The book Leading Open Innovation describes OI’s search for smart people who might expand the space for innovation. It reflects international, cross-sector, and transdisciplinary interests among contributors from the United States, Germany, France, Finland, the United Kingdom. Welcome to the 7th Moscow International Forum «Open Innovations». Leading experts, students, government officials and corporations from different countries and regions. Institute for Media Innovation, Nanyang Technological University. Duke University. Leading Open Innovation (Hardcover) By Anne Sigismund Huff (Editor), Kathrin M. Moslein (Editor), Ralf Reichwald (Editor) Mit Press, 494, 322pp. The book Leading Open Innovation describes OI’s search for smart people who might expand the space for innovation. It reflects international, cross-sector, and transdisciplinary interests among contributors from the United States, Germany, France, Finland, the United Kingdom, Portugal, Tunisia, Austria, and China working in large. S Huff—Leading Open Innovation 142 Frank Pillar and Christoph Ihl • Muji is a Japanese specialty retail chain, selling all kinds of consumer commodities, furniture, apparel, and food items. Creativity and innovation by designing the organization to foster an environment that is conducive for creativity to flourish. Leaders can do this by building friendly and inclusive working conditions for the members of the organization. When the social structure of the.
Leading Open Innovation
edited by Anne Sigismund Huff, Kathrin M. Möslein, and Ralf Reichwald
The MIT Press Cambridge, Massachusetts
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© 2013 Massachusetts Institute of Technology All rights reserved. No part of this book may be reproduced in any form by any electronic or mechanical means (including photocopying, recording, or information storage and retrieval) without permission in writing from the publisher. MIT Press books may be purchased at special quantity discounts for business or sales promotional use. For information, please email [email protected] or write to Special Sales Department, The MIT Press, 55 Hayward Street, Cambridge, MA 02142. This book was set in Stone Sans and Stone Serif by Toppan Best-set Premedia Limited. Printed and bound in the United States of America. Library of Congress Cataloging-in-Publication Data Leading open innovation / edited by Anne Sigismund Huff, Kathrin M. Möslein, and Ralf Reichwald. p. cm. Includes bibliographical references and index. ISBN 978-0-262-01849-4 (hardcover : alk. paper) 1. Technological innovations—Economic aspects. 2. Diffusion of innovations. I. Huff, Anne Sigismund. II. Möslein, Kathrin M. III. Reichwald, Ralf, 1943– HD45.L337 2013 658.4'063—dc23 2012020392 10 9 8 7 6 5 4 3 2 1
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9 Co-creation with Customers Frank Piller and Christoph Ihl
Introduction The main objective of a company engaging in co-creation is to enlarge its base of information about needs, applications, and solution technologies that resides in the domain of customers and users creation (Piller and Ihl 2009; Ramaswamy and Gouillart 2010). The methods used to achieve this objective include but go beyond tools described in chapter 5: user idea contests (Ebner et al. 2008; Piller and Walcher 2006; Füller 2010), consumer opinion platforms (Hennig-Thurau et al. 2004; Sawhney, Verona, and Prandelli 2005), toolkits for user innovation (von Hippel and Katz 2002; Franke and Piller 2004), and communities for customer co-creation (Franke and Shah 2003; Füller, Matzler, and Hoppe 2008). The difference between customer co-creation and the lead-user concept as introduced by Eric von Hippel (1988) and summarized in chapter 8 is often fuzzy in practice, but distinct from a conceptual point of view. Lead users are intrinsically motivated to innovate, performing the innovation process autonomously and without any interaction with a manufacturer. It then is the task of the interested firm to identify and capture the resulting inventions. Our understanding of customer co-creation, in contrast, is built on a firm-driven strategy that facilitates interaction with its customers and users. Instead of just screening the user base to detect any existing prototypes created by lead users, the firm provides instruments and tools to a broader group of customers and potential customers to actively co-create a solution together creation (Ramirez 1999). Consider as a typical example of co-creation—the case of Threadless, a Chicago-based fashion company. Its innovative business model allows the company to follow the concept of “fast fashion” with a vast assortment of styles and designs without the typical forecasting risk and without heavy investments into many designs or into
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Figure 9.1 Evaluating T-shirt ideas at Threadless.com: Overview (left) and score sheet (right) Source: Screenshots from Threadless.com
flexible manufacturing and distribution. Yet, the company is able to offer its customers a new assortment of styles and variants every week (Ogawa and Piller 2006). Started in 2000 by designers Jake Nickell and Jacob DeHart, Threadless focuses on a hot fashion item: T-shirts with colorful graphics. This is a typical hit-or-miss product. Its success is defined by fast changing trends, peer recognition, and finding the right distribution outlets for specific designs. Despite these challenges, none of the company’s many product variants has ever flopped. Examples of Threadless products appear on their website, www.threadless.com. The screen shot shown in figure 9.1 gives a good idea of the range of ideas submitted that are then ranked by the community. All products sold by Threadless are approved by user consensus before any larger investment is made into a new product. The garment is produced only after a sufficient number of customers have expressed their explicit willingness to buy the design. If commitment is missing, a potential design concept is dismissed. But, if enough customers pledge to purchase the product, the design is finalized and goes into production. In this way relatively small market research expenditures are turned into early sales. New designs regularly sell out fast, and are reproduced only if a large enough number of additional customers commit to purchase a reprint. The company exploits a large pool of talent and ideas to get new designs—much larger than it could afford if the design process were internalized. On average, 1,500 designs compete in any given week. Each week the staff selects about ten designs based
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primarily on an algorithm that gives priority to community response but also considers production and other factors. The selected designers receive $2,000 in cash, a $500 gift certificate (which they may trade in for $200 in cash), and an additional $500 for every reprint. When shirts are sold out, customers can request a reprint. However, reprinting occurs only when there is enough demand, and the decision to reprint is ultimately up to company. Together with 51 employees, in 2010 the company’s founders sold about 160,000 to 170,000 T-shirts per month for between $18 and $24 apiece with a 30 percent profit margin on sales. Total sales hit $30 million—with profits of roughly $9 million (Burkitt 2010). Since 2006, annual growth continued at more than 150 percent, with similar margins. Threadless has 1.5 million followers on Twitter and more than 100,000 fans on Facebook. The company’s website logged 2.5 million unique visitors in August 2010, a 50 percent increase over the same month the previous year (Saadi 2010). But Threadless is only one of many other examples of customer co-creation. Consider these additional examples: Fujitsu Computers (FSC), a large IT hardware and infrastructure provider, organized
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an online idea contest for webmasters and IT professionals to get their ideas about how data centers will work in the future, what services will be required by users, and which topics will be of strategic importance. Participants were asked not just to provide needs but conceptual ideas for possible solutions. Participants became members of an innovation community, commenting on the ideas of others, developing ideas further, and providing suggestions for technological realization. Despite a rather low monetary incentive (the best idea was rewarded 5,000 euros) and a high level of required technological expertise, more than 200 active users contributed to the contest—most of them during work time and with permission of their employer. Emporia Telecom, an Austrian mobile phone manufacturer, demonstrated in a recent
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co-creation contest that the user base for this kind of engagement is not just young web-savvy people but also a much larger community of senior citizens. The task they identified was to develop age-specific mobile phones in terms of functionality and design. Using an online platform, users could submit ideas for both functional hardware features and innovative services. Contrary to the beliefs of many, Emporia learned that senior customers are very willing to engage in an online co-creation project. Overall, more than 6,000 users visited the contest site, spending more than 800 hours there, and generated more than 200 highly elaborated ideas. Several ideas from the contest made it into prototyping and further development in the company (Leyhausen and Vossen 2011).
