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uk

Applied Management Project A REPORT TO REVIEW CUSTOMER INVOLVEMENT IN THE NEW PRODUCT/SERVICE DEVELOPMENT PROCESS

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Table of Contents
EXECUTIVE SUMMARY................................................................................................4 AIM.............................................................................................................................5 OBJECTIVES................................................................................................................5 LITERATURE REVIEW..................................................................................................7 Overview of the New Product/Service Development Process............................................7 Defining customer involvement.....................................................................................9 Benefits of Customer Involvement...............................................................................10 Negative Aspects of Customer Involvement..................................................................11 Customer Roles in New Product/Service Development..................................................12 Consumer Research Techniques in NPD.....................................................................18 Challenges to Customer Involvement..........................................................................23 ANALYSIS..................................................................................................................25 DISCUSSION..............................................................................................................32 The modern customer...............................................................................................32 Drawbacks of the conventional methods of product development....................................33 The drivers of innovation............................................................................................33 Customer Roles in New Product/Service Development..................................................34 The motivation for customer involvement in new product................................................37 Benefits of Customer Involvement...............................................................................38 Negative Aspects of Customer Involvement..................................................................40 RECOMMENDATIONS FOR CUSTOMER INVOLVEMENT IN THE NEW PRODUCT/SERVICE DEVELOPMENT PROCESS.........................................................................................41 Weigh risks and benefits............................................................................................41 For Business management assignments and dissertations Contact info@assignmentwriters.com – 0044-7575796565 www.assignmentwriters.co.uk

For Business management assignments and dissertations Contact info@assignmentwriters.com – 0044-7575796565 www.assignmentwriters.co.uk Well defined customer role in NPD process..................................................................42 Customer selection...................................................................................................42 The methods of interaction.........................................................................................43 Translation of customer input into feasible solutions......................................................44 Change in the architecture of product/service...............................................................45 Monitor and measure effectiveness of innovation process..............................................46 Collaborate with research institutes/educational institutions............................................47 International orientation for new product/service development.........................................47 CONCLUSION............................................................................................................48 WORKS CITED...........................................................................................................50 BIBLIOGRAPHY..........................................................................................................52 BIBLIOGRAPHY.

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EXECUTIVE SUMMARY This report on Consumer Involvement in the new product/service development (NPD) process reviews the role of the customer in design and development of new products and services. It is intuitive that if companies try and meet a heterogeneous demand, they would have to involve consumers in the whole process of product development. Consumers have become the most important stakeholders in the business value chain. Organizations are changing their entire structures and business models to revolve around customer. The report is divided into five sections: the literature review, analysis, discussion, recommendations and conclusion. The literature review begins with an introduction of the new product\service development process. Here we understand the need for radical innovation and the challenges faced during the process. Further on, we take a look at the various aspects of user involvement in the NPD process – what it means, why it is required and what could be the negative aspects. Through the work of eminent researchers, we outline the various roles that the user can play at different stages in the innovation process. The literature review then concludes with the managerial implications when consumers are involved in the NPD process. The analysis section takes a look at the innovation process of EU companies during 2006-2008. Companies are yet to exploit the potential of customers in their development processes. To support this, we have analyzed and presented data pertaining to innovation investments, innovation focused actions taken, sales performance and consumer involvement by the companies. The discussion section reflects on the changing needs of the modern consumer and the necessity to involve him in the product development process. We then understand the drivers of innovation and try to understand the different roles that a customer can play in
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the development process. Before we move further, we try to understand what the customer stands to gain from being involved – his motivation. And then consider the pros and cons of such involvement from the company’s perspective. We conclude with some recommendations for consumer involvement in the process/ service development process. We identify pre-requisites for customer involvement which need to be taken into consideration and what managers should do in for deriving the maximum returns from their innovations processes. The report ends with a summary of the findings from the report.

AIM To identify, describe and review the effectiveness of consumer involvement in the new product/service development process and to develop an associated theory to manage it.

OBJECTIVES The research seeks to:
1. Understand the factors driving the need for a new product/service development

process
2. Review the various components of the new product/service development process 3. Define consumer involvement in the new product/service development process 4. Analyze and discuss the positive and negative aspects of involving the consumer

in the new product/service development process
5. Identify and analyze the roles that a consumer can play at each stage of the new

product/ development process

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the effectiveness of

involving users at individual stages of the

process
7. Identify and outline the challenges to involving the consumers in the new

product/service development process.
8. Describe how consumer involvement can be managed effectively in the new

product/ service development process
9. Identify and recommend key focus areas for improving the effectiveness of

involving consumers in the in the new product/ service development process

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LITERATURE REVIEW Overview of the New Product/Service Development Process Today’s highly competitive and dynamic business environment demands innovation. This has put pressure on firms to come out with new ideas to enhance their product/service portfolios in order to grow and compete in the market. A firm looking to add to its existing portfolio can do so in two ways. One way is to acquire patents, licenses or companies whose products/services are an extension to the firm’s existing range. Another way is development of new products in-house, through contracts with independent researchers or outsourcing to independent companies (Kotler et al., 2007). Innovations can be done either be incremental or radical. Most firms concentrate on incremental innovation i.e. improving existing products or services. Less than 10 percent of new products are actually innovative and “new to the world” (Wind et al., 1988; Wind et al., 1997; Kotler et al. 2007). In a study conducted in the late 1980s, it was found that many firms conducted little or no product development and most companies preferred taking the merger and acquisition route (Wind et al., 1988). Though incremental innovations play a vital role in maintaining revenues, long term growth requires discontinuous innovation (Kaplan, 1999; Enkel et al., 2005). Generally new companies take the risk to create disruptive innovations which completely alter the market space and make existing products outdates and irrelevant in one go. Hence, as a pre-emptive measure, it is essential for existing companies to continuously be on the lookout for opportunities for radical innovation (Kotler et al., 2007). Some firms like 3M, W.L. Gore have realized the significance of innovations and made innovation a habit by inculcating it in the company culture. With the growing need for new products and service, companies are establishing a disciplined, formalized process for innovation. The stage-gate system for new product
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development is one of the commonly used decision process for new product/service development. At each stage of the NPD process, the new product team must fulfill certain criteria to move onto the next level. The senior managers review the project at each stage and decide whether to “go, kill, hold or recycle” the project. This increases the visibility and accountability for the new project.

