The nature of “innovation” is changing

by Jane Vita, Sofia Nyyssönen, Tinja Lindförs and Tiia-Marina Silva

The world is always changing and everything goes around adapting. Some companies that have more vision are already looking for the new market – we call them forerunners. These companies have a new vision and concepts in their minds such as design thinking, agile methods, service design, social design, among others. They are not thinking only about their consumers but how to make their employees do better products and services.

Consumers are also more concerned about their needs, they are more demanding, Products and services are created with their proposals, so why not put them in the center of the whole process of design and make them part of the creation? We went through 5 books where the main topic discussed was co-creation and we’ll share in this post what we find in common in all them.

Consumers are not more the same

People are made by their ideas, stories, experiences, relationships, culture, values, desires, among other things. They are influenced by the context, friends, time, work, family, weather, healthy, mood, etc. The cooperation, social interactions, individualism, altruism, punishment, free-riding and the instinct of collect things are part of our DNA.

The consumers are changing. But what has changed? Today, consumers are more concerned with the quality of what they are buying.

A study on the Zero Moment of Truth, published by Google, says that most users seek their goals in consumer search sites. According to the article the search done via mobile devices has increased considerably, because many of these searches happen in moments user are in transition. When the results are presented, consumer chooses those that are already most familiar and then others that seem to offer some greater attractiveness regarding their interest.

Another important fact is that more and more opinions matter, within so many options, who used,  who knows about, might end up influencing even more, not only about the words, what has more votes, or even a place in a ranking, an easy way with which the user can identify which one is the best option. The study also shows that people are much more likely to click a link if it is recommended by a trusted friend.

The book “The Future of Competition” by the professors Prahalad and Ramaswamy explain better the consumer behaviour tendencies, when the authors explore some themes as “Information Access”– consumers make decisions based on information, “Global view”– with the Internet consumers can find different and multiple information around world, “Networking” – consumers can join in thematic consumer communities, exchanging information with other people with the same interest, “Experimentation” – the Internet provides number of tools and facilities that enable consumers to develop, experiment, share their products and opinions, “Activism” – they can better discriminate when making choices.

The consumer of the future will no longer be fooled by pretty pictures and super estimated discounts. Even if no one tell them the real product information, they’ll research for it, and only after this they will make the purchase decision.

We must know more about the customer, their needs, interests, and research the proposal of them related to the service and product that is already been in use or in the phase of creation. The use observation and the feedbacks are the future of innovation. Easily, we can see how the new users generation, mainly kids, are more connected, social, technological and informed.

Change in the culture of company

Many companies are recognising the need to continually develop innovative services that are responsive to consumer needs. In his latest book, “Open Services Innovation” Henry Chesbrough is framing services innovation as no longer depending mainly on science and technology but instead co-creation, user involvement, environmental and societal questions  are becoming crucial elements in companies’ innovation process. What Chesbrough is talking about is companies opening up their innovation processes. Companies need to involve users in early stages of their innovation processes by tapping tacit (means implicit, unsaid, unspoken) knowledge and behavior from customers. Tapping tacit knowledge from customers and involving users in the beginning of innovation processes needs different competencies than has previously been necessary for innovation and even a new company culture.

Another concept Chesbrough’s framework is built around is splitting businesses into customer-facing front-end units, whose job is to provides personalized solutions to customers and back end units built on standardized processes supporting the requirements of individual clients. Front stage activities focus on accomplishing a positive customer experience in cooperation with consumers of services whereas product excellence and competitive costs are key to back stage activities, which focuses on specialization and standardization. The assumption is that, whether they make products or services, companies need to rethink the business as services business, opening up the business model, to create and capture value. Innovation thus becomes an open process, where contributions come from the outside.

Co-creation and user involvement ultimately become part of a company’s business model. Service based business models are built around long term customer relationships. This helps businesses provide real value to customers and obtain the knowledge and insight from customers that its’ competitors may not be aware of. Open innovation grows to be ultimately a business process that companies need to recognize in order to keep up with changes in technologies and markets. The roles of the company and the consumer converge towards a unique co-creation experience.

Cooperation between companies

As stated before, people are changing together with world. Nowadays, we need to think of the world as a one big marketplace where competition is tough and only strongest ones will survive. Companies need to think how to differentiate themselves from their competitors, how to make product or service unique in order to collect best profits and largest amount of customers. Of course you can invent something totally new, create a service or a product so unique you are making competition irrelevant.

Or then you can use one of the old ways making business: Cooperation between companies. Over decades, companies have used pools, trusts or even cartels in order to gain profits and bigger market shares. Of course in these cases are not always the most profitable ones when thinking consumer´s or even every company´s point of view.

It seems that when you think about it more, you will find lots of cooperation between companies you have not even thought about (at least I haven’t). Just think Windows and Nokia; Finnair as a part of OneWorld; the alliance between several member airlines or one of the latest, Angry Birds with Fazer (Finnish candy manufacturer). Are these all alliances still worthwhile, one can ask. You have to face it.

One of the most intriguing concept is groupon.com, deal-of-the-day website, bringing consumers and suppliers together. Doing also the charity work Groupon has combined today´s trends together; cooperation, interaction, sustainability and change in culture and values. Couple of questions still are left into air: Will this kind of cooperation be constant in the future? For sure there will be challenges to overcome, how to do it. Is there any room for new forms for cooperation or will the old “habits” starting to rise again?

Society and the future of innovative consumption

The nature of innovation process is changing quite permanently in Chesbrough’s analysis. There is information available for everyone to create a competing product. The centre of innovation is moving physically out of R&D departments and closer to the customer surface, where the co-operation takes place naturally. The focus of innovation is also changing from merely designing the technique or the user interface of a product to designing the whole user experience and the services to go with it. It is the package, the added services that bring in the profits in the future Chesbrough writes.

Chesbrough is in the front line of discussion about consumption. He points out that the change in the focus of innovation is also due to the diminishing environmental resources and people becoming more aware of it. He describes the slow change in the people’s mindset: it might no longer be necessary to own the product to use the service it provides. In this way, by sharing,  the resources that were used to manufacture a car, for example, would be in better use. This kind of development would be durable.

It would also be more durable, in Chesbrough’s thinking, that the civil society – from government to associations – would be using more service design thinking in order to create more cost effective services. In the States it’s alerting that the government uses more enterprises than universities in service design research. In designing future services, it is critical to take into consideration also those incapable of co-creation.

New guides for “innovation”

In a world that nothing looks new and different, innovation comes from the interest of the users and their needs, that is why the value of co-creation is so important for the service design. It is through these thoughts that we can come up with something innovative and that matters.

References:

Chan, Kim, W.  & Mauborgne, Renée (2005): Blue ocean strategy: how to create uncontested market space and make the competition irrelevant. Boston, Harvard Business School Press.

Chesbrough, Henry (2011) Open Services Innovation: Rethinking Your Business to Grow and Compete in a New Era. Jossey-Bass.

Doz, Yves and Kosonen, Mikko (2008): Fast Strategy, How strategic agility will help you stay ahead of the game.

Hamel, Gary (2000): Leading the revolution. Boston, MA: Harvard Business School Press.

Prahalad & Ramaswamy (2004). The future of competition: the co-creating of unique value with customers. Harvard Business School Press.

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