The Empty Whitecoat

What badly needs renewing is the process of innovation itself

I had a long conversation with Alan Mitchell (top UK marketing writer and author of Right Side Up and The New Bottom Line) about our bringing to the UK of Strategyn’s Outcome Driven Innovation method. The following week, an article written by Alan (with the above title) appears in Marketing Week, 18th May 2006. Here is an excerpt:

The biggest obstacle to innovation is rarely lack of creativity, but sclerotic industry structures and practices that must be bent to launch new products

What is the secret of successful innovation? Well, drawing on long and painful experience of failure as well as success, here are some pretty universal lessons.

First, if you can possibly avoid it, don't launch a product that is not immediately and intuitively grasped by your customers. If it needs a lot of explaining, you risk losing many customers straightaway.

Second, launch your new product under the umbrella of an existing brand, because launching new brands is getting impossibly expensive.

Third, avoid having to rely on new distribution channels. Not only will they be unfamiliar to your customers, they also create all sorts of risk in terms of channel conflict, making new relationships work, and so on.

Fourth, don't be mesmerised by new technologies that seem to promise the earth but that you don't really understand - bugs are killers when it comes to delighting customers.

Finally, remember your context. If your company is currently making £50m a year in profits, make sure your new idea will earn at least £1m incremental profits within, say, three years. Or else it won't move the needle and won't be worth the candle.

To sum up, then: in order to guarantee success, make your new product or service as similar as possible to your existing ones…..

Spotted the catch? Every step in this chain has a strong point to make. Put them all together, however, and you have a sure fire recipe for stifling conservatism. That's the trouble with innovation. Each obstacle represents a risk, and the more obstacles there are, the more risky it becomes. Exponentially so. Yet, at the same time, it's precisely the obstacle clearing that creates customer excitement, builds new brands and propels revenue and profit growth.

Is there a way round this dilemma? Probably not. But there may be ways to blunt the sharpness of its horns.

One big influence on this front is Harvard Business School professor Clayton Christensen, who observed that successful companies miss out on many big innovation opportunities because they focus on their customers. By definition, customers are customers because they like what you are doing. So if you ask customers what they want, they're likely to say "more of the same". That leaves everyone else - people who are not so enamoured of what you are doing - out of the frame. These are the people who propel "disruptive innovators" to fame and fortune.

Methodologies based on Christensen's theories of innovation are being licensed for application around the world (including the UK with the OMC Group signing a deal last week).

Alan is spot on, but unfortunately apart from the last para. Strategyn’s Outcome-Driven Innovation  (ODI) method which we have just licensed for the UK predates Christensen’s work. He is a big fan of ODI because it aligns with his thinking about innovation theory and strategy. Clayton also writes about ODI in The Innovators Solution and describes how it can be used to segment opportunities for innovation much more effectively than traditional methods. More on this later…

John Winsor in Boulder

Well, I am one jealous guy. I met up with John WInsor in Boulder, CO last Sat for a proper mountain bike ride in the 93 F heat 7500 ft up in the Flatirons above the town. John had obviously been up there a few times before as he whizzed around the trail whilst I spent more time pushing my crappy hire bike up hill over various rocks and tree stumps. There were some superb technical downhills though with tight bends and berms.

Anyway, when I was able to breathe again, we had some great conversation across a wide range of themes including (of course) co-creation, families, reason / emotion, outcome-driven innovation, skunks and the invention of the bicycle.

Why I am envious? Boulder is a great place, with lots of interesting people, superb bars, restaurants and shops not to mention some of the best mtb trials in the world and national parks on the doorstep, plus thriving college music scene and culture.

John is posting more perceptive stuff on co-creation and picking up on the debate co-creation vs co-marketing vs co-production etc.  Also, this man has four big climbing walls in his garage. Impressive!

Customer Advocacy and Brand Development

Something of a personal milestone achieved today - my first academic paper is published, in the Journal of Product and Brand Management, co-authored with Professor Simon Knox at Cranfield.

Copyright restrictions prevent me from giving out the article but I believe it is possible to access a version of the article - Customer Advocacy and Brand Development - on the Emerald website here. Those with library access can get it in the usual way, reference, Lawer, C. and Knox, S. "Customer Advocacy and Brand Management", JPBM, Spring 2006, p. 21-26.