Figure 1: Stage Gate system for NPD ( Source – Cooper, 1990)

But still new products and services fail. Why? Kotler et al. (2007) and Gassmann et al. (2006) highlight some of the factors that hinder new product development such as shortage of important ideas in certain areas, fragmented markets, high risk, dynamic business environment, social and government constraints, high costs of development, lack of capital, need for faster development time and shorter product cycles. Despite having a systematic process in place, many companies do not implement and follow the process in disciplined and effective manner with a certain degree of flexibility (Wind et al., 1988). While large companies find it difficult to adjust to the fast market changes because of their scale, smaller companies tend to be sales focused. In both cases,
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companies fail to invest into the product/service development process (Financial Times Ltd, 2005). The future uncertainty associated with radical innovation in terms of product acceptance and adoption, environment, market potential tends to limit the effectiveness of traditional product development techniques for radical innovation (Enkel, 2005). According to Gassmann and Wecht(2005), most new product ideas fail due to over-engineering which is a result of "technical weaknesses, competitive disadvantages, non-reflected me-too strategies, and as most critical factor - lack of market awareness." Wind and Mahajan (1988) found that most companies were not considering users and clients as potential sources for new products despite their significant contribution in identifying and developing new products. Incremental innovations, repositioning etc can satisfy only the expressed needs of the customer. In order to meet the more important latent needs, an organization needs to look beyond incremental innovation. This can happen only when the consumer is also involved in the new product development process. Defining customer involvement Though there is a plethora of new product literature, very few authors actually say what they mean by “customer involvement”. Matthing et al (2004) define customer involvement as "the processes, deeds and interactions where a service provider collaborates with current (or potential) customers to learn about the market and alter organizational behavior". They further define customer involvement in service innovation as "those processes, deeds and interactions where a service provider collaborates with current (or potential) customers at the program and/or project level of service development, to anticipate customers’ latent needs and develop new services accordingly".
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Another definition of customer involvement in the service context is given by Scupola and Nicolajsen (2009) as “the customer interaction that contributes to innovation. This innovation should not only benefit the customer company, but also the service provider, especially in the future provision of services”. Campbell and Cooper (1999) define customer partnership as “a formalized working relationship between a customer and a manufacturer which involves performing coordinated development activities to develop a new product. The goal of this partnership is to produce superior mutual outcomes or singular outcomes with expected reciprocity over time”. Over the last few decades, the customer has transformed from a “passive audience” to an “active player” in the value chain. During the 1970s and early 80s, the customer was passive buyer having no say in the design process. Companies created their products and services using information acquired through traditional market research. The significance of customer feedback in product/ service design was highlighted during the 1980s. Companies set up channels like help desks and call centers to create a two-way communication channel with the customer. From the 1990s, customers started the transition into more active role with companies looking towards them for ideas. During this time companies realised the significance of investing in long term relationships with valuable customers. In the New century, the customer has evolved to become “co creator of value” in the business networks, collaborating and co developing with companies (Prahalad and Ramaswamy, 2000). Benefits of Customer Involvement Theory and practice both identify the potential of user involvement in the product development process. More and more companies are reaching out to their end customers for their inputs and ideas. The literature is full of instances where consumers have played a pivotal role in the development process. Through his research,
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Alam(2002) showed that the key objectives for customer involvement by firms in the new service development were : Superior and differentiated service, cycle time reduction, user education, rapid diffusion of innovation, public relations and improve the producer-user relationships. Most authors agree on the critical role that customers can play in the product development process. Matthing et al (2004) argue that "the inseparable nature of customers as both producer and consumer and the tendency of service development to fall back on informal and ad hoc efforts make it natural and vital to include the customer in the innovation process". Customer integration in the NPD process can help companies to enhance their overall innovation capabilities while simultaneously reducing the "discontinuous innovations’ market risk" (Enkel et al., 2005). Gassmann and Wecht (2005) point out that end user involvement helps in developing a "more successful" product portfolio which is essential for profitable market growth. Customer integration gives more opportunity to understand the customers’ needs. This information translates into valuable knowledge which can be used by the company in the developing new products and services (Enkel et al., 2005). In a study of innovation in mobile phone services conducted by Kristensson et al. (2004), it was found that whereas the new ideas generated by phone developers were more "realizable", it was the ordinary users who produced the most original and valuable new ideas. Involving customers can help in detecting defects earlier and also help in getting an idea of the possible market reactions (Nambisan, 2002). It has also been found that customers who are highly involved with the product are more likely to be satisfied with it. Negative Aspects of Customer Involvement Some authors, however, consider the role of users in the development to be limited. Matthing et al (2004) point out that current techniques used to involve users tend to result in Incremental innovation rather than disruptive innovation. Literature indicates
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that "the customers have trouble imagining and giving feedback about something that they have not experienced"(Kaplan, 1999; Matthing et al, 2004). In 1999, Campbell and Cooper (1999) compared the in-house product development projects with customer-partnership projects and obtained surprising results - Customer partnership did not impact the new product success rate!

Figure 2: Customer partnership NPD vs. in-house NPD projects (Source- Campbell and Cooper, 1999)

The processes had been compared on two measures: 1. Performance metrics such as profitability, timeliness, and meeting objectives 2. Performance drivers such as new product advantage, fit with existing resources, process execution quality and senior management commitment However, they also found that customer partnership enhanced the advantage of the new products and execution quality of the new product development process. They suggest that customer partnerships may have long term strategic benefits. There is a need for substantial evidence, in measurable terms, to corroborate the benefits and risks of involving consumers in the new product/service development process. If the impact of users on the new product development process can be quantified, the risk may be more measurable and companies may be more willing to collaborate with customers for innovation.
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Customer Roles in New Product/Service Development Findings from financial services industry (Alam, 2002) shows that users could be involved with variable intensity throughout the service development process, primarily contributing in the stages of idea generation, service design and testing and pilot run. The table below presents a list of actual activities performed by both users and service producers at various stages of the development process (Alam 2002). NPD Stage Activity-Producer • Strategic Planning • Defining the mission, vision and direction of the development process Identification of users for involvement with relevant expertise Internal and external search for ideas Investigation of the needs, preferences, choices and selection criteria of the users Analysis of competitive product ratings Feasibility and attribute analysis Compilation of users’ problems and solutions Analysis of ideas with respect to users’ needs to eliminate the weaker concepts Assessment of customers’ purchase intent Look up patent legal and regulatory issues
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Activity-user • Limited feedback on the proposed process plan for new service development

• • Idea Generation •

• • • • • • •

State needs, problems, requirements and possible solutions Evaluate and criticize the existing services. State new service adoption criteria. Suggest rough guide to sales and market size Suggest desired features, benefits and attributes Provide feedback on concepts: liking, preference and purchase intent Assist producer in go/no-go decision

• • • • •

Idea Screening

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• • Business Analysis • • • • • • Formation of Cross• functional team

Economic analysis to justify product Market assessment Profitability analysis Budget drafting Resource commitment Detailed competitive analysis Section of team leader Induction of users into the team Allocation of roles and responsibilities to each team member in the development process Process mapping of the service attributes with their delivery process done jointly with users Documentation and final design blueprinting Estimation of service delivery time Installation and debugging of the product/service delivery mechanism Training of personnel for consistent service quality Testing the blueprint Implementation of changes and refinement Testing under real-life conditions

Limited feedback on profitability and competitor’s data

Assist in selection of team members

• • • • • • •

Joint development and review of the design blueprints Suggestions for improvements by identifying possible fail points Observation of service delivery trial by firm personnel Comparison of requirements with blueprints Observe, participate in the training and give feedback Participate in simulated service delivery process Suggest final improvements and design change

Service/system design

• • •

Personnel training

• •

Service testing & pilot run

• •

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• • Test marketing • • • • Commercialization • •

Determine user acceptance of service Development and user review of the marketing plan Examine sales potential and required marketing mix Limited roll out in market Planning of the marketing campaign Appointment of distributors and brokers Look for potential problems Modification according to market conditions • • • • • • • Feedback on the marketing plan Feedback on the marketing mix Suggestions for desired improvements Adopt service as trial Overall Performance feedback Suggestions for desired improvements, if any Word of mouth communication to other users.

