The new innovators

To avoid new product failure, companies need to involve their customer from the very start, writes Nasir Riaz.

Although a fast emerging concept in global marketing, in Pakistan user innovation still has a long way to go. In fact, so far there is no model which Pakistani manufacturers and marketers can adopt to reap the benefits of this approach. Yet user innovation is a necessary complement to the manufacturing innovation process; it entails involving end users in the early stages of new product design (the stages of idea generation and concept development). To secure shelf space in a highly competitive market every new product needs to have two crucial elements – design and brand building. The first one is crucial for value perception and the second for identification, visibility and creating consumer loyalty.

Designing the product is usually seen as the responsibility of R&D departments, market consultants and researchers in academia, whereas branding is seen as the responsibility of the marketing departments. Traditionally, whenever a company required a new product they turned to market research to discover ‘un-met latent needs’ among their customers. Once the need was identified, the task of designing a new product to fit the need was handed over to the product development team, and when the prototypes were ready these were handed over to marketing for testing. However, new research has rejected these traditional methods of product design and brand management by demonstrating that the majority of new product failures are the result of ideas dreamed up by manufacturers, academic researchers or inventors in the lab. These ideas, although attractive on the drawing board and in prototype, did not sell in the marketplace.

Today it is a universally accepted fact that it is the consumer who decides the fate of the brand and not the manufacturer. The concept of brand equity (the ultimate level of consumer loyalty) is also a function of consumer perception. It is also an established fact that the value chain, be it an industrial or consumer product, is consumer driven. As a result, the extension of end user dominance to new product development is improving the success rate of new products.

The evolution of the user innovation concept began when manufacturers in the developed countries, after spending millions on R&D, failed to achieve their ROI on new products; the reason being that very few companies were able to come up with truly innovative products and most of their offerings were perceived by consumers as being ‘me too’ products. With the failure of R&D to deliver innovative designs, manufacturers turned to the end users of their products for new ideas. Industrial as well as academic researchers discovered that the end users of many products were more than happy to share their post-consumption experiences with the manufacturer and in the process sometimes generate innovative ideas. When it comes to hi-tech products, it is an empirically tested fact that as much as 80% of new ideas originate through end users, and the most interesting finding was that these users were willing to share their ideas free of cost.

Clearly the focus today should be on involving customers in new product development, rather than simply persuading them to buy products. In fact, the most effective product development and commercialisation models are those that encourage dynamic communication and idea sharing among engineers, marketers and customers.

Another benefit of involving users in new product development is cost saving in R&D and prototype development as well as on new product promotion. In fact, the savings made on the promotion front can be considerable as a percentage of the total operating costs of the company, and thus can impact the bottom line positively.

In Pakistan most companies have a traditional approach to new product development in that they look for new ideas from overseas or via market research, their distributors, sales staff or the competition. However, in a competitive market this approach wipes out any chance of differentiation. Today almost 80% of products are standardised and with every passing day there is less room for differentiation. The rate of failure among new products is rising, with only two out of 10 new products surviving.

Research has shown that consumer innovation models are equally applicable in Pakistan. It is only a matter of changing mindsets and looking at customers as a source of idea generation and not just as a source of revenue. Pakistani manufacturers and marketers should not underestimate the ability of their end users to generate ideas. Pakistani consumers today are knowledgeable, educated, affluent, and have the ability to generate new ideas and share their post consumption experiences, making it a win-win situation for both parties. The end users get what they want and manufacturers get a healthy ROI on new products. Although end users may lack the technical knowledge to design products, the fact is that the new product development process starts with a simple idea. True innovation is the result of combining the end user’s knowledge with technical knowledge.

Some techniques which Pakistani manufacturers can use to start the involvement process include creating online communities; best idea competitions (through the print media or the internet); interactive TV programmes and websites; door-to-door surveys; focus groups and mall intercept interviews.

Be it an incremental innovation or ultimate innovation, customers can play a vital role in the process. In Pakistan the most realistic approach would be to start treating the ideas of ordinary users as the inspiration for the innovation process rather than as a solution. The idea of user innovation is based on one basic premise, which is that the end user knows more about design faults and benefits than a researcher sitting in a lab. Today, not only is the customer king, he is also market research head, R&D chief and product development manager.

Product categories
where customer’s killer ideas were hugely successful

• Computer game software
• Containerised shipping
• Food and beverages
• Home furnishings
• Fashion design
• Life saving medical equipment
• Open source software
• Packaging design and material development
• Personal product related backup services
• Reality TV shows
• Scientific instruments
• Sports equipment
• Textiles

Profitable global brands
where the customer has been they key innovator

·      Microsoft employs 15-20-year olds to brainstorm new ideas for computer application software.

·      Dell launched www.ideasstorm.com to gather and implement customers’ ideas.

·      Lego has a ‘mindstorms’ online user panel to solicit feedback on existing products.

·      Nestlé consults with parents regarding improvements to its baby formula products.

·      Pampers holds focus groups with parents to generate ideas for new designs.

·      Johnson & Johnson Personal Care undertakes consumer feedback and new product idea surveys.

·      P&G organises on-the-spot hair washing events to generate feedback on its shampoo range.

·      Nokia tests prototypes of every new device by distributing them to actual end users, sometimes free of cost.

·      BMW pioneered user innovation in car manufacturing by posting a toolkit for its customers to generate ideas for new designs. BMW selects the best ideas and invite these customers to meet their design engineers.

·      Starbucks launched www.mystarbucksidea.com to encourage user suggestions, which customers discuss and vote on, giving the company the ability to judge which ideas gain popular support.

·      eBay upgrades its website based on customer feedback.

Consumer innovation models in Pakistan

·      Unilever Pakistan’s Rabta Consumer Care Line: The message is “whether you have a complaint, compliment or suggestion, we would love to hear from you.”

·      Nestlé Pakistan’s web ‘call back’ and ‘talk to us’ option encourages customers to share their experiences. Customers are also invited to share their recipes which could help improve the company products.

·      ICI Home Paints involves its customers in devising colours and shades.

·      Depilex involves its customers through its training institute programmes.

·      Fashion designers work closely with their customers to innovate.

Product ideas
that didn’t come up to consumer expectations

·        Herbal medicines

·        Japanese and Thai restaurants

·        Flavoured tea

·        Flavoured yogurt

·        Medicated mattresses and shoes

·        Luxury and ranch homes

·        Packaged ready-to-eat desi food

Nasir Riaz is associated with the University of Central Punjab, Lahore, where he is involved in teaching, research and consultancy. nasir.riaz@ucp.edu.pk

First published in the January-February 2011 issue of Aurora.