The article summarises four brand management strategies for building customer advocacy. These are:

1) Build a branded advocacy network of partners and stakeholders

2) Align brand values with empowered customer value drivers

3) Focus on customer transparency and trust and,

4) Co-create a customer and partner brand community

Here is an extract from the conclusion that discusses some of the brand management implications of pursuing customer advocacy

Creating a successful customer advocacy brand requires a different set of brand management competencies. It requires managers to develop and harness the competencies of customers as well as their own. It demands new communication infrastructures to enable managers to “listen in” and participate in market and customer conversations. Also, it demands that brand management “let-go” of traditional notions of brand ownership, protection and control. It requires firms to rethink the nature of customer value and the role of the market. Critically, it hinges on the willingness and desire of customers to engage with the firm across multiple points of interaction and combined with their ability to extract some form of personalised value.

Throughout this article, we have discussed customer advocacy in the context of the vulnerabilities of brands and changing drivers of consumer value. We have identified a number of organisations that are experimenting with trust-based, customer advocacy business models and we have used these for contextualising a framework for brand management. For managers, our analysis will help them to evaluate how their organisation might benefit from either developing customer advocacy or by participating in a customer advocacy network. In either case, they may discover valuable opportunities to unlock the new drivers of empowered consumer value.

Off to Aspen, Colorado

Sat here in Newark Liberty waiting for connecting flight to Denver then drive up to Aspen for a week with the guys at Strategyn. Shall be blogging quite a bit over the next week about Voice of the Customer stuff as well as getting in some biking around Vail, CO. Should get some good pics of Rocky Mountains in all their glory.. . Well, you gotta have fun some time...!

Apple sells "Digital Experiences"

Found this succinct quote via John Winsor, from Forrester analyst Ted Schadler,

The Apple stores are selling digital experiences, not products Its stores can be seen as solutions boutiques. And that's the direction that selling technology to consumers, from cellphones to HDTV's, has to go to be successful.

“Customer-Made” is Lead User on Speed

I read Trendwatching’s beautifully presented summary of the Co-Creation trend, which they call Customer-Made.  It’s terrific that Rainier and his team are putting co-creation right at the top as their most important business and innovation trend. I’m bound to agree with that.

Customer-Made as TrendWatching define it is essentially about three areas of customer involvement with firms:

1. Customer-Made Stuff  - Involvement of customers in product design and development through the submission of their ideas and suggestions
2. Customer-Made Media  - Consumer-generated advertising content, mostly enabled by brands wanting to experiment with the value of open-source contributions. Their main goal is to use user-content to generate more attention and eyeballs
3. Customer-Made Suggestion Schemes – One-off large-scale, more sophisticated (digital) customer suggestion schemes, sometimes incentivised.

All very well and good. But effectively, these forms of co-creation amount to little more than lead user approaches on speed – they’re the old lead user customer involved innovation method just faster, more real-time, net enabled and therefore more likely to be “on the nose” in terms of the quality and value of the ideas. We’re all more savvy anyway so that helps too.   

My beef is that co-creation is much more than the above. And to get to its higher significance, it is important to look beyond stuff, media and suggestion schemes and instead touch upon what customers – you and I – really value from our interactions with companies. And that , as we all know, is found in the experience. Let me explain. Consider the following statements:

1. Value-creation is not embedded in stuff but rather it is found in experiences – that is, the whole intangible sense, emotion, feeling and meaning consumers get and derive from their interaction with products and services

2. Because these experiences are felt only we consume stuff or when we interact with companies and their products and services, then the firm’s emphasis on value-creation should be concerned with how to provide the best personalised experience for an individual customer. That is, because you and I have our own unique view of value.

3. Our own unique view of value varies in time and in space and also in context to what we need. We choose a company’s products and services on the basis of their ability to meet our experience expectations. We choose a product or service on the basis of the quality of the experience it might provide for us and we assess its value during and after its use. 

4. Therefore, co-creation is concerned with how a firm and its products and services can help me to access and co-create my own personal experience from active involvement with the firm’s products. In other words, we co-create personal value from each experience – the product is subordinate to the experience. 

Consider Medtronic  - the pacemaker guys. This week they announced FDA approval for their new wireless pacemaker devices. This means that when at home, a customer’s pacemaker can be automatically monitored by remote physicians, wirelessly. When a defect from the patients norm is sensed by the in-home monitoring device, the system auto-detects the patients condition and then diagnoses the problem by remotely adjusting the pacemaker.