In the figure below, Enkel et al (2005) summarize the customer types and their contributions with respect to each individual phase of the innovation process. Their five types of customers: i. Requesting customers who, based on their needs, communicate ideas for new products/ services in the form of complaints and suggestions and plays a limited role in the NPD process. ii. Launching customers are involved from the development phase to stimulate, design or participate in development activities. iii. Reference customer contributes to product and prototype testing in later stages. iv. First buyer gets involved only in the last two stages of the NPD process and hence, has a passive role. v. Lead users are involved throughout the development process with variable degree of involvement.Lead users are "users who face needs that will be general
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in the marketplace but face them months or years before the bulk of the marketplace encounters them and they are also positioned to benefit significantly by obtaining a solution to those needs" (Urban & von Hippel, 1988; Kujala 2003).

Figure 3: (Source - Enkel et al., 2005)

Kristensson et al. (2004) recommend using the customers’ input in the creative phase of development since the new ideas by ordinary customers are more original and valuable though they may be costly to realize. The Early Customer Integration model proposed by Gassmann and Wecht (2005) is based on the knowledge perspective of innovation and identifies five distinctive customer roles which connect to their contribution in the Fuzzy Front end (FFE) of New Product development: Opportunity sensor, Complementary specialist, Lead-User, Specifier and Selector. The figure below gives
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an overview of Early Customer Integration. Depending on the customer role, different types of knowledge are generated- tacit or explicit knowledge; market-related or technology-related content.

Figure 4: Overview of Early Customer Integration (Source-Gassmann and Wecht,2005)

As can be seen in the previous figure, consumers can contribute in multiple ways to the earlier stages of the development process. Kujala (2003) also recommends involving the user at early stage in the development process since the cost involved in making changes increases during the later stages of development.
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Nambisan (2002) visualises the customer is three roles - as a resource, as a co-creator and as a user. The table below highlights the key challenges associated with each role. He also points out the critical role a user can play in product support phase of new product development. Users often create forums were they provide product support to peers. Over a period of time, some users develop expert product knowledge; exploring, exploiting and expanding the potential and capabilities of the original product. Companies are yet to integrate customers in this role of product support.

Figure 5: Customer roles in NPD (source - Nambisan,2002)

Another new development in recent new product literature looks at the user as a creative, independent innovator. Berthon et al. (2007) define the creative consumer as”an individual or group who adapts, modifies, or transforms a proprietary offering, such as a product or service.” They differentiate between “lead user” and “creative consumer” using the following four criteria: 1. Unlike Lead users whose primary focus is just novel or enhanced products, creative consumers work with any and all types of offerings.
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2. Creative consumers are not driven by needs that may become general. 3. Creative consumers are not motivated by direct personal benefit, with the incentives being in the form of “prestige, status, and reputation”. 4. While lead users are selected through a defined process by firms, “creative consumers rarely ask permission to experiment with a firm’s offering, and critically it is they who select the product, the firm, and the innovation”. Berthon et al. (2007) argue that though creative consumers’ efforts may be unfocussed and independent, they must be included in the development process since the growth of technology will add to the capabilities and creative potential of these users. These same sentiments are reflected by Nambisan (2002) with respect to consumers as co creators in virtual communities. In addition, firms may lose a vital source of innovative ideas if the competition utilises their potential. However, Berthon et al (2007) advise caution regarding the risk of making research and development public by involving users. Nambisan (2002) expresses some other challenges to involving the user as a co creator: higher project uncertainty, more governance, risk of unreliable users, extra user training costs and need for better integration with the internal NPD team. Consumer Research Techniques in NPD Traditional Literature shows that user input can be obtained through any, or all of the following methods: ○ Interview ○ User visits and team meetings ○ brainstorming ○ user observation and feedback ○ Phone, faxes and e-mails
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○ focus group interview ○ Interaction with users in management retreat Nambisan (2002) argues that the formal inquiry mechanisms such as market surveys, focus groups do not represent the diverse consumer population completely and hence, tend to result in poorer quality information. He also recommends creation of virtual customer communities (VCC) where a company can actively collaborate with their customers effectively towards the shared goal of knowledge and value creation. Hippel (1976) argues that the research conducted by a company for identifying customer needs often generates information that is coupled with product design data. A prudent use of this information should save the company from ‘reinventing the wheel’. He suggests a method by which companies can build in the customer driven innovations in their own product development cycles. The key he says is to understand which stakeholder (customer/supplier/company/user groups) stands to gain maximum from the new product/innovation. This gain is measured in terms of return on innovation investment (ROII). Often the users themselves do the major innovation work and then bring about the successful production, marketing by a manufacturer. Therefore companies can share the risk and development cost with such users and make the proposition viable for its own sake. Hippel further states that more often than not, the sources for innovation in a particular industry are the same type. Therefore it is important that companies identify and tap these sources effectively. To identify these sources, the companies should look at past successful innovations and assess who gained most from these innovations. A pattern should emerge and point to the right innovation pool. The company should then focus its energies to that portion of the development cycle that it does best – say marketing. Alam(2002) mentions several other successful techniques to involve the customer in the product development processes - Lead User analysis(von Hippel, Thomke and Sonnack
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1999), information acceleration (Urban et al. 1997), beta testing (Dolan and Mathews 1993), Consumer idealized design (Cinciantelli and Magdison1993) , and Quality function deployment(Griffin 1992). Kaulio (1998) also developed a framework to analyze and compare the various methods used for customer involvement in new product development based longitudinal and lateral dimensions.

