Principled Innovation LLC

PI Interview #4: Six questions for Patricia Seybold

October 19th, 2006

Patricia Seybold, author of Customers.com and The Customer Revolution, explores the issue of customer-centric innovation in her new book, Outside Innovation: How Your Customers Will Co-Design Your Company’s Future. Patty graciously agreed to answer some of my questions on the topic of outside innovation.

How do you define “outside innovation” and in what ways is it different from traditional innovation models?

Outside Innovation is customer-led innovation. It’s when your customers co-design your services and products, your policies, your business processes, and even your business models.

The traditional form of innovation makes the presumption that our experts are smarter than our customers. Outside innovation presumes that members or customers are much smarter than we can ever hope to be when it comes to understanding their own context, their ideal outcomes, and the experiences they’d like to have. In outside innovation, we provide tools to enable our “lead customers”–the most insightful and imaginative ones– to co-design their own ideal ways of getting things done. We engage with these lead customers as they co-design their own solutions, support one another, and challenge the status quo and challenge our ways of doing things.

How has Web 2.0, the participatory Web, challenged organizations to rethink their approach to innovation?

The participatory Web is definitely a contributing factor to customer-led innovation. The online world, with its citizen journalism, customer-contributed content, open source software development, online multi-player gaming, social networks, customers engaging in peer production of knowledge bases like Wikipedia, and customers contributing and building upon each others’ creativity, artwork, photographs, videos, music, and designs, has made it easier than ever before both to nurture and harness customer innovation. There are now entire businesses (scientific and technical journals, Flickr, YouTube, MySpace) built from customer-created content. There are non-profit organizations like Mozilla.org (open source software), Biosource.org (open biotechnology), and virtual pharma initiatives for tropical and neglected diseases entirely created from intellectual property that is donated by its inventors. There are businesses like Threadless.com that exist to sell customers’ designs and inventions. Online gaming communities such as Second Life, The Sims and Spore, allow customers to create their own characters and design the clothing and tools those characters use, as well as the environments (homes, islands, cities and planets) they inhabit. All of these customer inventions can be bought and sold or created and contributed in the virtual world. The fact that it’s easy for customers to “strut their stuff” and to build on each others’ contributions makes it foolish for any organization to ignore the opportunities the participatory Web offers!

What are the common attributes or characteristics of “lead users” and “lead customers?”

Lead customers (those who are already your members) and lead users (people who aren’t your members but who are inventive people trying to achieve similar outcomes) are the ten percent or so of your total audience who are the most insightful and imaginative. They are passionate (positively or negatively) about the outcomes they want and quite frustrated about the issues that get in the way of achieving those outcomes. (In fact, it’s the tension between what they’d like to accomplish and what they can accomplish today that breeds inventiveness.) Lead customers are also influential in their organizations and/or in their circle of family and friends. They have thought deeply about the problem space and the domain of expertise required to address their issues. They are insightful about their own context and they can easily articulate their conditions of satisfaction, i.e., what works for them and what won’t work. They are imaginative and visionary. Yet, they are also pragmatic and realistic about the need for viable business models and win/win solutions. If they’re true “lead users” they may have already invented their own solutions and may be happy to share their solutions and improvisations with others in their situation.

What effect does collaborating with lead users/customers have on the risk of innovation?

You need to be very careful about the integrity of your brand as you open your organization up to your lead customers/users and give them tools to co-create their own contributions and solutions. Be clear about your brand experience. If you find that clients’ contributions aren’t brand-appropriate, if they begin to do things that are disrespectful, for example, then fail fast and move on. Re-set the tone and the brand experience that’s appropriate. For example, Chevy Tahoe invited customers to re-use video clips from its car ads to create their own ads. Many customers came up with negative and critical ads, calling the trucks gas guzzlers, road hogs and so forth. So the Chevy folks poked fun at themselves with good humor, but ended the contest.

Do you think associations have “lead members” and, if so, what techniques can they use to identify them?

Yes, I know they do. I’ve worked with many of them in the past. They are the clients and beneficiaries who fit the profile of “lead customers” I described above. They’re not hard to identify. Usually, you start with the people who have offered their insights and thoughts in the past. You ask your front line staff which members are the most insightful, i.e., not just the most vocal, but the most creative. As you find these thoughtful and creative people, you ask them to nominate other acquaintances who also have a lot of good insights and ideas. Gradually, you’ll build up a core group of these “lead customers” to help you co-design the future of your organization. It’s more than a client advisory board, because you want to recruit the most insightful people, as well as those with most at stake. If you bring them together in a face-to-face co-design session and/or in online communities, and you ask them the right questions–not what products or services they want, but what outcomes they want to achieve and how they’d ideally like to achieve them–and get them co-designing with each other and with your staff, you’ll create some breakthrough results!

What advice would you offer to association CEOs and senior volunteers who are reluctant to make innovation a strategic priority?

Ignore customer-led innovation at your peril. Today’s customers are becoming used to being heard and attended to. They’re gaining power and traction both online and offline. If you don’t provide the “safety valve” of letting customers co-design your services and the business processes that impact them the most, the chances are great that these customers will become vocally disaffected. You can’t afford to alienate them. You’re much better off empowering them and taking advantage of their energy and enthusiasm. Make sure that your entire organization becomes fanatically focused on achieving your members’ desired outcomes. You want to empower your members to create great results in their lives and to contribute their best ideas and solutions to their peers.

Take an inventory of all the roles your customers currently play in and around your organization. There are five key roles that customers are usually happy to play: lead customers (co-design new solutions), consultants (provide expertise and advice), guides (help other customers), contributors (contribute their own creations), and promoters (help spread the word). First, do an audit of the roles customers currently play in interacting with your organization. The chances are good that you’re already engaged in some form of customer-led innovation. Build on the successes you already have. Reinforce them, reward them, amplify them, and then engage with your members to play even more active roles in co-designing the future of your organization.

I completely agree with Patty that the direct engagement of customers in creating the future of our organizations continues to change the way we think about innovation itself. Associations have the opportunity to benefit from the creativity and imagination of lead customer and lead users, but only if senior staff and volunteer leaders are willing to let go of their self-reinforcing illusions of control and give these contributors the freedom to create in unexpected and surprising ways. Everyone has a role to play in the work of innovation and our members and customers are no exception. To support a more democratic form of innovation, then, associations need to eliminate bureaucratic structures to enable more flexible collaboration, recalibrate incentives for participation and allow exhausted traditions to simply fade away. If we can begin to move in this direction, outside innovation can work for us.

You can download Patty’s Customer Innovation Guide at her Outside Innovation website.

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