June 8, 2012

Co-Innovation: A subject for the Digital Agenda for Europe?

Since a week or so I participate in the forum of the Digital Agenda for Europe http://daa.ec.europa.eu/group/8/content.
In the issue of Innovation and Entrepreneurship I argue for including the issue of Co-Innovation in the Digital Agenda. My comment on the forum was meant to address the question if Co-Innovation is the same as Living Labs and whether there are successful examples. Also whether the issue is interesting enough for the EU Digital Agenda. My comment below:

The Co-Innovation has a number of common elements with Living Labs but it is in many respects they are different: while both are focused on innovation the Living Labs are commonly seen as mostly structured, institutionalized projects often having at societal or technical innovation focus. We consider Co-Innovation primarily as a marketing strategy aiming at engaging the final customer in product or services innovation processes taking place in digital environment and often making use of social media tools. The central question is how to effectively tap the customer creativity in order to innovate faster, cheaper, more efficiently i.e. reducing the ratio of unsuccessful products / services. In this sense the co-innovation goes one step further than the concept of the Open Innovation (Chesbrough, 2003) that propagates innovation in cooperation with the supply chain partners.

In the very heart of the Co-Innovation concept (also known as co-creation, crowdsourcing, or distributed co-creation to mention some of the most common terms) lays the empowered and sophisticated consumer who understands the effects of the democratization of technology and feels powerful enough to require participation in new product development processes. The sources of the customer empowerment are the new ICTs and more importantly the social media. The modern consumer furthermore is quite individualistic and willing to pay more for products tailored to his/her specific needs or having a very personal character. The industry response to this trend is known as Mass Customization; this is often seen also as a form of co-innovation.
While the co-creation is not by any means a new concept) in the marketing literature and practice (Prahalad and Ramaswamy, 2004) it is interesting to analyze and understand how this phenomenon develops in digital and networked environments. A primary focus in our research is to provide conceptual clarity around this issue and develop theories and models useful for the business operating in increasingly open, global and customer dominated environments. In that sense a prime objective is to develop a typology of co-innovation practices since there are different types of it; these types are characterized by different scope, different motives and different rewards for the participants. Next to this a number of interesting research issues require more research, experimentation and practical applications in order to fully understand the issue. The bottom line is to provide businesses with sustainable competitive advantages through efficient innovation processes based on customer creativity and engagement.
Regarding successful corporate examples there are many of them. Examples range from businesses who seem to have no need for R&D anymore since all new product ideas and development comes from the customers. Examples: The t-shirt producer Threadless http://www.threadless.com/ and LEGO http://mln.lego.com/en-us/network/status.aspx?ReturnUrl=/Default.aspx are known and typical examples.
Other companies use co-innovation approaches in order to collect new product ideas like P&G https://secure3.verticali.net/pg-connection-portal/ctx/noauth/PortalHome.do ,
Ford Motors http://social.ford.com/your-ideas/technologies/performance/ , Starbucks http://mystarbucksidea.force.com/ , Dell Computers http://www.ideastorm.com/ and NOKIA http://www.developer.nokia.com/Community/Discussion/content.php ).
In some cases co-innovation is about incremental, yet important innovations like customized packaging (Heineken http://www.facebook.com/heineken?sk=app_256849211027281 ) using social media as interaction platforms. Often attracting customer creativity takes the form of marketing actions (OSRAM http://www.led-emotionalize.com/ ) or it is focused on creation of communication concepts at low cost using amateur creativity (HEINZ http://www.youtube.com/watch?v=uh2FBhPGcHg ).
In some cases co-innovation is focused on finding solutions to technical problems arising in the process of innovation; such efforts to engage third parties as problem solvers include often a financial reward. There are many examples of “knowledge brokers” who facilitate such processes. www.innocentive.com . Another related area where co-innovation practices apply is the practice of engaging company employees in solving complicated management problems; these practices are known as Prediction Markets.
Finally plenty of mainly anecdotal evidence indicates that the concept is successful, yet relatively a very small percentage of businesses are open to the idea of engaging the customer in the innovation process that they see always as a proprietary one. To my opinion Co-Innovation can become a source of competitive advantage for European companies (and maybe European institutions and governments). I think that the EU should promote the concept or at least discuss it; the more opinions the better. In the University of Twente the issue in any case is on our research agenda.

Chesbrough, H.W. (2003) Open Innovation: The New Imperative for Creating and Profiting from Technology. Cambridge, MA: Harvard Business School Publishing
Prahalad, C. K., & Ramaswamy, V. (2004) Co-creation Experiences: The next practice in Value Creation. Journal of Interactive Marketing, 18(3), 5-14.