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Figure 6: (Source-Kaulio, 1998)

i. Concept testing: This approach involves the user in designing and testing a product concept using stimulus materials such as paper-and-pencil sketches, models, mock-ups and prototypes of the product-to-be (Kaulio, 1998).
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ii. Beta testing: This approach is used in the latter stages of the development process to test if product works as it should in the real user environment. Selected customers work with prototypes in the real environment and the results are used to eliminate bugs and improve the prototype (Kaulio, 1998). iii. Consumer idealized design: This approach involves groups of customers during the conceptual design and requirement analysis phase of product development. Selected participants from the target market are given a blank sheet of paper and are facilitated to identify their basis requirements/problems and accordingly design solutions for them irrespective of feasibility (Kaulio, 1998). iv. Lead user method: This is a four stage approach which involves selection of lead user indicators, identification of lead users groups, and concept design with lead users and concept testing with ordinary users (Kaulio, 1998). However, these techniques are limited by their relevance to the product design and manufacturing stages of the development process and apply to specific industries only. Hippel and Katz (2002) and Hippel (2001) write that even though companies strive hard to understand the user needs for an increasing number of customers, their efforts do not amount to much in the modern market place. This is because the traditional approach to innovations is a slow, inadequate and costly process. It cannot keep pace with the scorching pace of evolution of customer needs. Further, the expansion of markets beyond geographical borders and the cosmopolitan nature of the consumer add a degree of heterogeneity to the perceived needs that the conventional model is not capable of handling. This problem can be overcome by breaking the entire product development task into ‘sub-tasks’. Based on who is suited better to do the task, it is then divided among the users and manufacturers. Foe e: g ‘need’ based tasks are better handled by the users while the ‘solution’ based tasks are undertaken by the manufacturers. This reduces the
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time and cost of going back to the drawing board in case the product/service doesn’t exactly meet the customer expectations. The users are then equipped with user friendly ‘tool kits’ which allow them to build products that have a better fit with their needs. The manufacturer’s role is then to provide a space where the user can evaluate the practical and functional utility of the innovation, in certain case through a simulation. All such solutions that meet the needs of maximum customers can then be commercialised by the manufacturer or incorporated in the official version (Hippel, 2001). With heterogeneous needs becoming a common feature across industries and product categories, involving customers by providing them a ‘tool kit’ is likely to become a standard feature of most products/services. Most of the new product literature supports the Lead-user method as a technique of radical innovation. According to Enkel et al. (2005), as compared to conventional methods, the lead-user method generates higher returns and increases the effectiveness of cross-functional product development teams. In addition to the lead user theory, organizations are looking at technology for alternatives like creating virtual customer communities or user innovation networks. Schumacher and Feuerstein (2007) outline the customer integration methods in the new product development process, dividing them into two groups: traditional market research methods and ICT enabled Collaborative Working Environment (CWE) methods.

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Figure 7: Customer Integration Models (Source-Schumacher and Feuerstein, 2007)

Schumacher and Feurstein (2007) conclude that companies will gain better insight into the "possibilities and restrictions of their products" through customer integration in the product development process. However, both Gassmann et al (2005) and Schumacher et al (2007) concur on the need for developing customer integration methodologies and
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supporting tools with emphasis on the "unobtrusive" and "effective" deployment by giving careful consideration to the process set-up and execution. The same need holds true in the new service development context (Matthing et al, 2004). Challenges to Customer Involvement However, there are many challenges to customer involvement in the development process. Matthing et al (2004) conclude that the organization structure and culture could also hinder the customer involvement in development. Other reasons mentioned by them are communication barriers between users and developers , time-consumption and increased efforts, low organizational fit, increased uncertainty, the difficulty in identifying an appropriate set of customers, the difficulty in creating appropriate incitements for participation, and the difficulty of capturing the customers’ tacit knowledge (Matthing et al., 2004; Kujala, 2003). Literature suggests that customers still play a passive role in the NPD process. One of the reasons why firms do not involve users actively may be the lack of empirical evidence to support the gains accrued by working with users versus the in-house development process (Kristennson, 2004). Nambisan (2002) states "weak connectivity between the producer and the consumer" as the reason for this. He further argues that a value-creating partnership for NPD needs to be developed between producers and consumers with the help of various emerging technologies. A recent study of user involvement projects in telecommunication firms conducted by Kristensson et al. (2008) suggests that “a user involvement project during NPD should consider the following key strategies (research propositions): (1) Users identifying needs in their own setting of use; (2) Users identifying needs in their various roles; (3) Providing users with analytical tools; (4) Motivating users via the apparent benefit to be gained from their involvement;
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(5) Non-reliance on brainstorming when generating ideas; (6) Users not having too much knowledge of technology; and (7) The involvement of a heterogeneous group of users to ensure that a diversity of ideas is provided for future services.” Prahalad and Ramaswamy (2000) postulate that in order to harness the competencies of their customers, managers have to encourage active customer dialogue, mobilize customer communities, manage customer diversity and most importantly, co-create personalized experiences with customers. The customer is no longer a passive player and to keep him engaged companies have to design a channel for active, open conversations in order to understand and predict their needs. With the evolution and growth of internet, customers are connecting and collaborating online through virtual communities. Microsoft engaged its customers online to act as product testers for the beta version of Windows 2000. By taking this step, Microsoft was not only able to remove the defects from the system; it was able to communicate the value proposition of its new product to potential users. However, the customer diversity in terms of age, region, gender etc may pose a challenge to companies. Managers need to understand that developing partnerships with customers for NPD takes time and involves high costs. Hence, they need to understand and evaluate the costs versus benefits of involving customers. Also, they should have realistic expectations from customer partnership projects (Campbell and Cooper, 1999). Alam (2002) and Matthing et al (2004) both stress on the need for awareness and proactiveness of managers in collaborating with the potential users throughout the development process. Managers need to know and understand the gains accrued by involving users at various stages in the new product/service development process. In addition, focusing on customers' latent needs can facilitate learning and reduce the risk
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of being imitated and surpassed by competing organizations (Matthing et al, 2004; Kristensson et al., 2008).

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ANALYSIS (The analysis has been done using data retrieved from the Innobarometer survey reports for the years 2007 and 2009. The surveys were conducted with 5238 companies in the 27 Member States of the EU, Norway and Switzerland, under the framework of the Flash Eurobarometer surveys) Despite all the new product/service literature supporting the significance of innovations in the growth of a company, companies still seem to be unconvinced. This is evident from the survey of annual spending done on innovative activities by 5238 companies in the EU. The investment in innovation was found to be less than five percent in 59% of the companies. 15% of the companies made no investment in innovation efforts. Only 26% of the companies made significant investments in innovation. In this scenario it becomes important to determine the reason for the lack of innovation focus in these companies.

Figure 8: (Source - Innobarometer survey 2009)

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The survey indicates that less than 10% of the companies surveyed in the innovation intensive business sector had no contribution from innovation. However, only 33% companies in each size segment had innovation as primary or significant source of income with 9% companies dependent on innovation as primary source of income. This data shows that innovation may not contribute to the company’s sale income. Hence, companies may not include innovation in their primary focus areas. This also raises the question of whether returns from innovations are being realised effectively to their potential.

