My 9 year old looks at me, excitedly. ‘Mum, guess what happened in school today. Something amazing!’.
‘Er… you were the fastest swimmer’, I venture.
She shakes her head.
I try again: ‘You did really well in the spelling test’.
‘Mum…’ she interrupts, impatiently. ‘I said “something amazing” ’.
I open my arms. ‘Sorry. I have no clue. What was it?’
‘Mrs. W [science teacher’s name] received a letter from David Attenborough. He needs our help to save the Cross River gorilla from extinction’, she reveals.
As she proceeds to tell me about all the ‘brilliant ideas’ her class had come up with to ‘help’ Sir David Attenborough, I can not help but think: what a simple and, yet, clever way to get these children involved in a cause.
First, the children are given a goal: to raise funds and awareness for the cause. Yet, they are free to follow their own process to reach that goal. This means that the cause becomes the children’s own project and, so, they are engaged with the process and motivated to see the cause succeed.
Second, by handing over the decision regarding the process to the children, the number and the range of possible solutions increases. For instance, rather than focusing on traditional fundraising methods such as mufti days, their list included a parade, a talent show and a ticketed event.
The reason why I am mentioning this letter, here, is that this small example reminded me of two important business strategies particularly relevant in the digital environment: co-creation and open innovation.
Co-creation is a competitive strategy identified by Prahalad and Ramaswamy in which customers engage in active and explicit dialogue with producers of products and services. This dialogue marks a shift from customers as passive players in the market who ‘merely’ consume what the firm offers, to active counterparts who collaborate in the development of the product.
Such active customers benefit from highly personalised and unique experiences that fit their needs and preferences better than a traditional offer would. For instance, Nike fans can buy highly customised trainers and other accessories, in store or online; while Scion allows buyers to design and modify their cars, thus managing to create excitement in a very mature industry.
Source: Project Vehicles
Engaging the customer in the design of the product has numerous benefits for the organisation, from speeding the development process, to improving research productivity and fostering customer loyalty – benefits that are extremely valuable to organisations operating in today’s hyper competitive environment. Yet, how many times customer ideas and suggestions are dismissed or altogether ignored?
Open innovation is an approach to product development whereby the firm actively engages with the external community – e.g., suppliers, academics and other stakeholders – to identify development opportunities or overcome specific problems.
Lego actively taps into the open source community for beta testing and product development of its Mindstorms product line. When Lego launched the programmable construction toys, hackers quickly deciphered the code and started writing their own software. Rather than fighting this development, Lego embraced it – the company released a developer’s kit, encouraged the sharing of designs and programming techniques, created contests and incorporated the best ideas in selected versions of Lego Mindstorms. By leveraging the creative and technical potential of the open source community, Lego has developed Mindstorms much further than initially envisaged.
Source: Picture of a Kit of Lego Robotics used under the creative commons licence
Open innovation is particularly relevant in a competitive environment with increasing availability and mobility of skilled workers, relatively easy access to venture capital to enable good ideas to get off the ground, increasing capabilities of external suppliers and decreasing barriers to entry.
Whether my daughter and her friends will manage to raise significant funds to the Cross River gorilla cause remains to be seen. But the potential of co-creation and open-innovation for businesses is clear, in consumer as well as industrial markets.