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• Muji is a Japanese specialty retail chain, selling all kinds of consumer commodities, furniture, apparel, and food items (Ogawa and Piller 2006). The company is famous in Europe for its powerful internal design practice; it continuously involves customers in product development. In its Japanese home market, the company receives more than 8,000 suggestions for product improvements or new product ideas each month. Suggestions are sent on postcards attached to catalogs, as e-mails, or via feedback forms on the company’s website. On the sales floor, sales associates are encouraged to collect notes on customer behavior and short quotes from sales dialogues. But the most important means of interaction with its customers is its online community, Muji.net, with approximately 410,000 members. For evaluating new concepts and proposals, the company asks the opinion of its product managers, but it also hosts a broad evaluation and collaborative decision process, asking its community to vote on the products that should be introduced next. Recent data show that products that went through the screening of the crowd perform on average three times better than products that were selected by an internal steering committee. What do have these examples in common? Despite a range of industries, different cultural contexts, and various target age groups, these examples show how firms can create value with large groups of customers and users, moving beyond workshops with selected lead users. We also see very different tasks, ranging from designing a T-shirt to creating functional technological concepts. Structuring Customer Co-Creation We propose the framework shown in figure 9.2 to differentiate various forms of co-creation. Drawing on our research in the field (Diener and Piller 2010), two characteristics provide the conceptual dimensions of a typology of co-creation with customers: Degree of collaboration refers to the structure of the underlying relationships in an
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open innovation setting. Whether there is, on the one hand, a dyadic collaboration between a firm and a group of customers who are not connected among each other, or on the other, there are networks of customers who collaborate among themselves more or less independent from the firm. Degree of freedom refers to the nature of the task that has been assigned to customers;
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this could be a narrow and predefined task with only a few degrees of freedom or an open and creative task for which a solution is hardly foreseeable because of many degrees of freedom.
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Co-design tool kits
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Dyadic 1:1
Network 1:n / n:n
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Degree of collaboration Figure 9.2 Defining co-creation activities
This framework yields four kinds of co-creation. These are discussed in detail below. Two Dyadic (Individual) Based Co-creation Methods: Idea Contests and Co-design Tool Kits Dyadic co-creation starts when a company provides an opportunity for individual customers to engage in its innovation process. While the company may involve many different customers, there is little interaction among these actors and all activities are facilitated by the firm. The typical methods behind this form of co-creation are idea contests and co-design tool kits. The starting point of the development process centers on two essential activities: (1) generating novel concepts and ideas and (2) selecting specific concepts and ideas to be pursued further (O’Hern and Rindfleisch 2009). Both of these tasks have successfully been handed over to customers by the means of an idea contest (Ebner et al. 2008; Ebner, Leimeister, and Krcmar 2009; Piller and Walcher 2006; Leimeister et al. 2009; Bullinger et al. 2010). In an idea contest a firm seeking innovation-related information posts a request to a population of independent, competing agents (e.g., customers),
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asking for solutions to a given task within a given time frame. The firm then provides an award to the participant that generates the best solution. Idea contests thus address a core challenge for firms when opening the innovation process, which is how to incentivize participants to transfer their innovative ideas. A solution reward is important in the early stages of the innovation process because customers are unlikely to benefit directly from their contributions through new product availability within a short time frame, as often occurs in later stages of the innovation process. Some companies promise cash rewards or licensing contracts for innovative ideas; others build on nonmonetary acknowledgments—promising peer or company (brand) recognition that facilitates a pride-of-authorship effect. Obviously rewards or recognitions are not given to everyone submitting an idea, but only to those with the “best” submissions. This competitive mechanism is an explicit strategy to foster customer innovation. It should encourage more or better customers to participate, should inspire their creativity, and increase the quality of the submissions. For instance, over 120,000 individuals around the world served as voluntary members of Boeing’s World Design Team, contributing input to the design of its new 787 Dreamliner airplane (www.newairplane.com). Today we find a broad range of idea contests in practice. A good starting point to explore this field is www.innovation-community.de, a site listing more than 80 idea contests. These are differentiated according to the degree of problem specification, that is, by whether the problem clearly specifies the requirements for the sought solution or whether it is more or less an open call for solutions to a vaguely specified problem. The example of Threadless.com, a company built entirely on a continuous idea contest and user voting process, shows how broadly this kind of co-creation can be used. This company and many others use customers for idea screening and evaluation, that is, customers select submissions with the highest potential. In a successful idea contest a firm might easily end up with hundreds or thousands of ideas generated by customers. They might be evaluated by a panel of experts from the solution-seeking firm—ranked according to a set of evaluation criteria—but we believe that without the integration of users in the idea screening process, large-scale idea contests are not possible. However, Toubia and Florès (2007) propose that in light of a potentially very large number of ideas it is unreasonable to ask each consumer to evaluate more than a few ideas. This raises the challenge of efficiently selecting the ideas to be evaluated by each consumer. Chapter 14, by Füller, Hutter, and Hautz, provides detail on one promising software solution that unites participants into interactive innovation S
workshops.