Figure 9: (Source - Innobarometer survey 2009)

New opportunities within existing and new markets continue to be the traditional reason for developing new products and services. Innovation within the companies seems to depend on external factors rather internal. The major drivers for innovation were found to be pressure from competition and demands from clients. Around fifty percent of the companies accepted that demands from clients-public and commercial was a major
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factor in innovation. This clearly shows that companies need to be proactive in anticipating their customer needs. Despite the fast emergence of new technologies, only 30% companies are harnessing the potential of technology for driving innovation

Figure 10: (Source - Innobarometer survey 2009)

.

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Figure 11:( Source - Innobarometer survey 2009)

On comparing the financial success of the surveyed companies (above figure), it can be seen that companies with more innovation focus are faring slightly better than their noninnovation focussed counterparts. On the higher end of the sales increase, 5% of the innovation-focussed companies saw their sales increase by more than fifty per cent. However, companies (27%) in this segment also showed more losses as compared to companies with less innovation focus (24%). The huge variation in the sales performance of the innovation focussed companies highlights the high risk involved with innovation.
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Figure 12:( Source - Innobarometer survey 2009)

Most of the companies have been integrating various activities across the organization in order to support innovation. The various actions include internal mechanisms to capture the ideas and suggestions of employees, creation of cross functional teams on innovation, knowledge management systems to capture the tacit knowledge and staff rotation across different functions. However, in addition to focusing within the organization, companies are also looking to external resources to assist in the innovation process. While most of the companies still focus on in-house development for all types of innovation; they also take advantage of external resources to support their innovation processes.

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Figure 13:( Source - Innobarometer survey 2007)

Recently the trend has shifted towards including all stakeholders in the innovation process. Although a few companies have innovation networks with their counterparts in the same field, the advantage of these networks may be limited by restrictions related to sharing of sensitive competitive intelligence. Educational institutions and research institutes are another unexplored avenue for innovation. Less than 24% companies are collaborating with these institutions to support innovation processes in their organizations.

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Figure 14:( Source - Innobarometer survey 2009)

Nearly forty percent companies are building strategic relationships with their suppliers and specific customers. The underlying reason for this could be the high level of product knowledge acquired by suppliers and clients. Another reason could be new expectations from the product/service communicated by the user.

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Figure 15: (Source - Innobarometer survey 2009)

However, less than thirty percent of the companies involved their customers in a more active role. Only 24% of the companies involved their consumers in the in-house development process. Consumers were also used as new product testers in the later stages of the process development. Even with the growing relevance of internet, very few companies engaged their customers in virtual communities. The data shows that though the companies are realizing the significance of innovation in the organization, they are yet to exploit users as a potential source for innovation. Users still play a passive role in the new process/service development process. Further research is needed in order to investigate the reasons for companies’ reluctance to involve users in a more active role during the NPD process. Also, more empirical evidence needs to be gathered in order to support the consumers’ role in the innovation process.

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DISCUSSION The modern customer The modern customer has evolved radically over the last few decades. He has become more quality conscious and demanding in terms of service standards. With the increase in options available to him, the perceived difference between brands has gone down significantly as a result of which brand loyalties have become fickle. Companies across the world have been devising ways of keeping up with this pace of evolution. They have gone from mass markets to segments to individual customers. Mass customizations came into picture because of this desire to meet the individual expectations. The modern consumer is no longer satisfied with the information passed to him by the marketing departments. He is using peer networks, user communities and the internet in general to make an informed choice. More importantly the modern customer is vociferous about his needs, expectations and critique of the products and services that he uses. Google and other search engines have empowered him by giving him an easy yet powerful tool to look up information. The sheer success of Google is an indicator of this trend. This shift in the source of information has changed the way consumers perceive products and services. The traditional methods of product development had the consumer coming in only at the very beginning (need analysis and market research) and at the very end (product testing) of the product development process. The role played by him in the other stages was anything but marginal. In order to meet the expectations of the empowered customer it has become imperative that they be an integral part of the entire product development process. The modern customer thus informed is also more hands on and likely to experiment to satisfy his needs. Empirical studies have shown that many customers tend to be
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involved in modifying or developing a product. More importantly a lot of innovation ideas are credited to users in fields ranging from oil refining [Enos (1962)], semiconductor processing [Von Hippel (1988)] equipment innovations in certain sports [Shah (2000)]. It is then a consequence of this that the modern consumer is perceived to be a source of innovations. Drawbacks of the conventional methods of product development A product is considered a success if it fulfils the customer’s needs. However a company’s approach to solving a particular problem is constrained by its previous experience. The convergent thinking of the in-house engineers may hamper and restrict the generation of new ideas. Consider a case where the customer need is identified to be a fastening related problem. So while an adhesive company would try to solve it by the use of speciality adhesives, a hardware company would offer specialized nuts and bolts (Hippel and Katz).Today it is not feasible for a company to work in isolation; path breaking innovations can only come from the concerted efforts of the company and its network of stakeholders. Conventional methods are also slow in the modern terms. Since product development in itself is an iterative process, the involvement of the customer at the later stages could mean that a lot of revision is done and hence the market responsiveness is decreased. By involving customers from the beginning in the NPD process, companies can avail a wide variety of ideas; they can save both the time and money lost due to lack of market interest. To stay competitive in the current knowledge economy, companies are gradually transforming their innovation processes to revolve around their most important stake holders – their customers. The drivers of innovation The need for a new product arises when there is a well defined need in the market that is unsatisfied as yet. So it is the race between companies to meet this need. This is the
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most common driver of innovation, for instance - walkmans, e-book reader, language translation services. Innovations for such products are typically radical developments followed by incremental innovations in the form of newer versions of the same product or a surge of me-too products. Soon enough it becomes an entire category with options galore for the customer to choose from. Another driver of innovation is where the product/service tries to meet the latent, unstated needs of the consumer. In such categories, consumers themselves are not sure of what to expect and therefore the companies introducing these products have to take a lot of effort to educate them in order to shape their opinion. This is something that happened on introduction of cellular phones by Nokia and Ericsson. A third driver of innovation could be technology itself. Either the development of technology in one field can create a need in an entirely different field like the advent of trains giving rise to the need to accurate timekeeping. Or it could be the demand of even more powerful, accurate and efficient technology. Mobile phones with multimedia, computers, gaming consoles could be examples of this. Customer Roles in New Product/Service Development Customer involvement as a process has its share of disbelievers and distracters. How can a consumer, this group argues, say anything about a non-existent product. Or for that matter how can the market size be estimated correctly. Customers, it is believed, voice their expectations and concerns on the basis of their experience of the existing products; their feedback is often related to complaints or drawbacks of the existing. Logical though this argument is, it fails to value the role of the customer in the success of the final product. Sir Clive Sinclair, an inventor and genius admitted his lack of belief in market research. So although his product, the Sinclair C5 was a technological breakthrough, it failed because of poor marketing judgment and research (Marks, 1989).
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The role of the customer has evolved from a passive user to an active component of the entire development process. In fact it has become important to the extent that customers are being looked at as the partners in business value creation. This is particularly more significant in the context of service innovations since most service firms lack R&D departments. Let us discuss the role of the customer with respect to the stage in the new product/service development process:
1) The “Think Tank”: This has been one of the oldest and traditional roles of the

