When it comes to innovation, the customer isn't always right

It has become increasingly popular for companies to cooperate with their customers.

This has even led to the term co-creation, which is about how companies and customers can create experiences, new products and services together.

Research has previously shown that under the right circumstances customers can develop products which are both creative and have greater value for the users that what the company's own developers come up with.

Professor Anders Gustafsson at BI Norwegian Business School and Karlstad University in Sweden believes that profitable co-creation with customers largely concern communication and interaction between the company and its customers.

How should companies communicate with their customers? When is it profitable to listen to what they say?

Dialogue with customers

"Having a good and extensive dialogue with customers is viewed as a success factor when companies are developing new products and services," says Gustafsson.

Gustafsson, together with researchers Per Kristensson and Lars Witell at Karlstad University, have conducted a study to find out how you can communicate optimally with the customers to achieve successful development of new products and services.

The researchers conducted a survey among 334 managers who all had experience with innovation to create new products and services.

The researchers selected 284 real development projects that they divided into two main groups:

• Incremental innovation: 207 of the projects dealt with minor improvements of products or services.
• Radical innovation: The remaining 77 projects dealt with development of radically new products or services not previously known to the market.

Customer conversations create value

The BI researcher and his colleagues have looked at how a company communicates with customers. Both how often and in what manner, as well as the actual content of the communication.

The study shows that companies can achieve better results in its product development if customers are given the right pre-requisites for participating actively in the company's development processes.

The gain is in the form of enhanced creativity, improved user value and a more successful launch.

For minor improvements to products and services it is advantageous to talk frequently with the customers and have two-way communication between the company and customers. The researchers also saw that it is wise to listen carefully to what the customers actually said.

Users will often know better what is needed to make them even more satisfied with products and services. Customers will also be able to tell you what types of improvements they are willing to pay for.

On the other hand, the study shows that no particular means of communication make a positive contribution to successful innovation.

Don't listen to your customer

When a company aims to develop a product or service entirely new to the market (radical innovation), it will still be advantageous to talk frequently with customers.

The company can familiarise itself with the customer's situation through frequent communication and obtain a better understanding of what is important for the customer.

On the other hand, you should not listen too much to the customers' specific proposals. The researchers saw that companies that listened too much to what customers said were less successful with radical innovations than those which placed less emphasis on the contents of conversations.

"The customers base themselves to a great extent on previous experiences. The really radical solutions are difficult to imagine in advance based on experiences with current products," Gustafsson points out.