Patty Seybold on Customer Innovation

The notion of shared effort (network as virtual brain) certainly has gathered a lot of momentum. Open source software keeps on marching up the technology stack. Wikis are blooming everywhere. And companies are using all sorts of gimmicks to get not only their employees but partners and customers involved in sizing up opportunities and solving problems. (Recent example: IBM's online "Innovation Jam.") Now Patricia Seybold, a long-time corporate technology and customer-relations consultant, has put together book about companies tapping their customers for ideas about new products and services. The book, Outside Innovation: How Your Customers Will Co-design Your Company's Future, is due out in October. A lot has been written about wikis, blogs, open source software, etc., but Seybold does a good job of showing and explaining the practical uses of this stuff for businesses.

Seybold, one-third of the famed Seybold tech-industy analyst family, has been focusing on customer relations for a decade or so. She already published two books on the topic, and The Customer Revolution. Her thesis in the new book is that the best way for companies to differentiate themselves is to spend less time and effort on internal development and more time engaging customers in an open, give-and-take process of co-developing products. This goes way beyond focus groups and surveys. "You have to harness this customer energy. They're going to be all over your stuff anyway," she says.

A couple of cool examples she mentioned when she came in to meet with me recently:

Lego: The company has tapped thousands of customers to help it design its Lego MINDSTORMS robots. We're talking kids, math teachers, college professors, and software hackers. Back in 2004, the company held a two-day workshop at MIT with a handful of what Seybold calls its "lead customers," getting their help in identifying the features that should be put into the next generation product, MINDSTORMS NXT. Later, a couple of the members of this MINDSTORMS User Panel were invited into the top secret lego labs to make detailed suggestions on some of the physical pieces that should be added to the kits. Then before the commercial launch of the product, Lego recruited about 100 customers to be beta testers. The company also opened up its software APIs and encouraged customers to create extensions to its operating system or to actually replace its core software with theirs. The company also created a community to facilitate sharing of software and ideas between its customers. All of this customer engagement work is paying off for Lego. Its revenues climbed 11.5% last year and it swung from a loss to a profit.

GE Plastics: The company set up its ColorXpress Customer Innovation Lab, where customers meet with GE scientists and conceive and create new colors--all in one day. They also get access to GE's product development toolkit on line. GE is able to produce sample resins in small batches and deliver them to customers within a couple of days. It's real-time innovation.

Seybold says she had been thinking and writing about customer relations for several years before she realized that customers could become a vital source of innovation for companies. Now she's totally sold on the idea. And she doesn't think it should be seen as an extra frill. "At least 50% of your innovation should be done through this approach," she says.

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