GOOD BUSINESS AND IT COORDINATION CAN SUPPORT CUSTOMER-LED INNOVATION

As I continue the research I began for my recent book, “Outside Innovation,” I realize that in order to harness customer led innovation, you need a game plan that incorporates and coordinates both business strategy and IT efforts. In this report, I provide some guidelines and tips on how to achieve this type of coordinated effort.

But before we dive into the “how to’s,” let’s take a quick look at a number of innovative firms that have successfully harnessed customer-led innovation to break out of the pack and to reap tangible rewards in market share, revenues, reputation, and profitability.

RETAIL INNOVATOR. Karmaloop was featured on the cover of “Business Week’s” Small Business Edition in January 2007. Karmaloop is the most successful specialty retailer of urban streetwear to 14- to 25-year-olds. Karmaloop’s hip customers spot new fashion trends, model the clothes, engage in guerilla marketing, sell the company’s gear, and come up with their own clothing designs which they offer to one another on the company’s “Kasbah” e-market. In fact, Karmaloop’s lead customers can make or break any apparel brand that is seeking to break into the youth fashion market.

Greg Selkoe, the young entrepreneur who founded and leads Karmaloop, works hand-in-hand with his technologists to add new features to his e-business infrastructure as quickly as the customers’ ideas arise. For example, the Kasbah e-marketplace was inspired and co-designed by Karmaloop’s entrepreneurial customers and the company’s three-person IT staff.

BROADCASTING INNOVATOR. The once-staid BBC has become the highest-ranking source of news for bloggers by being the first broadcaster to open up its APIs to customers who want to experiment with new forms of news and entertainment delivery. These news hounds create customized traffic monitoring services to provide commuter advisory services for train and bus schedules. They super-impose news on maps. They combine sports statistics into new-fangled scoreboards. They provide tools to enable other customers to select and receive the highlights of their favorite programs at their convenience on the appliance of their choice (mobile phone, game console, iPod, PDA, TV, etc.). Customers also contribute their own stories, video footage, and photos of fast-breaking news, neighborhood news, and spotlights on topics of interest to them.

The BBC’s New Media technology team provided open APIs and toolkits to enable customers to combine the BBC’s content feeds with other applications, such as Google Maps, Yahoo!’s Flickr, YouTube and a variety of statistical and analytical applications.

HIGH-TECH INNOVATOR. National Instruments provides measurement and analysis software and sensors to scientists and engineers in a huge variety of industries. These engineers help each other solve tough problems by answering each others’ questions and by swapping the programs they’ve written with one another. A research scientist using medical imaging to map infants’ brain activity to detect epilepsy can pick up tips from the astronomers who are processing high-resolution imagery from outer space. The sports engineer monitoring the performance of bobsled trials can take advantage of sensors developed for video games. Fifty percent of the company’s R&D comes from the inventions of its customers as they solve their unique problems.

NI’s IT organization works closely with the e-business team, the customer support organization, and the R&D organization to ensure that NI’s vibrant online hosted community application is well-integrated into the rest of the customer self-service tools the company offers. Customers sign on once to gain access to their account information, to download application updates, and to access the online discussion forums.

CONSUMER PACKAGED GOODS INNOVATOR. Kraft’s Nabisco brand snack food division harnessed its customers’ creativity by recruiting 300 middle-aged women into an online discussion community, where they bonded and swapped stories about their lives and their challenges with weight and nutrition. These diet-averse, busy women wanted portion-controlled “rewards.” These customer consultants co-created Nabisco’s 100-Calorie Packs for “sensible snacking”--a blockbuster success that generated $100 million of revenues in its first year.

INDUSTRIAL PLASTICS INNOVATOR. GE Plastics regained profitability and market share in the highly-competitive global market by empowering its customers to create and share their own custom colors and finishes. GE provided its industrial design customers with access to the same design tools and color-matching database that GE’s color and plastics’ experts use. Customers can quickly find a color match, create a new custom color and texture, get samples overnight, and be in production within days anywhere in the world.

At GE Plastics, the IT organization works proactively with the ColorXpress Innovation Labs and the e-business group to provide customer self-service tools and transactional support to compliment the face-to-face design services offered at the ColorXpress labs.

COORDINATION IS KEY--LINK YOUR BUSINESS AND IT STRATEGIES TO SUPPORT CUSTOMER-LED INNOVATION

How can you emulate the companies whose successes we’ve just described (and the many others I’ve chronicled in my book and my blog)? If you want to make rapid progress in enabling and empowering your customers to lead your business towards new opportunities for organic growth, you’ll need a coordinated approach.

Ideally, your outside innovation initiatives should be led from the top of the firm. But we’ve also found that outside innovation can take root at virtually any level--corporate, business unit, functional department--as long as you’re able to gain enthusiastic support from business leaders, from operational staff, and from IT leaders to move in synch.

What Are the Five Key Innovation-Enabling Initiatives You Should Tackle in 2007?

In the last chapter of my book, Outside Innovation, I provide a blueprint to get you started on your innovation journey. It includes five steps to take,¹ five core competencies to master, and five pitfalls to avoid.

To recap, the five steps in the Blueprint for Outside Innovation include:

1. Identify, study, and engage with lead customers
2. Provide customers with tools to use to reach their outcomes
3. Nurture customer communities
4. Empower customers to strut their stuff
5. Open up your products and engage customers in peer production

On our Web site,² we offer self-assessment guides that you can use to determine which of these steps your firm has already taken and where you need to catch up.

The relative maturity of your firm’s activities in each of these areas will determine which of these steps may be next for you. You can tackle these initiatives in any order that makes sense for your situation. Think of these not as sequential steps, but rather as five broad initiatives you should ideally be doing in parallel.

As you review these initiatives and begin to break them down into bite-size chunks, you’ll find that you’ll need to engage with leaders in other parts of your business in order to be successful.

For example, you’ll need the involvement of your R&D organization in order to take customers’ ideas and turn them into profitable new solutions.

You’ll need the engagement of your operations groups to implement new processes and policies that will transform the way your customers get things done.

You’ll need the support of your HR organization to ensure that you have aligned your employee rewards and recognition with your appetite for outside innovation.

And, along the way, you’ll need an active partnership with your IT organization in order to design and implement the supporting infrastructure and tools to support customer-led innovation.

Five Key Initiatives to Coordinate with Your IT Organization

Business and IT executives can plan together to proactively enable support for outside innovation. You can implement many innovation-friendly enablers as part of your currently-slated IT projects. By taking a coordinated approach and knowing what capabilities you’ll need, you can be much more agile.

Instead of reacting to requests from different business units for online discussion groups, you can...