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A very different method, tool kits for customer co-design (Franke and Piller 2003, 2004; von Hippel and Katz 2002; Franke, Schreier, and Kaiser 2010; Franke and Schreier 2010), is found in the southwest corner of figure 9.2. In this form of co-creation, a tool kit provides a development environment that enables customers to transfer their needs iteratively into a concrete solution—often without coming into personal contact with the manufacturer. The manufacturer provides users with an interaction platform where they can design a solution according to their needs in the solution space the tool kit makes available. Tool kits resemble, in principle, a chemistry set. Their solution space is theoretically boundless. Tool kit users not only combine the manufacturer’s standard modules and components to create the best possible product for themselves, they can also expend a tremendous amount of effort in experimenting through trial and error processes on new and previously unknown solutions to their needs. Chapter 13, by van Delden and Wünderlich, provides examples of kits offered for the development of a mustard dip that would appeal to students and could be manipulated with scissors and paste. A contest aimed at a more professional group of users was developed by BAA, an international developer of flavors for food (Thomke and von Hippel 2002). The company established a new form of cooperation by providing tool kits to chefs interested in innovating. Each tool kit has a collection of flavors the company produces. For a new Mexican sauce, for example, the kit contained 25 flavors in little plastic bags with instructions on how to use them correctly. Though BAA’s flavorings are somewhat different from traditional raw ingredients, they save a great deal of effort, and chefs can discover how to use them through trial and error. The key insight from studying the results of this and similar kits, however, is that when a successful recipe is created, it can be immediately produced in the company’s factory because the user and the producer are using the same language. In BAA’s case the time to develop new ideas for flavor was reduced from around 26 weeks to around 3 weeks. The main effect behind this impressive improvement has been that the costly and demanding iteration between customers setting their specifications and the manufacturing unit turning these preferences into product specifications is replaced by customers themselves turning their ideas into a new product via the tool kit. It should be noted that some tool kits provide very complicated solution information that requires using programming languages or drawing software. A final type of tool kit targets consumers for development of custom variants within an existing solution space. This can be compared to a set of Lego bricks. Tool kits for user co-design offer users a choice of individual building blocks (modules, compoS
nents, parameters) that can be configured to make a product according to the user’s
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individual requirements. These building blocks lie within the range of a manufacturer’s economic and technological capability. Configuration tool kits are often integrated into a mass customization strategy (Salvador et al. 2009). Well-known examples of this kind of tool kit include Dell’s product configurator and configurators found, for example, in the automobile industry. Clothing and other consumer products can also be ordered to customer specification—a recent video describing the appeal of this option can be found at http://vimeo.com/25132966. Two Network (Community) Based Co-creation Methods: Discussion Forums and Social Product Development Two other types of co-creation methods shown on the right side of figure 9.2 build on facilitating collaboration among customers. These efforts have shown that user communities can be an important locus of innovation as they can operate entirely independent of firms. Chapter 8 indicates that Franke and Shah (2003) analyzed four firm-independent sports communities, showing that on average one-third of the community members improved or even designed their own product innovations for sports equipment. It is important to note that these innovations do not emerge solely from individual efforts but are driven to a significant extent by collaborations with other community members. In our understanding of customer co-creation, however, a focal company is needed to organize and facilitate a large, open network of participants in joint value creation. In these networks, tasks are broadcasted by individual users or a focal coordinating body; participants self-select whether or not they will contribute to a task, to what extent they will contribute, and with what resources. Those who respond to an open call for contributions are motivated by various incentives but not by (market) prices, salaries, or hierarchical commands (Füller et al. 2008; Prandelli, Verona, and Raccagni 2006; Sawhney and Prandelli 2000; Franke and Shah 2003). Starting with a rather low degree of freedom, product-related discussion forums at the bottom right of the figure offer a platform in which customers primarily exchange usage experiences and support each other. A good example of this form of firmorganized community is offered by Stata Corporation. The company is a manufacturer of statistical software, as further described by von Hippel (2005). Their customers are typically scientists or developers who use the software for a large number of statistical tests. In cases where the applications provided within the software cannot solve a certain task, or solve it elegantly enough for the customer, customers can program new tests. To facilitate that process, Stata has divided its software into two parts. One S
part contains basic features developed by the company and protected by proprietary
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rights. This functionality is sold through a traditional software license. The second part of the software is open. The user community contributes new statistical algorithms and tests and Stata supports these expert users by providing a development environment and a forum on the Internet where users trade tests, ask other users questions, and expand upon the developments of others. Since not all users are well-versed in programming, Stata also has developed a procedure in which the “best” or most popular developments taken from the user community are regularly selected by the company and made a part of their next commercial release. This decision is made entirely by Stata’s software developers, who take and improve applications by users and integrate them smoothly into the standard software. The additional value created by Strata is also an incentive for users to make their personal developments available to the company, usually without monetary return, simply because their motives for developing a new application are to use it in their own scientific work. In contrast, the concept of social product development in so-called communities of creation (Sawhney and Prandelli 2000) generate novel ideas and concepts. Consider as an example Quirky.com, a company that makes community-based innovation the core of its business model. Similar to Threadless, the community suggests new concepts, votes on the best ideas, and collectively commits to purchasing a product before it goes into production. These products include electronic gadgets, travel goods, and household items. Figure 9.3 provides a screenshot of Quirky.com with a few products on sale. Quirky goes much further than Threadless by engaging the community in many more activities along the entire span of the innovation process, including its financing. A project starts when a user pays a fee to suggest a new product idea (currently $99). The Quirky community then votes on the ideas that should enter the next stage of development, where ideas are jointly turned into a more developed product by the community and by Quirky’s own developers. This development is followed by another evaluation. If passed, the staff works with manufacturers and suppliers to specify a price and the concept is out for community financing. If the product receives enough (discounted) online preorders, it goes into production (The process is outlined at http://www.quirky.com/learn). Quirky currently is one of the best examples of co-creation in a firm-organized community. The site provides a platform for products originating from deep user insights and offering anyone the platform of turning great ideas into real products. Also an inventor whose idea does not make it to a final stage gets plenty of feedback from S
others on the idea. Quirky is a great model of “hybrid” co-creation between openness
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Figure 9.3 Products on sale on Quirky.com Source: Screenshot from Quirky.com
and closeness. Most activities are performed by the community and are freely revealed on the platform, but Quirky provides (hierarchical) coordination and takes over the more complicated developing activities, like partitioning the development task into chunks, assigning these subtasks to the community, integrating the granular solutions, and finalizing the design and manufacturing of the products. But still the community has a much larger work span and creative freedom compared to an idea contest. Finally, Quirky really takes external contributors seriously. According to its founder, the core challenge when launching the company was developing an algorithm that provides a fair distribution of 30 percent of all revenues to the community members
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Figure 9.4 Two examples of the Quirky co-creation process Source: Quirky.com
who contributed to a particular project (Piller 2010). In average, 1,200 to 1,500 contributors are paid per product! Such a large-scale contribution scheme still is very rare in for-profit industries—but could become a role model for the co-creation economy. Two examples of successful products that have come out of the Quirky co-creation process are shown in figure 9.4. Conclusion: Next Tasks for Co-Creation The objective of this chapter was to describe different methods of customer co-creation. But, in the end, all methods of customer co-creation follow a common principle. The underlying idea is that of an active, creative, and social collaboration process between producers and their customers (users). Co-creation involves customers in a company’s innovation process. Companies intending to profit from co-creation need to know which of the different methods are most suited to their organization and how to best use these tools (Diener and Piller 2010). To answer questions about co-creation, coordinated practical experience in companies and detailed research are needed. First, firms need to assess whether a particular innovation task is suited for customer co-creation. This could include answers to questions like how do innovation projects have to be reorganized for co-creation, what kinds of projects are suited for customer
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integration, and how do internal development processes have to be adjusted in order to allow optimal customer integration. More research is required that provides some “simple rules” to managers to cope with these questions. Second, much previous research has focused on successful examples of the application of co-creation. These examples are valuable evidence and are generating attention for customer co-creation, but they lack a differentiated perspective. To take the discussion of co-creation to the next level, more research on specific design components is needed in order to understand how the method can be best used. For example, while the motives of customers participating in an idea contest have recently become the subject of research (e.g., see Füller 2010; Füller, Matzler, and Hoppe 2008), the ways to best design an idea contest remain relatively vague. Which design factors, for instance, attract the desired participants or evoke the preferred behavior? How can a company influence the output of the co-creation activities? How can interaction and sharing among community members being facilitated? Idea for Innovative Leaders: Recognize the Power of NIH (Not Invented Here) Leaders of organizations who want to use co-creation need a clear picture of their organizations capabilities. They must also recognize organizational barriers and hurdles when implementing co-creation. An important challenge of applying co-creation (and other ideas from open innovation) involves the difficulties of integrating ideas and solutions created in the firm’s periphery into the corporate context. Internal (proprietary) knowledge has to be connected with externally generated knowledge. This process appears to be one of the most challenging tasks for firms that want to utilize gains from open innovation. Even as companies manage to search for and extract innovative inputs--perhaps investing in the installation of appropriate innovation-focused online platforms that collect customer inputs--the desired transfer of knowledge frequently fails due to the “not-invented-here” (NIH) problem. Katz and Allen (1982: 7) define the NIH syndrome as “the tendency of a project group of stable composition to believe that it possesses a monopoly of knowledge in its field, which leads it to reject new ideas from outsiders to the detriment of its performance.” Interestingly the NIH phenomenon was originally found between two different domains within one enterprise; for example, resistance on the part of the R&D engineers to innovations suggested by the marketing department. But resistance against external knowledge is often even greater than resistance against the knowledge of one’s own colleagues. We still have very little know S
ledge about the drivers of NIH and feasible ways of how to overcome it in a firm context.
