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Outside Innovation - Book Review

1 September 2010

Dr. Moria Levy

The book "Outside Innovation," published in 2006, primarily delves into innovation and client collaboration. It introduces a life concept centered around collaborative work, emphasizing a reciprocal exchange of services. The book imparts insights into transforming traditional roles and fostering partnerships with clients in specific aspects of our responsibilities. Some concepts are familiar and presented in a structured manner, while others introduce innovation on various levels. It's crucial to grasp that this represents a perceptual shift. At the same time, cooperation can be realized at tactical levels; the book suggests that conceptual realization may yield benefits on a scale beyond our current understanding.


The book explores the following topics:

  • Reasons customers might want to contribute

  • Potential gains for the organization

  • Ideas

  • Planning

  • Development

  • Testing

  • Content/Application

  • Marketing

  • Tips

  • Examples of customer-sharing organizations


How is this achieved? Through dedicated meetings and projects, online customer communities (open and closed), observations of broad client groups, the blogosphere, Mash Ups, and visitor centers. While the Internet undoubtedly facilitates stronger customer connections, it is not the sole factor.


The book is engaging for readers, not limited to those directly working with organizational customers. It is particularly recommended to read through the examples section. A crucial point is emphasized – if you decide to implement these ideas, do not disregard internal innovation. Customer innovation, being bottom-up, does not substitute organizational or top-down innovation.


Innovation is presented pleasantly and insightfully. The book extends well beyond this summary, with each discussed topic expanding the boundaries of innovation. It is a worthwhile read.


Reasons customers might want to contribute

Our customers are not homogeneous; they encompass a spectrum of motivations and preferences. While some seek to engage with us through product or service purchases, others are willing to form partnerships. Importantly, this partnership isn't solely driven by a desire for discounts or favors; customers have diverse reasons for their interest in collaboration. Some examples include, but are not limited to:

  1. As Organizations:

    a. They aim to influence product development direction to align with the needs of their respective organizations, facilitating the achievement of their goals.

    b. Recognizing that contributing to a shared content database related to the product/service allows them access to the content of others.

  2. As Individuals:

    a. Some are passionate about a particular issue and wish to contribute to its promotion actively; others have previously championed ideas and are eager to share their experiences.

    b. Individuals with a creative inclination find fulfillment in promoting ideas across various fields (leading users), meeting a personal need for creativity.

    c. Those with advisory inclinations are eager to provide insights on various topics.

    d. Some are content being part of the influence, whether by claiming credit for the original idea, impacting purchasing trends, or engaging in various forms of partnerships – a reflection of human nature.

    e. A sense of belonging motivates some customers to be part of an exclusive "club" of customers, influencing the future of the company's products.

    f. Recognition and acknowledgment are valued by others. The book's author categorizes partner clients into leaders, donors, consultants, guides, and promoters, each reflecting unique characteristics that align with individual preferences and personalities.


Potential gains for the organization

Any organization can reap multiple benefits through accurate and extensive sharing of customer insights. Profits can manifest on various levels:

  1. Enhanced Product Adaptation: Customers serve as accurate representatives of the market, enabling better alignment of the product with market needs.

  2. Facilitation of Innovation and Progress: Customer ideas complement those generated by the company's R&D team, contributing to innovation without replacing internal efforts.

  3. Abundance of Rich Content: Access to a plethora of valuable content that would have required significant time and effort for the organization to develop independently, possibly without the same level of investment.

  4. More comprehensive and Authentic Product/Service Distribution: Utilizing customer-driven channels can result in a broader and more authentic distribution than other internal channels.

  5. Targeted Offerings Based on Customer Choices: Leveraging other customers' preferences, whether in search engine results or recommendations for additional purchases, allows the organization to tailor its offerings more precisely to customer preferences.

  6. Analysis of Emerging Trends and Business Positioning: Valuable insights into evolving trends and a deeper understanding of business positioning for the organization and its competitors.

  7. Financial Savings and Time Efficiency: Realizing financial savings and time efficiencies by streamlining processes and shortening development cycles.

  8. Enhanced Image Through Authentic Customer Feedback: Improved organizational image based on authentic customer ratings, blogs, and other customer-generated content.

