Philips: The creative customer

Increasing consumer involvement in product-innovation processes at Philips. By Maaike Spoor, Aad Streng and Paul Louis Iske

Creating technological and customer knowledge, and translating it into products and services, are the core activities of any product-development process. Most organisations know how important customer knowledge is. Yet they often fail in finding effective ways of exploiting it in the development process.

In today’s highly competitive environment, speed in bringing the right product to market is of critical importance. A new approach to product development is emerging that promises a more direct and faster way to collect and activate information about what new products need to be developed. This approach relies on using the collective knowledge of people within the marketplace.

Developments in information and communication technologies, such as broadband internet access and the increased presence of users in online communities, are providing new opportunities and challenges. Collaboration with online consumer groups to activate and tap into their collective wisdom and mobilise their creativity provides opportunities to enhance the speed and effectiveness of product development. This method has become known as co-creation.

It is defined by heterogeneous interaction with active, empowered and knowledgeable individuals, rather than by the organised control of passive consumers.

Consumer roles in product innovation

Traditionally, the role of consumers in innovation has centred on importing knowledge about needs and wants, which in turn prompts new product development. Today, the internet enables a two-way relationship, boosting mechanisms for direct co-operation and knowledge creation. Three consumer roles can be defined for consumer involvement in product-innovation processes.

The first is ‘consumer as resource’. Tracking online user communities, in which users exchange product experience, can help to keep a company abreast of trends and issues that concern users. Alternatively, companies can initiate discussions concerning product-specific themes. On Womensnet.de, users give their opinion about ‘the perfect summer look’, providing Schwarzkopf with invaluable consumer insights.

In the second role, consumers act as ‘co-creator’. In essence, consumers become part of the company’s activities. Via virtual representations and rapid prototyping, users can have a stake in developing a concept based on their current product experience and product knowledge. Trial and error provides the opportunity to learn and to improve upon a given concept.

Web-based tools allow users to add their creativity and design capabilities to product blueprints.

Last, consumers act as ‘users’. In this role, they provide product feedback or support. Screening communities, in which users write product reviews or discuss a product in a forum, provide a company with information about product limitations and general consumer attitudes towards its product. This information is useful in the early phases of a product’s launch, and can serve as input for product improvements. Users with significant knowledge and expertise in product usage may also provide support to other users. Online message boards are an excellent way to enable user-to-user support, where users can engage in an interactive learning process.

The focus of this article is consumers acting in the role of co-creator. Enabling users with the ability and the opportunity to invent and produce solutions, which have personal value and meaning for them, offers businesses the opportunity to accelerate their own learning. It allows a company to tap into consumers’ intelligence and to leverage their creativity and problem-solving capabilities. Moreover, it facilitates the creation of knowledge about key features or functions that will assure product success in the market.

Philips Pronto

The Philips Pronto is an intelligent, programmable remote control (www.pronto.philips.com). The Philips Pronto team has a good relationship with the independent Remote Central community (www.remotecentral.com). This community has established itself as the ultimate online source of information about remote controls.

In this community, which incorporates more than 31,000 members, users support each other in the programming of their remote control, provide relevant information (tips and tricks, documentation, FAQs etc) about programming remote controls, and share created files. Users submit their created files, which are hosted on the community site. More than 8,800 Pronto files are downloadable on Remote Central. In turn, some files have been downloaded in excess of 100,000 times.

In this community, co-creation takes place as users create files that fit their needs. They are directly adding value to the product with the development of (tailored) applications. Moreover, exchanging files makes the product more attractive to the market and extends the product’s lifetime.

Based on the files users have developed, the Pronto Team is able to identify key features for the success for future releases. As users are stimulating and challenging each other in the development of innovative files, they encounter limitations in the toolkit (Pronto Edit) and the performance of the device. The Pronto Team therefore receives ideas and requests for product-performance improvements, as well as suggested solutions for tool or product enhancements. Moreover, the Pronto Team is able to identify and contact highly skilled, knowledgeable and innovative users (‘lead users’) to participate in its beta testing programme.

Added value for Philips

Philips is transforming itself into a market-driven company, with the aim of becoming the most appreciated brand in its industry sector. The new brand campaign, ‘Sense and Simplicity’, is a step towards this transformation.

Co-creation expresses the element of ‘sense’ in the way that Philips takes care of, and listens to, its consumers. Three pillars – ‘designed around you’, ‘easy to experience’ and ‘advanced’ – support the brand positioning and are used internally to help deploy the Philips brand solidly and consistently. Co-creation is the perfect means to develop products that meet the criteria of the three pillars. The process involves designing a product with consumers, and enables the start of a discussion (with general users) as to whether Philips products are ‘easy to experience’. The third pillar is satisfied in that lead users and innovators help Philips find the smartest application of its technology.

