How GE, Microsoft, Others Engage Customers to Create Winning Products, Experiences

Contrary to what your parents told you, it often does pay to follow the crowd.

Many companies are using crowd sourcing strategies to gather new ideas or provide operational support. Crowd sourcing involves the harnessing of dozens if not thousands of people through specialized techniques and intermediaries to address a specific business opportunity or solve a research problem. Some leading companies have taken crowd sourcing to the next level, collaborating with customers and key stakeholders to co-create new products or troubleshoot perplexing problems. This new approach can spark breakthrough innovation and solve difficult technical challenges much faster and at lower total cost than deploying expensive R&D teams or buying risky start-ups.

Co-creation is well suited to better deliver on customer needs, at lower product development costs and risks. Some notable examples of co-creation (as highlighted in the Harvard Business Review) include:

FedEx

Problem: How to ensure on-time, zero-defect delivery of live tissues for organ donation.

Solution: With external medical staff and suppliers, FedEx developed a sophisticated logistics technology that manages key variables like location, temperature and pressure.

General Electric

Problem: How to extract Alberta’s heavy oil in an environmentally friendly, low-cost way.

Solution: GE, government officials and customers collaborated at a shared innovation centre to develop a new water filtration system that reduced water consumption.

Microsoft

Problem: How to improve the performance of a call center.

Solution: Working with customers and call center agents, Microsoft redesigned the customer experience to make it more personal and responsive.

A variety of innovation projects have used co-creation in diverse areas such as new product design, content creation, software development, video games and mobile app development. Interestingly, some companies and entrepreneurs are using new crowd sourcing models like Kickstarter or Indiegogo to finance new products and TV and movie production.

To exploit co-creation’s potential, firms must pay attention to five key ingredients:

1. A willingness to open up and interact

Collaborating with customers and stakeholders is not easy for many companies, even ones that purport to be customer-centric. Since Co-creation is a creative and problem-solving process, it requires all employees to be good listeners and collaborators. For inward-looking cultures, leaders may have to encourage openness by tweaking management systems, launching change management initiatives or bringing in outside facilitators.

2. A big but specific problem

Leaders will get the most out of co-creation strategies when they target big problems and opportunities that the firm cannot deal with on its own. Open-ended problems are rarely successful, given the challenges of engaging participants and vetting the ideas.

To effectively manage the process, management should craft a number of hypotheses for the crowd to explore. Furthermore, the firm should anticipate that prospective solutions would evolve as different stakeholder groups provide input.

3. Make it easy for the right people

Leveraging dozens if not thousands of stakeholders across many organizations and regions can be complicated. To keep the co-creation process controllable and productive, managers must carefully consider the makeup of the internal team and extent of outside collaboration. Firms should cast a wide net to attract the right number of external experts, in areas like the supply chain and customer ecosystem as well as universities and startups. Moreover, organizations need to make sure they have the right data, rules and IT systems to foster rich interactions.

Numbers matter; for some problems, the input of a dozen experts can be more valuable than hundreds of amateurs. Furthermore, the number of submitted ideas will be proportional to the ease of participation. P&G’s Connect + Develop program requires only a name, email and physical address to submit an idea.

4. The right platform

To properly engage the crowd, companies should carefully consider which online or physical vehicle they use. In some cases, web-based platforms like Crowdspring or InnoCentive will work best. In other cases, firms should consider building their own specialized co-creation model like GE or 3M’s customer innovation centers.

5. Evaluate well

Even when using hypotheses, companies can still get inundated with many interesting ideas. To understand which solutions are feasible and have the greatest potential, managers should undertake quick online experiments, computer simulations or launch first in virtual worlds like Second Life.

Utilizing the crowd can be problematic. Like executing other key business strategies, prudent leaders will ‘measure twice and cut once,’ to ensure they design the right program for the right challenge – and can leverage the raw value of the biggest ideas. For those that do, Co-creation will be a game-changer in terms of better tackling customer needs and improving the pace and efficiency of innovation.

Mitchell Osak is managing director of Quanta Consulting Inc. Quanta has delivered a variety of strategy and organizational transformation consulting and educational solutions to global Fortune 1,000 organizations. Mitchell can be reached at mosak@quantaconsulting.com