user in the innovation process. The customer has always been considered as a rich source of ideas. Over the years, companies have used various methodologies and techniques to tap the ideas lying in their customer pool. From giving ideas indirectly through feedback and complaints based on unmet needs from existing products, users have now evolved to take a centre stage in the development processes. The way customers score over in-house engineers is while engineers have limited interaction with their peers; the customers can either work individually or tap in the vast global consumer network. The first stage of any NPD is essentially an idea generation phase. Users can contribute through inputs derived from their experience of from brainstorming. The next stage of the process is analysis of the ideas generated.
2) The “Designer”: The customers today are not limited to stating their needs and

problem, they are using their creativity and problem solving skills to identify and design original solutions to their problems. There is sufficient proof available to support the importance of customer involvement in the ideation and design phases of the new product/service development.
3) The “Developer”: This role sees the customer independently or collaboratively

developing and implementing new products/services. The power of the customer
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in this role has increased with the new technologies coming up every day. With all the information accessible at the click of a mouse, customers have acquired high levels of product expertise. Especially in the technology sector, independent customers are modifying and creating new products to support their requirement.
4) The “Tester”: Customers are using their extensive product knowledge to help the

companies test their new products; helping in market assessment, defect identification and product improvement before the commercialization of the product/service. This also helps the potential customers to learn and understand the unique vale proposition of the new products and services. A good case to support this would be the pre-launch user testing of Microsoft Windows 2000 which helped the developers remove bugs and thereby result in time and cost savings.
5) The “Marketer”: Customers involved in the development of a new product are

more likely to promote the product among peers through word-of-mouth. New customers are more likely to trust the opinions of their peers with regards to any new product or service. Hence, the credibility of customers involved in the innovation process can induce product trial in other target customers. With the growth of technology, viral marketing has emerged as a powerful tool for the promotion of new products and services.
6) As a “Product User” : As an ordinary user, customers can give critical feedback

for the next phase of development and help the companies understand the factors for the success/failure of the new product/idea. The customer may take up one or more roles in the development process. To understand the roles of the customer, let us consider the example of a company like Threadless (Piller and Ihl, 2009) where users are involved as co-creators in the new product/development design process. As think tanks, the users individually or
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collectively scour through their natural environment, external information and virtual environments to generate as many ideas as possible. Based on these ideas, the user in the role of the designer creates prototypes to share their visualization of the product design. By having a poll on the designs submitted, the customer in the role of a “tester” selects the best designs and gives feedback regarding the submitted designs. Hence, the customer can generate ideas, screen out the unfavorable ones, create prototypes, state his preferences and give feedback as to what made the product a hit or a fail. Moreover, the customer can share the process within his social network, inviting other like minded customers to join the process, thereby increasing the customer base and expanding the pool of potential ideas. Most researchers agree on the importance of the customer in the earlier phases of the process development. However, further investigation is required into the customer contributions in the latter stages of the development process. A customer as developer is an opportunity yet to be fully realized. Some companies have already started providing toolkits to “lead users” to encourage them to develop new products. The motivation for customer involvement in new product Customer involvement is not a recent phenomenon. Iconic products like Harley Davidson have had legions of fans which have played an important role in the product development. But such involvement has revolved around customers who are essentially either hobbyists or ardent fans. A good example is online games. The virtual world is replete with ‘cheats’ and codes developed by gaming enthusiasts which suitably modify the game so that level of interest is increased. The motivations of the customer to be involved in product development could be range from monetary gain or to simply the recognition from the company or just the satisfaction of having a say in the development of one’s favourite product. The popular incentives include licensing agreements and cash rewards. In any case, the
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involvement of customers both ‘internal’ and ‘external’ is something that has to be nurtured over a period of time. It is one thing to have a fanatical fan following or a dedicated employee base and quite another to turn these both groups into innovation pools. Open source software development is a key example of new product developments being driven by the customers. From ardent open source supporters to large corporations, these ‘customers’ are driven by the need for a viable and cheaper alternative to the costlier proprietary software. The factor that has contributed to their success is the ease with which diverse user groups can collaborate online. As Hippel and Katz (2002) state that the key to solving a problem is the convergence of the needed information and the right set of skills at a single locus. The virtual world makes this convergence possible at little or no extra cost to the corporations. It also scores over the traditional method by offering a continuous (24X7) iterative development process which churns out new additions to the product. We can appreciate this point if we compare the number of versions and the number of add-on’s that have come up in the same time frame for say Mozilla browser and that for the proprietary Internet explorer. By using techniques such as innovation contests, companies can try to encourage consumers by providing both monetary and non-monetary incentives. The monetary rewards could be in the form of a cash prize while the non-monetary incentives could be citations, social recognitions etc. In some educational institutes, companies offer a future job opportunity to winners of the innovation contests. It is a win-win situation for both since companies get a valuable resource and the innovators get an opportunity to implement their ideas in real time on a real world scale.