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But, if the transfer and transformation of customer input generated by co-creation fails, investments in customer innovation initiatives only turn into additional costs. References and Further Reading Bullinger, A. C., A. K. Neyer, M. Rass, and K. M. Moeslein. 2010. Community-based innovation contests: Where competition meets cooperation. Creativity and Innovation Management 19 (3): 290–303. Burkitt, L. 2010. Need to build a community? Learn from Threadless. Forbes, January (01.07.10). Available at: http://www.forbes.com/2010/01/06/threadless-t-shirt-community-crowdsourcing -cmo-network-threadless.html Diener, K., and F. T. Piller. 2010. The Market for Open Innovation. Raleigh, NC: Lulu. Ebner, W., J. M. Leimeister, and H. Krcmar. 2009. Community engineering for innovations: The ideas competition as a method to nurture a virtual community for innovations. R&D Management 39 (4): 342–56. Ebner, W., M. Leimeister, U. Bretschneider, and H. Krcmar. 2008. Leveraging the wisdom of crowds: Designing an IT-supported ideas competition for an ERP software company. In Proceedings of the 41st Annual Hawaii International Conference on System Sciences (HICSS 2008), January 7–10, Waikoloa, Big Island, Hawaii. Franke, N., and F. T. Piller. 2003. Key research issues in user interaction with user toolkits in a mass customization system. International Journal of Technology Management 26 (5): 578–99. Franke, N., and F. T. Piller. 2004. Toolkits for user innovation and design: An exploration of user interaction and value creation. Journal of Product Innovation Management 21 (6): 401–15. Franke, N., and S. Shah. 2003. How communities support innovative activities: An exploration of assistance and sharing among end-users. Research Policy 32 (1): 157–78. Franke, N., and M. Schreier. 2010. Why customers value self-designed products: The importance of process effort and enjoyment. Journal of Product Innovation Management 27 (7): 1020–31. Franke, N., M. Schreier, and U. Kaiser. 2010. The “I designed it myself” effect in mass customization. Management Science 56 (1): 125–40. Füller, J. 2010. Refining virtual co-creation from a consumer perspective. California Management Review 52 (2): 98–122. Füller, J., K. Matzler, and M. Hoppe. 2008. Brand community members as a source of innovation. Journal of Product Innovation Management 25 (6): 608–19. Hennig-Thurau, T., K. P. Gwinner, G. Walsh, and D. D. Gremler. 2004. Electronic word-of-mouth via consumer-opinion platforms: What motivates consumers to articulate themselves on the internet? Journal of Interactive Marketing 18 (1): 38–52.
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Katz, R., and T. Allen. 1982. Investigating the not invented here (NIH) syndrome. R&D Management 12 (1): 7–19. Leimeister, J. M., M. Huber, U. Bretschneider, and H. Krcmar. 2009. Leveraging crowdsourcing: Activation-supporting components for IT-based ideas competition. Journal of Management Information Systems 26 (1): 197–224. Leyhausen, F., and A. Vossen. 2011. We could have known better—Consumer-oriented marketing in Germany’s ageing market. In M. Boppel, S. Boehm, and S. Kunisch, eds., From Grey to Silver. Berlin, Heidelberg: Springer, 175–84. O’Hern, M. S., and A. Rindfleisch. 2009. Customer co-creation: a typology and research agenda. In K. M. Naresh, ed., Review of Marketing Research, vol. 6. Armonk, NY: Sharpe, 84–106. Ogawa, S., and F. T. Piller. 2006. Reducing the risks of new product development. Sloan Management Review 47 (2): 65–72. Piller, F. T. 2010. Ten reasons why I consider Quirky.com as best in crowdsourcing and open innovation. MC&OI News (Web Blog), October. Available at: http://mass-customization.blogs.com/ mass_customization_open_i/2010/10/. Piller, F. T., and C. Ihl. 2009. Open Innovation with Customers: Foundations, Competences and International Trends. Expert study commissioned by the European Union, The German Federal Ministry of Research, and the European Social Fund. Published as part of the project “International Monitoring.”. Aachen: RWTH ZLW-IMA. Piller, F. T., and D. Walcher. 2006. Toolkits for idea competitions: A novel method to integrate users in new product development. R&D Management 36 (3): 307–18. Prandelli, E., M. S. Sawhney, and G. Verona. 2008. Collaborating with Customers to Innovate: Conceiving and Marketing Products in the Networking Age. Cheltenham, UK: Elgar. Prandelli, E., G. Verona, and D. Raccagni. 2006. Diffusion of web-based product innovation. California Management Review 48 (4): 109–36. Ramaswamy, V., and F. Gouillart. 2010. The Power of Co-Creation. New York: Free Press. Ramirez, R. 1999. Value co-production: intellectual origins and implications for practice and research. Strategic Management Journal 20 (1): 49–65. Saadi, S. 2010. T-Shirts are just the start for Threadless, Bloomberg Businessweek, September 20, issue: 24–26. Salvador, F., M. de Holan, and F. T. Piller. 2009. Cracking the code of mass customization. MIT Sloan Management Review 50 (3): 71–78. Sawhney, M., and E. Prandelli. 2000. Communities of creation: Managing distributed innovation in turbulent markets. California Management Review 42 (4): 24–54. Sawhney, M., G. Verona, and E. Prandelli. 2005. Collaborating to create: The internet as a platform for customer engagement in product innovation. Journal of Interactive Marketing 19 (4): 4–17.