  9. Building Over-loyalty among Partner Customers: Establishing a sense of over-loyalty among partner customers who actively contribute to and engage with the organization.


Ideas

Gathering ideas from customers regarding new products or improved versions of existing ones is a perpetual catalyst for advancing the company. These ideas can be effectively gathered through various methods:

  1. Dedicated Client Partner Projects: Initiating dedicated projects with client partners designed explicitly for brainstorming and idea development. It is crucial to meticulously filter suitable customers, particularly those with a "leading" inclination, to avoid time wastage and a sense of unproductiveness. These projects serve to collect ideas and build and maintain high-level relationships with customers, expressing gratitude for their contributions.

  2. Regular Discussion Forums: Establishing recurring discussion forums where customers can freely suggest new ideas.

  3. Comprehensive Customer Surveys: Conducting in-depth customer surveys to capture a broad spectrum of opinions.

  4. Offer Corner on the Company's Website: Providing a dedicated space on the company's website for customers to submit their ideas.

  5. Customer Competitions: Organizing competitions among customers regularly (weekly/monthly) to encourage submitting the best ideas.

  6. Observations of User Behavior: Conducting extensive observations of users, whether in prototype testing, existing product usage, or related behaviors. This may involve visits to customers at their homes or organizations.

  7. Beta Program for Product Delivery: Implementing a beta program wherein products are delivered in a partial or prototype state to a designated group of customers for feedback and testing.


Planning

Customer involvement in the planning stage may face some resistance but holds significant potential. Customers can contribute to planning in various capacities:

  1. User Interface Design: Assisting in the design of user interfaces or interfaces in general. This is particularly advantageous due to its ease of sharing and crucial because the emotional impact of the interface on purchasing decisions is high and not always predictable.

  2. Functional Design in Software Products: In software products and beyond, customers can participate in designing the functional aspects of the product. Notable examples exist in the open-source field.

  3. Content Shaping: In products or services where content plays a pivotal role, customer input can significantly shape the offering. For instance, eBay's expansion resulted from public tenders and the inclusion of a diverse customer base, impacting the content sold.

  4. Custom Product Design: For "made-to-measure" products, involving customers in a regulated manner in the design phase and later in the development process is advantageous. This approach gains popularity, mainly when catering to special needs, such as unusual sizes or luxury products. It is evolving into general markets to provide unique added value through customization, allowing customers to get something tailored to their needs and fostering creativity.


Tips:

  • Inclusive Employee Engagement: During the planning stage, typically an internal organizational process, it is crucial to involve as many organizational employees as possible in customer interactions. This facilitates a change in perception and enhances the acceptance of planning ideas and their implementation.

  • Smart Collaborative Planning: Collaborative planning with customers can yield immediate changes, streamline work processes, drive policy changes, and even eliminate unnecessary components or processes. Companies that successfully navigate this non-trivial stage are expected to demonstrate such outcomes.


Development

Customer involvement in the direct development of a product may not be widely accepted, but there are at least two examples demonstrating that customers can indeed participate in this stage:

  1. Open Source Development: In the realm of open-source development, customers themselves take on the role of developers. This paradigm has proven to be a resounding success, with at least a decade of sustained momentum.

  2. User-Led Development Stages: Another approach involves transferring all stages, including planning, development, and testing, to the user. The company functions as a recognized platform in this business model, earning a percentage as an intermediary. This innovative approach redefines the conventional development model by placing users at the center of the entire product life cycle.


Testing

Customers can contribute to testing and providing recommendations for repairs at various levels:

  1. Open Source Systems: Customers and the community generally play a crucial role as software testers in open-source systems. Support mechanisms are developed to manage tests and distribute them in a regulated manner. Some systems also incorporate two circles of testing—an external, broader circle, and an internal one.

  2. Product Usefulness Testing Websites: Numerous platforms enable customers to assess the usefulness of products they intend to offer. This is highly relevant not only to software but also to other types of products.

  3. Beta Customers: These customers take the lead in testing products upon initial use, reporting malfunctions, or suggesting improvements. They act as early adopters and provide valuable feedback.

  4. Problem-Solving Platforms: Some websites allow customers to pose questions and share problems related to product applications. Other customers then contribute by providing answers and solutions to these queries.