In essence, the pacemaker product (the stuff inside the patient) adapts to the unique circumstances and conditions of the patient. In doing so, it co-creates unique value, value that is embedded in the experience interaction between the patient and Medtronics.

I would suggest therefore that in addition to TrendWatchings Co-Created Stuff, Media and Suggestion Schemes, the real potential of Co-Creation lies in personalised (unique) experience innovation where the emphasis is on the intangible value exchanged or felt between the firm and the customer .

Anyway, here’s my own suggestion scheme, if there is enough demand, I will happily co-create a TrendWatching like article on this form of experience co-creation. Please drop me comments, let me know..

The Empty Whitecoat

I got bored with Creating Positive Context, so with a hat tip to Charles Handy, and after about ten minutes thinking about it (heck the age of planning is now well and truly dead) I have switched the name of this blog to The Empty Whitecoat - for reasons I think I needn't explain. Well, maybe later.

Pdf Version of Eight Styles of Co-Creation

A pdf version of the blog on Eight Styles of Co-Creation is now available for download here (registration required). Click on the link for the No. 4 paper in the OMC Insights Series to download.

Eight Styles of Co-Creation: A Model and Definitions

I have been working on a new framework that will help me to scope down my research into how firms can co-create knowledge with their customers. To do so, I began to identify different styles of co-creation based on a number of distinguishing criteria such as:

1. THE NATURE OF THE VALUE CREATED – What form of value the co-creation primarily creates – products, services or experiences
2. WHO IS PRIMARY BENEFICIARY - Who benefits from the involvement of the customer and the exchange of their knowledge?
3. THE EXPLICITNESS OF THE CUSTOMER BENEFIT – Whether the customer value benefit is explicitly stated or rather is an inherent part of the value-exchange process (e.g. expressed through lower prices or more convenience), it is simply part of the “contract” between the firm and the customer
4. THE TIMING OF VALUE CREATION – When the value created is used, whether in the design phase pre-market, when in the market in “beta” mode or when in context to an individual customer’s consumption-in-use.
5. THE DEGREE OF CUSTOMER COMPETENCE – The degree of end-user competence and skill required
6. THE INTENSITY OF FIRM-CUSTOMER INTERACTION / CUSTOMER INVOLVEMENT – The frequency and intensity of knowledge exchange between the firm and the customer
7. THE NUMBER AND TYPES OF CUSTOMERS INVOLVED– Whether value co-creation is limited to lead users, a single customer at a given point in time or all customers possessing knowledge or seeking some kind of value
8. THE CUSTOMER’S ROLE IN THE PROCESS – Whether customers are performing an active or passive role, i.e. they are aware they are contributing value to the firm
9. THE NATURE OF CUSTOMER KNOWLEDGE EXCHANGED – Expressed or latent, or a combination of both
10. THE DEGREE OF CUSTOMER-CUSTOMER INTERACTION – Whether co-creation occurs in distributed environments away from direct firm involvement and amongst peer users.
11. WHO OWNS THE INTELLECTUAL PROPERTY CREATED - Whether there is no ownership of any IP or the firm takes ownership for its own purposes (relates to Point 2 - the Primary Beneficiary).

In the end, I settled on two factors which distinguished different styles of co-creation. These are:

The degree of adaptability or personalisation of the value created, with standard, fixed products at one end of the scale and unique, personalised, adaptable experiences at the other

The point (or “locus of innovation”) where the value creation occurs, within firms or within markets, ranging on a scale from occurring wholly within the firm with limited invited lead user involvement at one end (here value is created and embedded in new products before they are released to the market) or at the other end, where value creation occurs at the point of use by an individual consumer in the market or a community (here value is co-created according the individual’s context, event or preferences in time and space – these define personalised experiences).

Therefore, using these two factors, I am able to identify eight different styles of customer-company co-creation, which I show (with examples) in the powerpoint chart below (click on the chart to blow-up a bigger version – apologies the typeface is so small).