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Thomke, S., and E. von Hippel. 2002. Customers as innovators: A new way to create value. Harvard Business Review 80 (4): 74–81. Toubia, O., and L. Florès. 2007. Adaptive idea screening using consumers. Marketing Science 26 (3): 342–60. von Hippel, E., and R. Katz. 2002. Shifting innovation to users via toolkits. Management Science 48 (7): 821–33. von Hippel, E. 1988. The Sources of Innovation. Cambridge: MIT Press. von Hippel, E. 2005. Democratizing innovation. Cambridge: MIT Press.
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edited by Anne Sigismund Huff, Kathrin M. Möslein, and Ralf Reichwald
The MIT Press Cambridge, Massachusetts
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© 2013 Massachusetts Institute of Technology All rights reserved. No part of this book may be reproduced in any form by any electronic or mechanical means (including photocopying, recording, or information storage and retrieval) without permission in writing from the publisher. MIT Press books may be purchased at special quantity discounts for business or sales promotional use. For information, please email [email protected] or write to Special Sales Department, The MIT Press, 55 Hayward Street, Cambridge, MA 02142. This book was set in Stone Sans and Stone Serif by Toppan Best-set Premedia Limited. Printed and bound in the United States of America. Library of Congress Cataloging-in-Publication Data Leading open innovation / edited by Anne Sigismund Huff, Kathrin M. Möslein, and Ralf Reichwald. p. cm. Includes bibliographical references and index. ISBN 978-0-262-01849-4 (hardcover : alk. paper) 1. Technological innovations—Economic aspects. 2. Diffusion of innovations. I. Huff, Anne Sigismund. II. Möslein, Kathrin M. III. Reichwald, Ralf, 1943– HD45.L337 2013 658.4'063—dc23 2012020392 10 9 8 7 6 5 4 3 2 1
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9 Co-creation with Customers Frank Piller and Christoph Ihl
Introduction The main objective of a company engaging in co-creation is to enlarge its base of information about needs, applications, and solution technologies that resides in the domain of customers and users creation (Piller and Ihl 2009; Ramaswamy and Gouillart 2010). The methods used to achieve this objective include but go beyond tools described in chapter 5: user idea contests (Ebner et al. 2008; Piller and Walcher 2006; Füller 2010), consumer opinion platforms (Hennig-Thurau et al. 2004; Sawhney, Verona, and Prandelli 2005), toolkits for user innovation (von Hippel and Katz 2002; Franke and Piller 2004), and communities for customer co-creation (Franke and Shah 2003; Füller, Matzler, and Hoppe 2008). The difference between customer co-creation and the lead-user concept as introduced by Eric von Hippel (1988) and summarized in chapter 8 is often fuzzy in practice, but distinct from a conceptual point of view. Lead users are intrinsically motivated to innovate, performing the innovation process autonomously and without any interaction with a manufacturer. It then is the task of the interested firm to identify and capture the resulting inventions. Our understanding of customer co-creation, in contrast, is built on a firm-driven strategy that facilitates interaction with its customers and users. Instead of just screening the user base to detect any existing prototypes created by lead users, the firm provides instruments and tools to a broader group of customers and potential customers to actively co-create a solution together creation (Ramirez 1999). Consider as a typical example of co-creation—the case of Threadless, a Chicago-based fashion company. Its innovative business model allows the company to follow the concept of “fast fashion” with a vast assortment of styles and designs without the typical forecasting risk and without heavy investments into many designs or into
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Figure 9.1 Evaluating T-shirt ideas at Threadless.com: Overview (left) and score sheet (right) Source: Screenshots from Threadless.com
flexible manufacturing and distribution. Yet, the company is able to offer its customers a new assortment of styles and variants every week (Ogawa and Piller 2006). Started in 2000 by designers Jake Nickell and Jacob DeHart, Threadless focuses on a hot fashion item: T-shirts with colorful graphics. This is a typical hit-or-miss product. Its success is defined by fast changing trends, peer recognition, and finding the right distribution outlets for specific designs. Despite these challenges, none of the company’s many product variants has ever flopped. Examples of Threadless products appear on their website, www.threadless.com. The screen shot shown in figure 9.1 gives a good idea of the range of ideas submitted that are then ranked by the community. All products sold by Threadless are approved by user consensus before any larger investment is made into a new product. The garment is produced only after a sufficient number of customers have expressed their explicit willingness to buy the design. If commitment is missing, a potential design concept is dismissed. But, if enough customers pledge to purchase the product, the design is finalized and goes into production. In this way relatively small market research expenditures are turned into early sales. New designs regularly sell out fast, and are reproduced only if a large enough number of additional customers commit to purchase a reprint. The company exploits a large pool of talent and ideas to get new designs—much larger than it could afford if the design process were internalized. On average, 1,500 designs compete in any given week. Each week the staff selects about ten designs based
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primarily on an algorithm that gives priority to community response but also considers production and other factors. The selected designers receive $2,000 in cash, a $500 gift certificate (which they may trade in for $200 in cash), and an additional $500 for every reprint. When shirts are sold out, customers can request a reprint. However, reprinting occurs only when there is enough demand, and the decision to reprint is ultimately up to company. Together with 51 employees, in 2010 the company’s founders sold about 160,000 to 170,000 T-shirts per month for between $18 and $24 apiece with a 30 percent profit margin on sales. Total sales hit $30 million—with profits of roughly $9 million (Burkitt 2010). Since 2006, annual growth continued at more than 150 percent, with similar margins. Threadless has 1.5 million followers on Twitter and more than 100,000 fans on Facebook. The company’s website logged 2.5 million unique visitors in August 2010, a 50 percent increase over the same month the previous year (Saadi 2010). But Threadless is only one of many other examples of customer co-creation. Consider these additional examples: Fujitsu Computers (FSC), a large IT hardware and infrastructure provider, organized
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an online idea contest for webmasters and IT professionals to get their ideas about how data centers will work in the future, what services will be required by users, and which topics will be of strategic importance. Participants were asked not just to provide needs but conceptual ideas for possible solutions. Participants became members of an innovation community, commenting on the ideas of others, developing ideas further, and providing suggestions for technological realization. Despite a rather low monetary incentive (the best idea was rewarded 5,000 euros) and a high level of required technological expertise, more than 200 active users contributed to the contest—most of them during work time and with permission of their employer. Emporia Telecom, an Austrian mobile phone manufacturer, demonstrated in a recent
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co-creation contest that the user base for this kind of engagement is not just young web-savvy people but also a much larger community of senior citizens. The task they identified was to develop age-specific mobile phones in terms of functionality and design. Using an online platform, users could submit ideas for both functional hardware features and innovative services. Contrary to the beliefs of many, Emporia learned that senior customers are very willing to engage in an online co-creation project. Overall, more than 6,000 users visited the contest site, spending more than 800 hours there, and generated more than 200 highly elaborated ideas. Several ideas from the contest made it into prototyping and further development in the company (Leyhausen and Vossen 2011).
