CUSTOMER INNOVATION GUIDE
Mastering the Fourth Core Competency: Opening Up Product Development
By Patricia B. Seybold and Ronni T. Marshak, August 30, 2007 

Determining How Far Along You Are in the Open Development Continuum
 
In my book, Outside Innovation: How Your Customers Will Co-Design Your Company’s Future, we specify the five core competencies to master:

For each competency, we provide context and a list of activities (methods/behaviors/programs) you should be implementing to reinvent your organizational culture around customer-led innovation. We also provide you with space to complete your self assessment: how well is your organization/division/department/group doing on fulfilling these requirements? We recommend that you identify those activities broken down into three categories (which mirror our Customer Scenario^® Mapping methodology):

Finally, we provide a place for you to make note of your next steps for each activity. We recommend that you include the name of a person who is to take responsibility for the next action as well as a target deadline for completion of that action.

COMPETENCY 4: Open Development

The business world has changed. Maintaining a veil of secrecy about new ideas and product plans doesn’t cut it in the era of full disclosure. Oh, sure, this is a slippery slope to navigate—how do you create a competitive advantage if you put all your ideas out there for everyone to see?

We’re not advocating complete public disclosure of your breakthrough concepts. But don’t wait until your products and business models are “baked” before you invite customers to alpha or beta test them. Don’t limit customer engagement to usability testing or focus groups commenting on the user interface. The earlier in the product development cycle you engage your outside innovators—your customers in the roles of lead customers and consultants—the more likely that your products will reflect their needs and address their frustrations.

Nurture Lead Customers and Customer Consultants.¹ So what’s the difference between the two customer roles? Customers as consultants will tell you how to improve the products you’ve already got, helping you evolve your offerings. Your customer-consultants can give you marching orders on what capabilities are required; these are insightful people who use your products every day, and who often have brilliant ideas about what would make them even more useful, sexy, and successful.

Your lead customers won’t dwell on your current products; they’ll show you what solutions they need that your products don’t address at all. Lead customers will take you in new directions, telling you how to build what they need that they currently can’t get from anyone else.

For both roles, you want to provide these customers with innovation toolkits including open interfaces; you want to work side by side, making these customers part of your co-development community.

Many of your customers develop products of their own, and they know how to contribute effectively to your development process. The goal is not just to get their “advice” and put their ideas into your next generation of products, but to open up your products. Give customers and partners customization, configuration and innovation toolkits—and the permission/empowerment—to “mess” with your intellectual property and improvise on the foundation of your offerings. Whether your firm sells financial instruments, backpacks, cars, software, or medical instruments, embody your firm’s subject matter expertise and domain knowledge in toolkits that customers and partners can use to design solutions that work in their specific contexts.

The Open Development Continuum. There is a continuum of innovation in open development. (See Illustration 1.) As customers customize and extend your products, they put their customizations back for others, including you, to build upon. These customizations become your new base products for enhancement, and the changes continue evolving. There is a maturity curve for how well and completely you support open development by customers. We see six stages in the open innovation continuum:²

1. Closed. Your company is stuck in Proprietary Development. “We have the best ideas, and we don’t want anyone to know about them until we’re ready to launch,” is the corporate mantra. You may do some basic requirements gathering by looking at competitors and doing standard market research, but you believe that you know what’s best for customers.

2. Open Enhancement. You recognize the value of customer input when creating the next generation of your products. You work with customers as consultants to prioritize new functions/features and to test new product concepts and ideas. For example, when extending the Bob the Builder product line, RC2 Corporation sent block sets out to a set of moms, who observed how their kids used the blocks, and gave feedback to the company, which incorporated the moms’suggestions in the ultimate released product.

3. Lead Customer Product Creation. You identify, recruit, and work with lead customers to discover new applications. These applications are sparked by the lead customers’ need for new types of solutions, which they can’t find elsewhere. This is what Professor Seymour Papert and his students did when they added a computer chip to a LEGO block and created a programming language—LOGO—that kids could use to program robots. LEGO built on that solution to design its top-selling LEGO Mindstorms^® product line.

4. Commercialize Customer Improvisations. Once you have products in the market, look at how your lead customers have improvised on your products, and commercialize their improvisations, leveraging their insights and development efforts. Tufts Professor Chris Rogers, designed a child-friendly user interface on top of National Instruments’LabView engineering process control software running on the Apple Macintosh to bring LEGO Mindstorms onto the Mac.³ This improvisation (using the LabView software platform) became the blueprint for Mindstorms NXT.

5. Provide Customization and Design Tools; Leverage Patterns of Customization and Improvisation. Realizing that a subset of customers want to “roll their own” solutions, you make it a point to offer tools with which customers can customize and extend your products. You watch what customizations they do, you recognize and applaud their improvisations, and you encourage them to contribute their creations to your growing customer community. By identifying their patterns of customization, you evolve your own next-gen offerings. Now you have a platform for evolutionary innovation. Examples include Nike, Converse, and Reebok, which allow customers to configure their own running shoes, mixing colors, patterns, and logos; BMW’s MiniCooper and other customer-configured vehicles; Timbuk2’s backpacks; or any of the companies that offer mix and match software tools and information in the form of Apple’s dashboard widgets, Yahoo Widgets, or Google gadgets.

6. Open Development. You empower, encourage, and reward customers for extending your products, coming up with new products, and sharing their solutions with others. You encourage customers to extend your products, provide them with toolkits that facilitate the process, and reward them for their innovations. Soon, customers are creating more than 50 percent of the intellectual property in the solutions you offer. This is the Open Source model. For those of you concerned about the quality of a development environment where everyone can contribute, remember that not all contributions need be accepted. Successful open source projects are rigorous in their quality control.

Note that level 5 includes levels 1 through 4; this is an innovation continuum of co-creation with customers for the purposes of improved product and process development.

The Innovation Continuum

Illustration 1. As customers improvise on your products, customizing them for their specific use, they offer the ideas back to your company, which then commercializes the enhancements. Customers (and partners) build on the new enhanced products, which gives you new products to work with and commercialize.

This report continues…

To read the full report: http://www.psgroup.com/detail.aspx?ID=844.

*Endnotes*
1) See “Customer Innovation Guide: Five Roles Your Customers Should Be Playing,”October 11, 2006, http://www.psgroup.com/detail.aspx?ID=760.

3) See “LEGO Mindstorms NXT: Powered by Customer Inventiveness,”March 16, 2006, http://www.psgroup.com/detail.aspx?ID=695.
*Endnotes*