Customers as Innovators

Topics: Strategic management, Marketing, Mass customization Pages: 5 (1511 words) Published: September 4, 2013
Thomke, S., & von Hippel, E. (2002). Customers as Innovators: A New Way to Create Value. Harvard Business Review (Vol. 80, pp. 74).

Main point

Many companies sometime lack the understanding of what exactly their customers’ needs. This can cost companies a lot of money for loss of customers and sales, and to win back those customers. Product R&D in this case is a major drawback. Authors, Thomke and Von Hippel, have found that companies nowadays have come up with a new approach. Instead of researching and developing inexact products internally to meet customers’ needs, they turn customers as innovators with a package of tool kit to design and develop their own customisation to experience the difference. Companies adopting this innovation will need to re - modernise their business model and operational management accordingly.

The key issues:
* The difficulty and challenge for any company is that fully understand customers’ needs are very costly and inexact process. * Companies who want to get one step ahead have adopted new approach ‘the user friendly tool kit for customer innovation’. It act as computer simulation allows customers to design and customises their own product using prototype much faster and cost efficient. * By turning customers into innovators, although it has created lots of values for customers, businesses need to ensure that not only they have the right tool kit, but at the same time refresh and re-modernise their business models and management accordingly to maintain the healthy customer relationship.

The importance to CRM and marketing of the article’s key issues CRM is an on-going relationship process and a business strategy with an integration of I.T system approach that allows company to engage with customers by creating a long term relationship. At the same time, companies can take advantage of this relationship to understand their changing needs and behaviour, to create and deliver customers values to get sustainable profitable growth.

Customers as innovators have connection with CRM in the following areas:

A costly problem and a radical solution
It’s costly because R&D (customers’ needs) resides with them, and the solution (how to satisfy the needs) lies with the manufacturer. Besides, it’s hard to compromise at times. This longing relationship is call the ping-ponging effect where companies go back and forth internally just to test a number of prototypes for customers to get the final satisfaction. In reality on average, clients and customers may accept only 15% of final product for full evaluation, and only 5 – 10% is marketable. Meanwhile, regardless of R&D investment, those margins can make the company difficult because of increased competition among competitors and cost pressures from customers.

The ultimate solution for companies regardless of industries would be using the right tool kit for customers to do their own customisation which will be cost and time efficient, and simultaneously produce sample results in a short time. This do-it-yourself (DIY) tool kit simulation must have four important capabilities including 1. It must be designed for easy learning by doing

2. It must be user friendly to customers
3. It must contain libraries of useful knowledge and components of the product category 4. It must have the capabilities and limitation so that customer’s design is producible.

An industry transformed
The article has used custom computer chip as an example for transformation. To save cost and time, I.T engineers have turned their expertise into computer based tools; what they call the CAM/CAD programs. These programs are the most effective where it allows rapid testing in trial and error in different simulation; so customers can get instant result faster.

The benefits and challenges
The benefits:
It satisfies customer needs more than what manufacturers know. It is faster and more...
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