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Benefits of Customer Involvement When innovation in product/services is driven entirely internally to company, its engineers are essentially trying to create a change which they think the customer wants. This may or may not be true. However where radical innovations are concerned, such a predisposition can prove costly and in certain cases fatal to a company. Radical innovation is often achieved through a technological breakthrough. But in itself a ‘technology push’ cannot guarantee market success. Motorola’s Iridium satellite service launched in 1998 could be the costliest product failure ever – a radical innovation which failed to attract enough customers. Or on a smaller scale an example could be the “Sinclair C5” an electric vehicle which was launched in 1985 despite a comparable product or without market research to substantiate the need for such a vehicle (Marks). These products were ground breaking – unlike any other product service available earlier and with a vast apparent opportunity. However one of the reasons for their failure was the lack of customer insights in the product development phase. Whenever companies are on the brink of discontinuous innovation they face the problem of predicting the customer response and anticipating his/her response to the innovation. Customer involvement has been shown to reduce the market risks associated with discontinuous innovation (Chesbrough, 2003; Gassmann & Enkel, 2004). It has also made it possible for companies to understand the pulse of the consumer. Apple which is credited with creating the most ‘user friendly’ devices is said to have an uncanny understanding of consumer needs. For certain product categories, involving the customer in continuous product improvement and development is a must. Software companies spend anywhere from 50% to 75% of the total development cost on debugging the systems. Now, there’s an inherent limitation to carrying out the testing in-house. Therefore Error Reporting Systems (ERS) form an integral part of all major software packages.
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Another advantage of customer involvement is the insight obtained in the very motivations, aspirations of the customer. While all ideas might not be feasible, even the most outlandish ones can have a seed that can later develop into something significant. Ordinary consumers are unaware of the functional implications of their ideas. They are concerned not with the implementation but the generation of ideas. Their divergent approach often leads to a good starting point for companies. Take for instance the case of Threadless, a t-shirt selling company (Piller and Ihl, 2009) for open innovation with users to co-create value. The company has handed over the designing of new T-shirts entirely to consumer. At no additional cost, Threadless now has access to an inexhaustible supply of new ideas, a loyal customer base and has been able to focus its efforts primarily on the operational and customer interaction aspects of the business. Customer involvement also helps companies overcome the problems of a set way of thinking. Creative breakthroughs often occur when the developments in an analogous or even seemingly unrelated field are applied to the problem at hand. Customer can come from varied backgrounds and then can combine knowledge from diverse fields to actually increase the solution space. Customer involvement can also help small and nimble companies score over their larger counterparts with huge R&D budgets by being more responsive to consumer needs. In fact it’s not just the small companies which are trying to tap the consumer innovation pool. Understanding the role of the consumers countries like Denmark have passed legislation that encourages manufacturers to integrate user led innovation from the very early stages of product development. Negative Aspects of Customer Involvement Customer involvement in the product development process is in no way a panacea to all the problems or a guide to radical innovation. It is but a pointer and should be considered as such. For even the most extensive market research can fail to state the
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latent need or gauge the future success of an entirely novel product. On other hand since companies themselves are not sure of what to expect from customer interactions they can find themselves with inputs that give unfeasible solutions/specifications of the desired products. These are then passed to the tech departments for processing. This can be a recipe for failure. Imagine the marketing consequence of translating the consumer need for a long lasting bulb (say for 20 years) into reality. An important negative aspect of customer involvement is the perceived loss of control. Since the locus on information moves outside the organization many people become uncomfortable. It is difficult to accept the risk of having outsiders contribute to innovation. In addition to the risk it is difficulty of keeping tab on the activities of such groups because the formal managerial structures, property rights, legal frameworks and similar principles do not operate in such environment. When Lego introduced an online toolkit it was shocked to see that within two weeks its software was hacked and modified in a way that users found beneficial but which in the short term affected the company’s sales. Another important aspect is the risk of loss of knowhow. At early stages of innovation it is very important to keep a tab on the development. The process is therefore very secretive. By involving customers companies are relinquishing their control systems for even the best of non disclosure agreements cannot prevent the transfer of knowledge in certain cases. And that could be disastrous. The sharing of intellectual property rights can also become a sore issue during joint development with both the customer and the company claiming the entire/ more than fair credit. A very close relationship with the customers can also affect the flexibility of the company. There have been instances where the products developed after feedback
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from the lead users were rejected by the majority users because they found them too advanced.

RECOMMENDATIONS FOR CUSTOMER INVOLVEMENT PRODUCT/SERVICE DEVELOPMENT PROCESS following areas. Weigh risks and benefits

IN

THE

NEW

In for a company to the get the most out of the customer, it needs to focus on the