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• Muji is a Japanese specialty retail chain, selling all kinds of consumer commodities, furniture, apparel, and food items (Ogawa and Piller 2006). The company is famous in Europe for its powerful internal design practice; it continuously involves customers in product development. In its Japanese home market, the company receives more than 8,000 suggestions for product improvements or new product ideas each month. Suggestions are sent on postcards attached to catalogs, as e-mails, or via feedback forms on the company’s website. On the sales floor, sales associates are encouraged to collect notes on customer behavior and short quotes from sales dialogues. But the most important means of interaction with its customers is its online community, Muji.net, with approximately 410,000 members. For evaluating new concepts and proposals, the company asks the opinion of its product managers, but it also hosts a broad evaluation and collaborative decision process, asking its community to vote on the products that should be introduced next. Recent data show that products that went through the screening of the crowd perform on average three times better than products that were selected by an internal steering committee. What do have these examples in common? Despite a range of industries, different cultural contexts, and various target age groups, these examples show how firms can create value with large groups of customers and users, moving beyond workshops with selected lead users. We also see very different tasks, ranging from designing a T-shirt to creating functional technological concepts. Structuring Customer Co-Creation We propose the framework shown in figure 9.2 to differentiate various forms of co-creation. Drawing on our research in the field (Diener and Piller 2010), two characteristics provide the conceptual dimensions of a typology of co-creation with customers: Degree of collaboration refers to the structure of the underlying relationships in an
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open innovation setting. Whether there is, on the one hand, a dyadic collaboration between a firm and a group of customers who are not connected among each other, or on the other, there are networks of customers who collaborate among themselves more or less independent from the firm. Degree of freedom refers to the nature of the task that has been assigned to customers;
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this could be a narrow and predefined task with only a few degrees of freedom or an open and creative task for which a solution is hardly foreseeable because of many degrees of freedom.
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Network 1:n / n:n
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Degree of collaboration Figure 9.2 Defining co-creation activities
This framework yields four kinds of co-creation. These are discussed in detail below. Two Dyadic (Individual) Based Co-creation Methods: Idea Contests and Co-design Tool Kits Dyadic co-creation starts when a company provides an opportunity for individual customers to engage in its innovation process. While the company may involve many different customers, there is little interaction among these actors and all activities are facilitated by the firm. The typical methods behind this form of co-creation are idea contests and co-design tool kits. The starting point of the development process centers on two essential activities: (1) generating novel concepts and ideas and (2) selecting specific concepts and ideas to be pursued further (O’Hern and Rindfleisch 2009). Both of these tasks have successfully been handed over to customers by the means of an idea contest (Ebner et al. 2008; Ebner, Leimeister, and Krcmar 2009; Piller and Walcher 2006; Leimeister et al. 2009; Bullinger et al. 2010). In an idea contest a firm seeking innovation-related information posts a request to a population of independent, competing agents (e.g., customers),
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asking for solutions to a given task within a given time frame. The firm then provides an award to the participant that generates the best solution. Idea contests thus address a core challenge for firms when opening the innovation process, which is how to incentivize participants to transfer their innovative ideas. A solution reward is important in the early stages of the innovation process because customers are unlikely to benefit directly from their contributions through new product availability within a short time frame, as often occurs in later stages of the innovation process. Some companies promise cash rewards or licensing contracts for innovative ideas; others build on nonmonetary acknowledgments—promising peer or company (brand) recognition that facilitates a pride-of-authorship effect. Obviously rewards or recognitions are not given to everyone submitting an idea, but only to those with the “best” submissions. This competitive mechanism is an explicit strategy to foster customer innovation. It should encourage more or better customers to participate, should inspire their creativity, and increase the quality of the submissions. For instance, over 120,000 individuals around the world served as voluntary members of Boeing’s World Design Team, contributing input to the design of its new 787 Dreamliner airplane (www.newairplane.com). Today we find a broad range of idea contests in practice. A good starting point to explore this field is www.innovation-community.de, a site listing more than 80 idea contests. These are differentiated according to the degree of problem specification, that is, by whether the problem clearly specifies the requirements for the sought solution or whether it is more or less an open call for solutions to a vaguely specified problem. The example of Threadless.com, a company built entirely on a continuous idea contest and user voting process, shows how broadly this kind of co-creation can be used. This company and many others use customers for idea screening and evaluation, that is, customers select submissions with the highest potential. In a successful idea contest a firm might easily end up with hundreds or thousands of ideas generated by customers. They might be evaluated by a panel of experts from the solution-seeking firm—ranked according to a set of evaluation criteria—but we believe that without the integration of users in the idea screening process, large-scale idea contests are not possible. However, Toubia and Florès (2007) propose that in light of a potentially very large number of ideas it is unreasonable to ask each consumer to evaluate more than a few ideas. This raises the challenge of efficiently selecting the ideas to be evaluated by each consumer. Chapter 14, by Füller, Hutter, and Hautz, provides detail on one promising software solution that unites participants into interactive innovation S
workshops.
