it may be their downfall.

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      Eric von Hippel coined the term "lead users" to describe a group of both customers and non-customers who are passionate about getting certain things accomplished. They may not know or care about the products or services you offer. But they do care about their project or need. Lead users have already explored innovative ways to get things done. They're usually willing to share their approaches with others.
      I use the term "lead customers" to describe the small percentage of your current customers who are truly innovative. These may not be your most vocal customers, your most profitable customers, or your largest customers. But they are the customers who care deeply about the way in which your products or services could help them achieve something they care about.
      We’ve spent the last 25 years identifying, interviewing, selecting, and grouping customers together to participate in our Customer Scenario® Mapping sessions. Over the years, we’ve learned how to identify the people who will contribute the most to a customer co-design session. These are the same kinds of people you should be recruiting when you set out to harness customer-led innovation.
      You no longer win by having the smartest engineers and scientists; you win by having the smartest customers!
      In more than 25 years of business strategy consulting, we’ve found that customer co-design is a woefully under-used capability.
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    « Crowdsourcing, Customer-Contributed Content or Lead Customer Innovation | Main | THE NEXT DISRUPTORS »

    September 19, 2006


    Patty Seybold

    Thanks for the thoughtful post.. Here are my "quick takes" on your comments. I agree that DEEP understanding of your customers' goals and context are an essential pre-requisite to doing this work well. I also agree that it's important to understand your own firm's core competencies. And, I definitely agree that customer-led innovation isn't just about co-designing new PRODUCTS, it's about co-designing business processes, business models and new ways of accomplishing customers' outcomes.

    Thanks for your guidance and suggestions!


    Jonathan Narducci


    I just read the last three entries (September 16th,17th and 19th) and, while the content was good, they prompted to make the following “guidance” comments:

    1. Both commentaries “felt like” innovation must be in the form of some kind of product. But when it comes to business and its customers, innovation has to cover potential products, services (those related to products and those that are not), ways to get work done, how to manage, how to avoid risks, and how to overcome constraints, just to name a few areas. For example, effective co-innovation collaboration techniques can be an innovation in itself. Customers want, and welcome, innovation in these areas as well.

    Since they do, then when companies start on their path to co-innovation, they have to consider the only reason customers want to participate – to increase their chances of market success by more effectively solving their problems that include increasing market share, creating perpetual customers, and optimally managing costs (again, just to name a few reasons). This means in order for innovation to take place, companies and their customers have to have a thorough understanding of what those problems are, what they mean to their businesses, and how customers view their participation and contributions to the resulting solutions.

    2. The other thing that came to mind was that part of co-innovation is determining whether or not either party can develop new ideas into effective results. This means both the company and its customers have to have a clear understanding of their capabilities – which ones need to be added, subtracted, changed and improved. For example, building innovation toolkits might require their own new skills, processes and tools.

    “Capability” development is somewhat related to the first comment in that any capabilities developed could be innovations on their own, although bringing capabilities in line with the targeted innovation is a requirement for success. And it’s also important to note that each customer or customer group may have a different set of capabilities that may need attention.

    3. By starting any co-innovation program, or, better yet, on-going process, questions about what is known about the customer’s objectives (requirements or needs), risks, and constraints must be ascertained. Then questions about the companies capabilities – skills, process, tools, resources, deliverable characteristics, and time management – must be asked to get a thorough understanding of these “areas” for innovation. In fact, the questions themselves could lead to the discovery of “hidden” opportunities and improvements, especially if answers are discussed among the various “silos” in the company.

    Next, the questions from above (or some variations) could/should be asked, about the same areas mentioned above, of customers, especially the “lead users.” First, it will confirm the company’s knowledge of their customers – based on their answers from above – and second, get insight to their customers’ customers, since they will be asked questions about their knowledge of their customers’ objectives, risks and constraints.

    The process to develop and ask questions can certainly help find ideas, but, more importantly, help find the right ideas as well as act as preparation for a successful “collaborative partnership.”

    My paper, The Essential Core Value: Do All You Can to Make Your Customers Successful!, outlines a process that could fulfill the needs outlined in these three points (found on my website).

    Bottom line on these comments – don’t forget about the basics before starting to co-innovate. Companies always feel they know enough and have all their capabilities developed and working up to snuff, but it’s always that one little thing that’s either missing or misunderstood by the entire organization that stops the success of any new initiative. Too much emphasis on the “results” (the innovation) and not enough on how to get there.

    Also, assessment questions can be the “seeds” necessary to instigate the need for co-innovation. It isn’t always obvious and could use the proverbial two by four. Lastly, co-innovation is only worthwhile if it produces results beneficial to both the company and the customer, but, more importantly, the customer. Although this might sound like the customer is more important, keep in mind, successful businesses have customers who want their suppliers to be successful as well. It’s to their benefit for many reasons, akin to wanting to keep customers (less expensive to keep a supplier than find a new one, etc.).

    I’m sure you thought about some of these things but I hope these comments add fuel and value to the discussion.

    Jonathan Narducci

    CornerStone Cubed

    The comments to this entry are closed.

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