Virtual product experience and customer participation—A chance for customer-centred, really new products
Introduction
Today, absorbing external knowledge is becoming indispensable for the creation of successful innovations (Cohen and Levinthal, 1990; Sawhney and Prandelli, 2000; Chao-Ton et al., 2006). In the era of “open innovation”, researchers as well as consultants ask for more active engagement of customers into new product development than traditional market research allows (Kambil et al., 1999; Sawhney and Prandelli, 2000; Vandenbosch and Dawar, 2002; von Hippel, 2002; Chesbrough, 2003; Prahalad and Ramaswamy, 2004; Hobo et al., 2006). To sustain the pace of innovation resulting from fast changing technologies and customer needs, Leonard-Barton (1996), Teece et al. (1997), and Lengnick-Hall (1996), among others, suggested integrating customers into value creation and absorbing customers’ knowledge to strengthen a company's core competencies (Cohen and Levinthal, 1990) and to discover their needs (Dahan and Hauser, 2002a). As a consequence, new methods are needed that allow active engagement of customers into new product development (Lilien et al., 2002). Only by experiencing a new product and its features, will customers be able to realistically assess whether they like it and whether the new product idea fulfils a latent—hitherto unknown—need.
The Internet as an interactive and multimedia-rich technology with low costs of mass communication (Dahan and Hauser, 2002a, Dahan and Hauser, 2002b; Dahan and Srinivasan, 2000; Urban and Hauser, 2004) allows consumers to virtually experience new products and offers new, simplified modes of large-scale interaction between producers and consumers. In literature, a number of new tools to interact virtually with customers can be found (von Hippel, 2001; von Hippel and Katz, 2002). However, it lacks some case studies shedding light on how to virtually integrate customers in practice. The information missing in detail is: how to identify qualified customers on the Internet, how to motivate them and how to interact with them. Under which conditions are users willing and able to share their knowledge with producers?
In this paper, we show that virtual product experiences enable customers to express their latent, so far unknown, needs. Producers with access to this information obtain a chance to develop customer-centred, really new products. Further, the virtual product experience empowers customers to participate in the creation of new products much more actively. Customers become known as co-creators and are recognised as valuable resources for new product development (Kambil et al., 1999; Prahalad and Ramaswamy, 2000, Prahalad and Ramaswamy, 2002; Chesbrough, 2003). To use the customer knowledge available on the Internet to a larger extent, producers have to know how to create a virtual product experience that motivates customers to fiddle around with new products, honestly state their preferences, contribute their know-how, and share their ideas with producers.
This paper is structured as follows. First, we give an overview of the problems associated with too closely listening to the voice of the customer. Second, we argue that by means of virtual product experiences, customers can get their hands on innovations long before they really exist, thereby building sound judgments and enabling them to express their former unknown needs and desires through trial and error loops. Third, we introduce the concept of customer integration along a three-stage innovation process. Fourth, we present a detailed explorative case study to demonstrate how to virtually integrate customers into new product development in practice. Finally, we discuss the results and summarise their implications.
Section snippets
Customers’ problems to articulate their needs
As lately shown by Matzler and Bailom (2006) companies that are able to identify customer needs and align these with their core competencies are those who champion innovation. Such companies are more profitable than others. Innovation champions combine their vision and core competencies with customers’ knowledge when creating new products. Further, strong market orientation and producers’ capabilities to get customer insight are considered as important success factors for new product
The virtual product experience
Nowadays, new product development cannot be imagined without powerful three-dimensional (3D) modelling software helping to create products better and faster. Virtual reality has become pervasive in the engineering, design, simulation, and testing of new products. Producers, taking this concept a step further, may use virtual prototypes to integrate customers into new product development via the Internet. Thereby, customers get their hands on innovations long before the design has been
Concept of virtual customer integration
With its currently more than one billion users (Almanac, 2006), the Internet offers an enormous pool of knowledge, impossible to encounter elsewhere. According to von Hippel (2005), users encountered in online communities present a promising source of innovation. Fig. 2 shows how customers can add value to all stages of the innovation process. Potential tasks and roles that can be transferred to customers are illustrated along a three-stage development process (Fig. 2).
The first stage of Idea
Virtual customer integration at AUDI
We present here an exploratory case study conducted at AUDI which illustrates the application of virtual customer integration in practice. The project was focused on the development of infotainment systems. These systems integrate state of the art communication and entertainment technologies in the audio, video, navigation, telematics and user interface domains to a infotainment system in the car. One of the authors had the possibility to accompany the Audi project from its initiation to
Management considerations of virtual customer integration
For practitioners intending to integrate customers virtually into NPD it is important to consider a number of aspects. First of all, the virtual customer integration has to be in line with a company's goals and support its core competencies. It is important to balance the expected benefits of an intensive interaction with customers against possible costs of integrating them. The benefits of virtual customer integration are as follows.
Reduction of market uncertainties: Through virtual customer
Discussion
The dilemma innovative companies face is that on the one hand new products have to meet customers’ future needs, but on the other hand too closely listening to customers may result in a tendency to make only incremental, less successful improvements (Christensen, 1997; Ulwick, 2002).
In this article, we argued, that companies using virtual customer integration methods to absorb customers’ knowledge may overcome this problem. While many articles report about customers difficulties in articulating
Johann Füller is assistant professor in marketing at Innsbruck University School of Management and board member of HYVE AG, a company specialized in virtual customer integration. He received his Ph.D. in business administration at the Innsbruck University School of Management. Johann holds a master's degree in international management, a degree in mechanical engineering, and a degree in industrial engineering and management. His research interests are in the field of innovation creation in
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Johann Füller is assistant professor in marketing at Innsbruck University School of Management and board member of HYVE AG, a company specialized in virtual customer integration. He received his Ph.D. in business administration at the Innsbruck University School of Management. Johann holds a master's degree in international management, a degree in mechanical engineering, and a degree in industrial engineering and management. His research interests are in the field of innovation creation in online communities and in virtual consumer integration into new product development.
Kurt Matzler is head of the department of International Management at Johannes Kepler University, Linz in Austria and Partner of IMP, an international consulting firm. His research and teaching interests are in the area of innovation, market orientation, and strategy.