To open the powerpoint version of the model (much more readable), click here

The eight different styles of co-creation shown in the model are:

1. Product “Finishing”. The customer completes the product or service and is the final co-creator of value or actor in the business system or value chain, e.g. IKEA
2. New Product Design and Development (Lead User). Here a limited number of expert customers are invited “into the firm” to share their knowledge and contribute to the development of new products and services. There is a good description of the Lego Mindstorms lead user project in February 2006’s Wired magazine. Other examples include Harley Davidson HOG events, Saturn Cars, Proctor and Gamble’s Connect & Develop programme and Silicon Graphics.
3. Existing Product Adaptation (Customer Feedback). Here the company actively solicits expressed customer needs or feedback to improve its products, e.g. Cisco and Microsoft Knowledgebase
4. Mass Customisation, This is the provision to the customer of a limited set of company-determined choices or options with which the customer can personalise a standard product or service template. Examples include Adidas custom shoes, Dell PC’s and BMW cars (plus most other car manufacturers)
5. Open Community Ideation and Product Design and Development. I differentiate the open-source movement because a) it is more distributed and b) firms cede more control to the community of users and creators. Also, open source tends to bias in digital environments, creating mods to games software for example as well as the well-known examples of Linux, Firefox and Sugar CRM. I also include Innocentive here because of its community basis for creating solutions to R&D problems.
6. New Service Design, I distinguish new service design from new product design and development (Lead User) (3 above) because services tend to involve more consumers in the innovation process and are also easier to test in markets than products through experimentation, probe and learn approaches. Also, of course, service value is inherently more adaptable than tangible product value, involving more knowledge-rich interaction. Examples include Teliasonera’s testing and piloting of new mobile phone services and Alaris Medical Systems constant dialogue with customers to improve its advocacy offering.
7. Real-Time Marketing & Service Adaptation, Moving more to within markets and value-in-use with higher adaptability, this style of co-creation is characterised by high levels of customer dialogue and interaction, enabled by digital technology. This allows individual customers to change the value presented by the firm in real-time, so for example, Cemex allows its customers to modify the delivery time and quantity of cement to fit with their regularly changing (hourly) requirements, Fedex allows large corporate customers to change package transit times and destinations in real-time. These are enabled via an intelligent knowledge interface between the firm and the individual customer.
8. Personalised Experience Value and Knowledge Co-Creation. Finally, this is where the firm and the customer interact within an experience environment to realise unique co-created value. The unit of value is not the product or the service but the individual experience and its interaction with a host or experience network partners. Examples here include those such as iPod / iTunes (facilitates a personalised music experience, it is less about the white box and more about the experience gateway it provides), Medtronics pacemakers (less about the pacemaker technology, more about the intelligent care network ), John Deere (less about the heavy agricultural machinery, more about the remote sensing capability and adapt-to-farm conditions value) and Amazon (especially in the US which is experimenting with all kinds of personalised interfaces and content).

So those are my 8 styles of co-creation. I now have to choose which one or area of the model I must focus on. What is interesting is that each style requires different capabilities for strategy, learning and marketing.

Each also demands a number of different pre-conditions and enablers for firms to be effective co-creators. If I can identify these, then I can help firms understand what to change in order to embrace the opportunities afforded from collaborating with customers.

Natrually, some of the co-creation styles overlap. Also, any one company may combine the different styles to realise different forms of product, service and experience value.

As they currently stand, I don’t claim the styles to be accurate or highly robust in their differences (that is the job of my research) so I am really keen to explore and discuss your views as to whether they are valid or can be improved. After all, that is what co-creation of value is all about!

chris lawer co-creation

Being Green and Being Commercial

Wired this month has a positively green feature on ethical consumerism and the role of technology and commercialism in bringing about a sea-change in consumer attitudes and behaviour

Here is an excerpt which really resonated with me:

Green-minded activists failed to move the broader public not because they were wrong about the problems, but because the solutions they offered were unappealing to most people. They called for tightening belts and curbing appetites, turning down the thermostat and living lower on the food chain. They rejected technology, business, and prosperity in favor of returning to a simpler way of life. No wonder the movement got so little traction. Asking people in the world's wealthiest, most advanced societies to turn their backs on the very forces that drove such abundance is naive at best.

With climate change hard upon us, a new green movement is taking shape, one that embraces environmentalism's concerns but rejects its worn-out answers. Technology can be a font of endlessly creative solutions. Business can be a vehicle for change. Prosperity can help us build the kind of world we want. Scientific exploration, innovative design, and cultural evolution are the most powerful tools we have. Entrepreneurial zeal and market forces, guided by sustainable policies, can propel the world into a bright green future.

In the UK, the annual Co-Op Ethical COnsumerism report published in December 2005, found that almost 5 out of 10 UK consumers wanted to shop ethically but either did not know how or were not motivated to turn desire into action.

My humble prediction? A host of more commercially minded ethical marketing mechanics, consumption guides, intermediaries, portals and open communities will explode into the UK and other mature markets in the next year...