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A very different method, tool kits for customer co-design (Franke and Piller 2003, 2004; von Hippel and Katz 2002; Franke, Schreier, and Kaiser 2010; Franke and Schreier 2010), is found in the southwest corner of figure 9.2. In this form of co-creation, a tool kit provides a development environment that enables customers to transfer their needs iteratively into a concrete solution—often without coming into personal contact with the manufacturer. The manufacturer provides users with an interaction platform where they can design a solution according to their needs in the solution space the tool kit makes available. Tool kits resemble, in principle, a chemistry set. Their solution space is theoretically boundless. Tool kit users not only combine the manufacturer’s standard modules and components to create the best possible product for themselves, they can also expend a tremendous amount of effort in experimenting through trial and error processes on new and previously unknown solutions to their needs. Chapter 13, by van Delden and Wünderlich, provides examples of kits offered for the development of a mustard dip that would appeal to students and could be manipulated with scissors and paste. A contest aimed at a more professional group of users was developed by BAA, an international developer of flavors for food (Thomke and von Hippel 2002). The company established a new form of cooperation by providing tool kits to chefs interested in innovating. Each tool kit has a collection of flavors the company produces. For a new Mexican sauce, for example, the kit contained 25 flavors in little plastic bags with instructions on how to use them correctly. Though BAA’s flavorings are somewhat different from traditional raw ingredients, they save a great deal of effort, and chefs can discover how to use them through trial and error. The key insight from studying the results of this and similar kits, however, is that when a successful recipe is created, it can be immediately produced in the company’s factory because the user and the producer are using the same language. In BAA’s case the time to develop new ideas for flavor was reduced from around 26 weeks to around 3 weeks. The main effect behind this impressive improvement has been that the costly and demanding iteration between customers setting their specifications and the manufacturing unit turning these preferences into product specifications is replaced by customers themselves turning their ideas into a new product via the tool kit. It should be noted that some tool kits provide very complicated solution information that requires using programming languages or drawing software. A final type of tool kit targets consumers for development of custom variants within an existing solution space. This can be compared to a set of Lego bricks. Tool kits for user co-design offer users a choice of individual building blocks (modules, compoS
nents, parameters) that can be configured to make a product according to the user’s
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individual requirements. These building blocks lie within the range of a manufacturer’s economic and technological capability. Configuration tool kits are often integrated into a mass customization strategy (Salvador et al. 2009). Well-known examples of this kind of tool kit include Dell’s product configurator and configurators found, for example, in the automobile industry. Clothing and other consumer products can also be ordered to customer specification—a recent video describing the appeal of this option can be found at http://vimeo.com/25132966. Two Network (Community) Based Co-creation Methods: Discussion Forums and Social Product Development Two other types of co-creation methods shown on the right side of figure 9.2 build on facilitating collaboration among customers. These efforts have shown that user communities can be an important locus of innovation as they can operate entirely independent of firms. Chapter 8 indicates that Franke and Shah (2003) analyzed four firm-independent sports communities, showing that on average one-third of the community members improved or even designed their own product innovations for sports equipment. It is important to note that these innovations do not emerge solely from individual efforts but are driven to a significant extent by collaborations with other community members. In our understanding of customer co-creation, however, a focal company is needed to organize and facilitate a large, open network of participants in joint value creation. In these networks, tasks are broadcasted by individual users or a focal coordinating body; participants self-select whether or not they will contribute to a task, to what extent they will contribute, and with what resources. Those who respond to an open call for contributions are motivated by various incentives but not by (market) prices, salaries, or hierarchical commands (Füller et al. 2008; Prandelli, Verona, and Raccagni 2006; Sawhney and Prandelli 2000; Franke and Shah 2003). Starting with a rather low degree of freedom, product-related discussion forums at the bottom right of the figure offer a platform in which customers primarily exchange usage experiences and support each other. A good example of this form of firmorganized community is offered by Stata Corporation. The company is a manufacturer of statistical software, as further described by von Hippel (2005). Their customers are typically scientists or developers who use the software for a large number of statistical tests. In cases where the applications provided within the software cannot solve a certain task, or solve it elegantly enough for the customer, customers can program new tests. To facilitate that process, Stata has divided its software into two parts. One S
part contains basic features developed by the company and protected by proprietary
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rights. This functionality is sold through a traditional software license. The second part of the software is open. The user community contributes new statistical algorithms and tests and Stata supports these expert users by providing a development environment and a forum on the Internet where users trade tests, ask other users questions, and expand upon the developments of others. Since not all users are well-versed in programming, Stata also has developed a procedure in which the “best” or most popular developments taken from the user community are regularly selected by the company and made a part of their next commercial release. This decision is made entirely by Stata’s software developers, who take and improve applications by users and integrate them smoothly into the standard software. The additional value created by Strata is also an incentive for users to make their personal developments available to the company, usually without monetary return, simply because their motives for developing a new application are to use it in their own scientific work. In contrast, the concept of social product development in so-called communities of creation (Sawhney and Prandelli 2000) generate novel ideas and concepts. Consider as an example Quirky.com, a company that makes community-based innovation the core of its business model. Similar to Threadless, the community suggests new concepts, votes on the best ideas, and collectively commits to purchasing a product before it goes into production. These products include electronic gadgets, travel goods, and household items. Figure 9.3 provides a screenshot of Quirky.com with a few products on sale. Quirky goes much further than Threadless by engaging the community in many more activities along the entire span of the innovation process, including its financing. A project starts when a user pays a fee to suggest a new product idea (currently $99). The Quirky community then votes on the ideas that should enter the next stage of development, where ideas are jointly turned into a more developed product by the community and by Quirky’s own developers. This development is followed by another evaluation. If passed, the staff works with manufacturers and suppliers to specify a price and the concept is out for community financing. If the product receives enough (discounted) online preorders, it goes into production (The process is outlined at http://www.quirky.com/learn). Quirky currently is one of the best examples of co-creation in a firm-organized community. The site provides a platform for products originating from deep user insights and offering anyone the platform of turning great ideas into real products. Also an inventor whose idea does not make it to a final stage gets plenty of feedback from S
others on the idea. Quirky is a great model of “hybrid” co-creation between openness
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Figure 9.3 Products on sale on Quirky.com Source: Screenshot from Quirky.com
and closeness. Most activities are performed by the community and are freely revealed on the platform, but Quirky provides (hierarchical) coordination and takes over the more complicated developing activities, like partitioning the development task into chunks, assigning these subtasks to the community, integrating the granular solutions, and finalizing the design and manufacturing of the products. But still the community has a much larger work span and creative freedom compared to an idea contest. Finally, Quirky really takes external contributors seriously. According to its founder, the core challenge when launching the company was developing an algorithm that provides a fair distribution of 30 percent of all revenues to the community members
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Figure 9.4 Two examples of the Quirky co-creation process Source: Quirky.com
who contributed to a particular project (Piller 2010). In average, 1,200 to 1,500 contributors are paid per product! Such a large-scale contribution scheme still is very rare in for-profit industries—but could become a role model for the co-creation economy. Two examples of successful products that have come out of the Quirky co-creation process are shown in figure 9.4. Conclusion: Next Tasks for Co-Creation The objective of this chapter was to describe different methods of customer co-creation. But, in the end, all methods of customer co-creation follow a common principle. The underlying idea is that of an active, creative, and social collaboration process between producers and their customers (users). Co-creation involves customers in a company’s innovation process. Companies intending to profit from co-creation need to know which of the different methods are most suited to their organization and how to best use these tools (Diener and Piller 2010). To answer questions about co-creation, coordinated practical experience in companies and detailed research are needed. First, firms need to assess whether a particular innovation task is suited for customer co-creation. This could include answers to questions like how do innovation projects have to be reorganized for co-creation, what kinds of projects are suited for customer
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integration, and how do internal development processes have to be adjusted in order to allow optimal customer integration. More research is required that provides some “simple rules” to managers to cope with these questions. Second, much previous research has focused on successful examples of the application of co-creation. These examples are valuable evidence and are generating attention for customer co-creation, but they lack a differentiated perspective. To take the discussion of co-creation to the next level, more research on specific design components is needed in order to understand how the method can be best used. For example, while the motives of customers participating in an idea contest have recently become the subject of research (e.g., see Füller 2010; Füller, Matzler, and Hoppe 2008), the ways to best design an idea contest remain relatively vague. Which design factors, for instance, attract the desired participants or evoke the preferred behavior? How can a company influence the output of the co-creation activities? How can interaction and sharing among community members being facilitated? Idea for Innovative Leaders: Recognize the Power of NIH (Not Invented Here) Leaders of organizations who want to use co-creation need a clear picture of their organizations capabilities. They must also recognize organizational barriers and hurdles when implementing co-creation. An important challenge of applying co-creation (and other ideas from open innovation) involves the difficulties of integrating ideas and solutions created in the firm’s periphery into the corporate context. Internal (proprietary) knowledge has to be connected with externally generated knowledge. This process appears to be one of the most challenging tasks for firms that want to utilize gains from open innovation. Even as companies manage to search for and extract innovative inputs--perhaps investing in the installation of appropriate innovation-focused online platforms that collect customer inputs--the desired transfer of knowledge frequently fails due to the “not-invented-here” (NIH) problem. Katz and Allen (1982: 7) define the NIH syndrome as “the tendency of a project group of stable composition to believe that it possesses a monopoly of knowledge in its field, which leads it to reject new ideas from outsiders to the detriment of its performance.” Interestingly the NIH phenomenon was originally found between two different domains within one enterprise; for example, resistance on the part of the R&D engineers to innovations suggested by the marketing department. But resistance against external knowledge is often even greater than resistance against the knowledge of one’s own colleagues. We still have very little know S
ledge about the drivers of NIH and feasible ways of how to overcome it in a firm context.