Content/Application

Products and services gain enhanced added value when utilized for more contributory purposes. Embracing the WEB2.0 ideology and applicable in the traditional world, products, and services elevate their added value through user-generated content. Examples of integrating such content or sharing applications span various levels:

  1. "Empty" Platforms: Flickr and eBay derive their value solely from customer-generated content. Without customer contributions, these platforms would hold no value. Although not regenerative in this concept, academic journals also follow a similar framework where the company provides the structure, and the content, sometimes even the editors, comes from customers.

  2. Customer Repositories: Public or closed repositories, exclusive to customers, house a bank of applications for the enhanced use of the product or shareable content for others.

  3. User Ratings: Websites featuring audience ratings alongside product advertisements contribute to the product's image. While it may not directly save money for the company, it improves its reputation.

  4. User Recommendations: Major search engines prioritize documents based on user preferences, and platforms like Amazon recommend products related to a customer's search based on the purchasing patterns of others with similar profiles.

  5. Utilizing External Content: Companies can leverage content not explicitly written for them. Journalists, for instance, source information from blogs, and market research relies on content generated by existing or potential customers. This enables companies to gauge public sentiment through online blogs.

  6. Self-Assembly Kits: Some companies produce products that are self-assembly kits, leaving the application, either wholly or partly, to customers. There are even companies that sustain themselves by conducting assembly workshops.


Tips:

  • To facilitate user experimentation with products and the creation of applications on top of them, companies must provide development environments, workspaces, toolboxes, or equivalent resources tailored to the specific product or service context. Transferring the responsibility for application development to customers saves significant resources for the organization.

  • A meticulous review of user-generated content and applications can extend beyond initial use, offering insights for:

  • Identifying trends and changes that should be considered in the development of product lines.

  • Identifying targeted products that should be developed or branded based on popular applications.


Marketing

Customer marketing is an exceptional promotional tool that sometimes cannot be replicated even with significant financial investments. Implementing marketing through customers can occur at various levels:

  1. Customer Distributors: Engage customers as distributors and offer them rewards for sales, creating a network of customer promoters.

  2. Customer-Driven Website: Establishing a dedicated website for customers where they actively contribute various marketing ideas. An illustrative example is the development of Firefox, where customers took on the responsibility for marketing efforts.

  3. Customer Involvement in Branding: Seeking customer assistance in generating branding ideas and fostering a collaborative approach to brand development.

  4. Customer Participation in Distribution: Utilizing customers as distributors for flyers or marketing labels, exemplified by the approach taken by Karmaloop.

  5. Leveraging Customers as Rumor Spreaders: Enlist customers as advocates who spread the word or serve as storytellers, contributing to organic and authentic promotion.

  6. Customer Insights into Marketing Trends: Harnessing customer insights to identify emerging marketing trends, capitalizing on their perspectives to stay ahead in the market.


Tips

Here are some guidelines for implementing customer-based innovation processes:

  1. The Sharing Process: The author introduces a method known as the "key client scenario" to locate customers and facilitate sharing. This approach identifies target customers, and each group develops critical scenarios. These scenarios serve as the foundation for generating ideas by proposing ideal solutions suited to these scenarios and deriving the optimal possible solution.

  2. Handling Objections in the Organization: While customer innovation appears straightforward and involves sharing, it can be complicated. Organizational personnel may struggle to assimilate customer ideas, advice, and statements. Investing in cultural change within organizations is necessary to facilitate knowledge sharing. Exposing customers to various layers and groups of employees within the organization is advisable to overcome resistance to ideas and advice.

  3. Policies and Mechanisms: Define and publish policies that outline sharing rules and boundaries in advance. This helps prevent inappropriate intervention, bridging gaps in expectations that could adversely impact the benefits of sharing. Additionally, create mechanisms that empower customers to develop and convey ideas to the company, ensuring the assimilation of ideas into the filtering and development track.

  4. Business Sharing: Assist customers in developing ideas for products or services and business models.

  5. Emotional Connection: Strive to connect with what excites or inspires customers, sometimes prioritizing emotional aspects over functional-rational needs.

  6. Recognition and Appreciation: Recognize and appreciate contributing customers. Publicize their names, offer discounts, and demonstrate their importance to the community.