Before involving customers in the new product/service development, managers need to understand how users can add advantage to the process. They need to have clear objectives as to what information they are looking for and how working with users can help them acquire that. On the other hand, they need to evaluate the risks associated with user selection and integration into the process. User integration can be costly and time consuming. Hence, before involving consumers, companies need to thoroughly examine the strategic long term and short term benefits of involving customers in both tangible and intangible measures. User involvement cannot guarantee market success. Having incorporated customer feedback, companies have found to their dismay that their product failed in the market. This is because although the products preformed the intended functions they were either costlier or had developed unforeseen characteristics which the consumers didn’t like. Well defined customer role in NPD process Once the companies decide to involve the consumers, they should clearly define the role that the customer would have in the process and what stage. At each stage, the customer may be a passive or active participant. To get the best results from the innovation process, companies should outline the expectations from the customer role
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and gains achieved by it at each and every stage. Basic trainings and techniques for customer interactions can then be decided in accordance with the role. Customer selection Selecting the appropriate customer for integration is a very critical for the success of the innovation process. Not only should he be representative of the target market, he should also satisfy certain criteria such as – level of product knowledge, creativeness etc. These criteria need to be decided based on the customer role and the expectations from him. Some criteria for selection could be the levels of specific product know how, usage patterns for products in a particular range etc. For instance, in the role of a product tester for a technology, the user would need to have certain level of expertise in order to explore and examine the new product fully. Typically the innovators are “lead users” or ardent hobbyists or individuals who are happy about the recognition given by the companies. A community of such users can be the ideal pool for selection of the appropriate customer because they become good sparring partners for the in-house team. While lead users are the preferred category of customers, it is also important to study the laggard customers or the ones who have given up on the product. This might lead to a much needed innovation which can help improve the product performance and therefore the market position of the product, something that happened with J&J’s Accu– Chek Comfort Curve. The methods of interaction No single method can be a correct barometer of shifting trends of customer demand. However it is not just the lead user who can be a source of ideas. Ideas should be generated through a variety of ways focus group discussions, company hosted and managed user communities, monitoring of customer complaints (3M claims to get 75%
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of new product improvement ideas by listening to consumer complaints), trial runs of products with the ‘lead users’, specialist fairs, customer competitions for the best idea/innovation, following the online communities (RSS feeds is an easy option to read about a particular topic) and blogs of product users (blog mining) and product bashers. Internet communities are quite different from the customer communities. While customer community members have a close bond with other users and share a vision for product improvement, online community members have a loose tie with each other mainly because of the common enthusiasm. They are not as serious or driven towards innovation as the customer communities. So while online groups work well as forums for discussions on particular topics, customer communities are better poised for creation. Companies can’t dictate which problems they want solved on such platforms; it is the customers who take up problems according the perceived challenge or utility value. Therefore it is better that company’s break down the overall task into small modules which can be worked upon by the customers. Considering the volunteer nature of such community members, such break up into manageable chunks makes eliciting a useful response more probabilistic. Online communities are however an invaluable source because they allow isolated customers to collaborate. These communities make it possible for several individuals to contribute to the common good through even small individual contributions. This nature and spread of online communities makes it possible to even share even complex problems to be solved by customers. It is also important to take inputs from the ‘internal customer’. This can be done through methods like ‘quality circle’ or ‘kaizen’. Companies like GE, 3M, Toyota, and Google invest in the vision of individual employees and draw wisdom from their attempts. Such companies by their encouragement to innovate bring out the creative tendencies in its employees. They also have clear cut strategy, metric and methodologies to align employee creativity with organizational goals.
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If possible, developing a simulation of the product/service experience for customers and then having their feedback can prove as the most valuable technique. Volvo offered a simulation of concept cars that allowed users to become familiar with what would be future offerings and then give their feedback (www.conceptlabvolvo.com) Managers should evaluate what technique would work best with customers involved in the development process. For instance, to evaluate a new-to-the-world product, the creative technique used should be able to aid the user in visualizing the new concept clearly, so that an unbiased evaluation can be done by him. In some cases, observing the user in natural settings could be more insightful to understand his needs. Based on the objective of the innovation process, a suitable technique for customer integration could be selected or designed. In addition, the outcome-based interaction technique designed by Ulwick (2006) can be used to minimize the ambiguity of the customers’ inputs. Virtual consumer communities and ICT enabled collaborative working environments can be used to involve and manage the customers’ roles in the new product/service development process. Translation of customer input into feasible solutions It is important not to take all the customer inputs on face value. A customer’s feedback is based on his individual use of the product which may or may not be the same as that perceived use by the company. Also if the feedback has phrases such as ‘durable’, ‘strong’ ‘easy’ which are vague pointers and which would make the task of translating it into specifications quite difficult. As an example consider a survey carried out by Ulwick (2006) of Motorola cell phone users found that there were multiple interpretations of a single desirable quality ‘easy to use’. Therefore there should be clear and concise parameters while taking customer inputs which can then be translated into real time benefits.
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A first level of idea screening can be carried out by users themselves through voting. The users can review all the ideas and rank each according to their perception. Or the ideas can be enriched by addition/modification. This ensures that the idea goes from being a brainwave to a reality. It is important to reward both the improvement as well as the original innovation. Wikipedia is a good example of how contributions from several members can be integrated to form a logical and coherent whole. Moreover it is important to rate all the inputs on the parameters of fit with the company, resources required for development and attractiveness in terms of future potential. Each parameter must be rated as objectively as possible although estimates of future potential tend to be highly subjective. Future actions should be decided on such a rating. Change in the architecture of product/service For being responsive to the customers needs to cater to the ever changing and evolving customer needs, there has to be a fundamental change to the way the product/service is designed. Not just that, at times it is important to re-look at the entire business model and organizational structure in order to be nimble and responsiveness to external changes. Flat organizations or small autonomous units have been seen to react faster than large hierarchical organizations. Incentives also need to be built in the system of championing and working on customer contributions. This is because customer inputs are in the raw form and need a lot of rework and processing before they become tangible benefits. A certain realignment of organization through the formation of committees, teams which help in aligning the customer innovations with the organizational goals is also needed. It is with time that NPD processes with the involvement of customers become a part of the company DNA. P&G, Harley Davidson, Kraft, 3M, Dell could be a few examples which managed such changes successfully.
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Companies in the Software as a Service (SAAS) arena are a change in the way the serviced has been traditionally designed. For a typical SAAS product, the key elements, tools and platform is standardised while the actual interface and service is customised by the client to suit his requirements. With this innovation the company is able to cater to a wide range of customers and their unique demands. Companies that have been able to cater to heterogeneous needs while still maintaining some degree of standardisation have been enormously successful. Dell would be a case in the point – a company that allowed users to build their own PC’s revolutionised the entire industry. Standardisation of the basic building blocks is the key to meeting a diverse set of customer needs. This can be understood with a simple example – consider ordering a pizza. With the limited options of toppings and seasonings, customers are able to create a very large variety of options. Even the mass customisation of cars is in effect achieved from a similar principle. This is because by and large, even the customers who seek customised products do not want an entirely radical product. It’s just that their needs are not met with the mass available option. By allowing them to choose from a standard ‘library’ of options, they get to have their say in the final product. Monitor and measure effectiveness of innovation process Is the process working as desired? Companies need to develop a monitoring system to ensure that their innovation process is effective. They need to define key performance indicators for the process and bench mark it against the best practices in the industry or in the business. Collaborate with research institutes/educational institutions Research and educational institutes are hotbeds for potential innovations since they are teeming with ideas. By aliasing with these institutes, companies can exploit the
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intellectual capabilities of the institutes to explore and improve the effectiveness of innovation processes. In the absence of conclusive literature, companies need to substantiate the impact of user involvement and design a specific innovation process, customized to the company’s requirements. More and more firms are looking to educational institutes for radical ideas. Some technology firms conduct contests across educational institutes where in the participants not only to give ideas, they also have to design new products/services and present the complete business case in order to support their product/service. In some cases, participants also develop the prototype. For instance, MTV India conducted a contest in certain management institutes where students were asked to develop new programmes which would appeal to the youth market. Participants had to submit tangible and intangible evidence in order to support their idea. In this case, the customers are also the creators. By appealing to the competitive spirit of customers in the student community, MTV was able to achieve many objectives – understand the preferences of its target audience, get a variety of original ideas and program designs, exploit the expertise of students, involve potential employees in the development process and develop strategic relationships with the institution. International orientation for new product/service development With the world now turning into a global village, it is important to remember to include the global customers’ sensitivities and expectations in NPD. There are quite a success stories where the product failed to meet expectations in its domestic market but went on to become a success in foreign markets. Involvement of foreign customers is particularly challenging because of the cultural differences and difficulties in communication and coordination. across the world.
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However, emergent

technologies are decreasing this gap and making it easier to connect with people

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CONCLUSION Over the years, customers have begun to play and ever increasing role in product development. With the increasing diversity of the market place both from the marketer’s and consumer’s point of view, customer’s involvement in NPD is being perceived as something that will give an edge to a company. Newer techniques are being devised to keep in touch with the customer’s pulse. Companies that make a move to empower the customer through information or by giving creative freedom of ‘tool kits’ often enjoy a leadership and trendsetting position. Companies should therefore embrace this trend. Organizations need to make fundamental changes to the way they operate in order to incorporate the role of the consumer in NPD. For this process to be successful, it should be developed to be clear, concise and measurable. The organizations should have clear answers to the following questions: What does the company aim to achieve by involving consumers? What inputs are they looking for? Where all can they locate the kind of customer input needed for the development process? How can the company approach and partner their customers? How to retrieve the desired information effectively from the consumers? What motivates the customer to innovate and what incentives can the company offer them? Through the report we have tried to answer the above questions by presenting the key findings from earlier new product/service literature, analyzing data from EU firms pertaining to their innovation processes and through discussion of various facets of consumer involvement in the NPD process. Based on our findings, we have identified the key focus areas that companies need to explore in order to effectively manage their new product service: risks vs. benefits analysis of customer involvement in innovation; well-defined customer role in NPD process; appropriate customer selection; methods of customer interaction; translation of customer input into feasible solutions; change in the architecture of product/services; monitoring and measurement of the effectiveness of
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innovation process; collaboration with research institutes/educational institution; and international orientation for new product/service development. Most importantly, organizations need to inculcate the spirit of collaboration for innovation in the organization culture and values so that the company is willing to support the partnership with all external stakeholders of the company.

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