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But, if the transfer and transformation of customer input generated by co-creation fails, investments in customer innovation initiatives only turn into additional costs. References and Further Reading Bullinger, A. C., A. K. Neyer, M. Rass, and K. M. Moeslein. 2010. Community-based innovation contests: Where competition meets cooperation. Creativity and Innovation Management 19 (3): 290–303. Burkitt, L. 2010. Need to build a community? Learn from Threadless. Forbes, January (01.07.10). Available at: http://www.forbes.com/2010/01/06/threadless-t-shirt-community-crowdsourcing -cmo-network-threadless.html Diener, K., and F. T. Piller. 2010. The Market for Open Innovation. Raleigh, NC: Lulu. Ebner, W., J. M. Leimeister, and H. Krcmar. 2009. Community engineering for innovations: The ideas competition as a method to nurture a virtual community for innovations. R&D Management 39 (4): 342–56. Ebner, W., M. Leimeister, U. Bretschneider, and H. Krcmar. 2008. Leveraging the wisdom of crowds: Designing an IT-supported ideas competition for an ERP software company. In Proceedings of the 41st Annual Hawaii International Conference on System Sciences (HICSS 2008), January 7–10, Waikoloa, Big Island, Hawaii. Franke, N., and F. T. Piller. 2003. Key research issues in user interaction with user toolkits in a mass customization system. International Journal of Technology Management 26 (5): 578–99. Franke, N., and F. T. Piller. 2004. Toolkits for user innovation and design: An exploration of user interaction and value creation. Journal of Product Innovation Management 21 (6): 401–15. Franke, N., and S. Shah. 2003. How communities support innovative activities: An exploration of assistance and sharing among end-users. Research Policy 32 (1): 157–78. Franke, N., and M. Schreier. 2010. Why customers value self-designed products: The importance of process effort and enjoyment. Journal of Product Innovation Management 27 (7): 1020–31. Franke, N., M. Schreier, and U. Kaiser. 2010. The “I designed it myself” effect in mass customization. Management Science 56 (1): 125–40. Füller, J. 2010. Refining virtual co-creation from a consumer perspective. California Management Review 52 (2): 98–122. Füller, J., K. Matzler, and M. Hoppe. 2008. Brand community members as a source of innovation. Journal of Product Innovation Management 25 (6): 608–19. Hennig-Thurau, T., K. P. Gwinner, G. Walsh, and D. D. Gremler. 2004. Electronic word-of-mouth via consumer-opinion platforms: What motivates consumers to articulate themselves on the internet? Journal of Interactive Marketing 18 (1): 38–52.
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Hundreds of websites used to find links to torrent files for downloading pirated content are serving millions of visitors malware every month, new research has discovered.
While there is a current misconception that torrent search websites -- such as the Pirate Bay and KickAss Torrents -- are only used to facilitate piracy, this isn't the case. Torrent files facilitate the download of large files across peer-to-peer networking, and in itself this technology is not illegal and can be highly useful in finding license-free content or sharing large files with one another.
However, torrents are also used to download content for free which infringes upon intellectual property rights, such as movies, television shows, music and games.
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Institutions such as the Motion Picture Association of America (MPAA) are fighting a losing battle in relation to preventing this type of piracy, simply because of the sheer number of people across the world tapping into the technology to download their favourite television show or album.
When a pirate is caught, they may be sent a notice demanding restitution or wind up in court, and the cost for downloading that film last Friday night can be far more expensive than the price of a DVD.
However, the cost can not only be financial but also be a loss of privacy and the theft of your data, according to a recent study scrutinising the security of torrent-based search engine websites.
According to researchers from the Digital Citizens Alliance and RiskIQ, almost a third of the 800 main torrent search websites online today regularly serve their visitors malware.
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As reported by Security Affairs, the firms' latest research (.PDF) claims that from June to August this year, 800 popular torrent websites served malware to visitors through ads and the download of malicious files.
Dubbed 'malvertising,' cyberattackers are using ad networks to silently deliver malware payloads to unsuspecting visitors. Not only can this affect legitimate websites, but malicious ads are also found in abundance on torrent search sites which rely on advertising to stay afloat.
The study suggests that these malware payloads, served by 33 percent of the sample group, are designed to steal data for sale on the black market -- through both malvertising and the download of copyrighted material embedded with malicious code. Malware served through ads targets users by drive-by downloads -- downloads which do not require users to do anything to become infected -- and by duping users to click on links.
In the latter form, fake Flash updates and pop-up prompts trick users into downloading larger malware payloads which can be far more dangerous.
Malware is also found in torrented content. In one example, a pirated copy of the game Fallout 4 served malware to a gamer victim resulting in the theft of their bitcoin savings, worth approximately $2000. Exploits, Remote Access Trojans (RATs), adware, ransomware and botnets were all discovered by the team, and all of which could lead to the theft of sensitive data or system surveillance.
In total, 12 million users a month in the United States alone were exposed to malware, suggesting torrent search websites are a major attack vector for today's digital threats, and this allowed cybercriminals to earn over $70 million dollars.
Simply put, nothing in life is free. If you wish to use torrent sites to download either legitimate or illegal content, you're taking a risk.
Tom Galvin, executive director of the Digital Citizens Alliance commented: Download game killer 25 apk.
'When you visit mainstreams sites, things are naturally happening without you clicking anything: pictures are being downloaded, ads are generating.
What's happening now is that users can click on one of these content sites and decide not to watch a movie, but the malware is already on their computer scraping for their Social Security number. That's used to mimic and adopt your online persona, access banking information, and in some cases, people are getting credit fraud notifications.'
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