Five Obstacles to Watch Out For:

  1. Risk of Organizational Damage: Be cautious of potential harm to the organization due to incorrect sharing, adoption of flawed ideas, insufficient testing, and other risks.

  2. Customer Misconduct: Guard against potential harm to the organization resulting from customer misconduct related to sharing and products.

  3. Intellectual Property Issues: Avoid unintentionally relying on ideas that may be protected as patents or other intellectual property assets.

  4. Respect Boundaries: Avoid blocking customers or preventing them from pursuing their ideas. If unwanted boundaries are crossed, consider how to act wisely and gently.

  5. Avoiding Massive Price Reductions: Customer sharing should not be a justification for significant price reductions. Maintain a balance between innovation and financial sustainability.


Examples of customer-sharing organizations

And in detail. This encompasses:


LEGO

The Game Stones Company. Developed robot kits and learning kits in collaboration with customers.

  • Apps transformed into products

  • Ideation

  • Strategic planning


National Instruments

Mechanical engineering software development company (robotics and more). Served as the intermediary between LEGO and customers and engaged teachers and parents in LEGO-based education and other projects.

  • Ideation

  • Implementation consulting


Staples

A small company selling office equipment to small-medium organizations. Conducted extensive observations to gain a better understanding of the customer perspective.

  • Ideas for service improvement

  • Collaborative planning


Hallmark

Greeting card company. Managed a loyalty club website for generating card ideas, jokes, and titles.

  • Product concept suggestions

  • Implementation consulting


FORCE

A health food company. Managed a closed website of customers who acted as a community among themselves.

  • Marketing ideas and desired product perception


Bob the Builder

Children's toy company. Managed a customer club website + mothers' diaries to follow.

  • Evaluation of prototypes of cubes and their potential applications


KOKO Fitness

A company selling unique weight loss fitness devices. Planned and refined the product based on customer feedback.

  • Product and interface planning


SOUP

Loan sites are where people lend to each other.

  • Business model planning


Tripod

Manage people's sites and blogs.

  • Customer-generated content


American Institute of Physics

Scientific Journal.

  • Customer-generated content

  • Article Approvers – Customers


Cisco

Communication software company. Built a community of customers.

  • Troubleshooting by customers for other customers


Amazon

A company selling books and products on the Internet. Allowed customers to comment and rate goods on the site.

  • Content – reviews and ratings of products and books by users


IgoUgo

A website with travel information.

  • Content – entirely based on customer contributions.


Flickr

Image website.

  • Content – entirely based on customer contributions

  • Flickr-based applications


BBC

Telecommunications company (wide media – television, news, and more).

  • Applications based on customer ideas

  • Collaborative planning with customers


Mozilla Firefox

Open-source software - browser, email software, and more.

  • Software testing

  • Software Development

  • Marketing the software


Open Source PBX

Open-source software – for self-development of telephony software.

  • Developing part of the software


Changes

BiOS - a common technological platform for ideas and technological developments in biotechnology.

  • Shared customer-generated content


Wikipedia

Shared online encyclopedia.

  • Customer-generated content

  • Editing and correction of content - ditto


NIKE, Adidas, Converse, Reebok

Companies that allow self-design of sports shoes.

  • Planning


BMW, Volvo

Companies that allow self-design of car models.

  • Planning


Build-A-Bear

Toy teddy bear workshop company.

  • Planning and implementation


GE ColorXpress

Design and manufacturing services for products by GE. Set up a visitor center where you host and save designs, applications, and content.

  • Planning and implementation


SIX

A company that advises clients on financial and other planning plans for their future.

  • Ideas for content used in scenarios in the company's consulting toolkit.


National Semiconductor

A company that sells hardware equipment for telephony and computing (analog interfaces). Developed an environment where you can learn about components and applications that others have used.

  • Content

  • Applications


Threadless

A company that sells shirts over the Internet. Developed loyalty clubs and software competitions for design and t-shirt titles.

  • Content - Design and titles


Muji

A company for cheap and simple designed products.

  • Planning


Karmaloop

A venture to sell unique fashion needs to young people. Created a customer club.

  • Planning

  • Marketing


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