Users willing to join a community for co-creation show specific characteristics. They are highly involved with the product, show brand affinity and have particular psycho-sociological needs. These latter principally consist of the expression of needs, creativity and product knowledge.

It appears that consumers become highly involved with products that demonstrate a high hedonic element. Users are also willing to engage in the process of co-creation for products that have the potential to directly benefit them. Typically, these are novel products that show high potential for new features or substantial improvements, or products to which new technology or material can be applied.

Benchmark examples have demonstrated that co-creation is applicable to almost every product, as long as there is a certain appeal for users. For instance, strictly functional products (commodities) that are characterised by a low hedonic factor can be made attractive to users by focusing on product applications.

Co-creation for lamp-bulbs per se will not have a high chance of success. But if you involve users in discussion about the atmosphere and ambience that they want to create with light, there is a chance the co-creation process may take off. It is also important to anticipate the hedonic element of the transferred task: many people enjoy the design process. Finally, users may also be incentivised through special awards or prizes.

At Philips, two product divisions – Philips Consumer Electronics (CE) and Philips Domestic Appliances and Personal Care (DAP) serve the consumer market. With its vision of a ‘connected planet’, Philips CE focuses on consumers who want the freedom to enjoy their favourite digital content and to share it with friends, at any place, at any time. As the product portfolio of Philips DAP is mainly characterised by commodities, however, in order to attract users for co-creation, the focal point of discussion must be at the level of applications and experiences. Philips also uses it news and product-information portal, Club Philips, to encourage consumers to engage in the co-creation process (www.club.philips.com).

Co-creation forms an integral part of Philips’s development strategy, enabling customer knowledge to be employed effectively. This implies an open-minded culture. Consumers must be seen as knowledge partners and development teams must be receptive towards their contributions, while actively engaging in dialogue with them. Indeed, engaging in co-creation requires development teams to have a thorough understanding of the company’s product strategy, product architecture and product-development processes. This understanding allows the purpose of co-creation and desired user contributions to be properly identified. The provision of adequate toolkits also helps to ensure the quality and applicability of user contributions. A specific validation process should be established to assess the applicability of contributions consistently and efficiently.

It is important that development teams recognise the implications of setting up a process of co-creation. First, empowering users to contribute to product development sets expectations. They will be dissatisfied and leave the community if they do not see their contributions integrated into new products. Transparency about what users can expect from their contributions is therefore essential.

Second, being responsive to the community requires the integration of consumer intelligence with internal intelligence and flexible processes. Smooth information flows, involving rich information that is distributed to the right people, facilitate qualitative and speedy decision making, which will lead to the evolution of more successful concepts. Being alert to trends within the community and organising internal processes in such a way that co-creation forms an integral part of the development process will help the business to stay ahead of its competitors.

Third, the development team has to realise that increased openness and the development of a relationship with user communities have implications for decision-making processes. Once opened up to the community, development process cannot then be hidden away again.

Finally, significant resources are needed to set up and maintain the platform for co-creation, as well as to manage the organisation’s relationship with the community. Should consumers feel offended or disappointed, the brand’s reputation will be put at risk. Timely and careful intervention in discussions that have the potential to harm the brand, together with managing consumers’ expectations and relationships, is essential.

Lessons learnt

Philips has learnt a number of powerful lessons from its experience with co-creation.

Establish value alignment – Co-creation is about mutual value creation, where the value drivers of the company and the individual consumers should be aligned. Users want to see their contributions integrated in novel products, to acquire additional product knowledge and to enjoy themselves. To increase the applicability of user contributions, companies need to define a framework that sets the user’s degree of freedom in terms of the contributions they will be able to make. It is, however, important to allow enough freedom for users to express their needs and creativity.

Target the right consumers – Targeting users who are enthusiastic, involved with the product, possess adequate knowledge and skills, and are willing to contribute to product development or enhancement is vital to establishing a continuous flow of innovative and coherent contributions. In the phase of concept generation, companies can significantly benefit from so-called lead users, whereas during testing, representatives of specific product segments are more valuable.

User incentives – Surveys completed by community members have shown that enjoyment and the acquisition of product knowledge, recognition and esteem are more important than monetary incentives in motivating users to become involved in the co-creation process.

Co-creation as a branding tool – Co-creation communities generate high levels of publicity. Over 2.4 million people visited Peugeot’s website during the two design competitions (see sidebar ‘Peugeot’s customer-led design contest’). Moreover, co-creation allows the building of relationships with users, resulting in increased customer loyalty. Enthusiastic and satisfied users have the potential to become invaluable product and brand ambassadors.

Legal aspects – Co-creation can create potential legal risks for both consumers and the company involved. Users may unknowingly violate copyrights or other intellectual-property rights through the submission of content in the co-creation process. User contributions should therefore be carefully evaluated.

Despite the risks, however, Philips’s experience suggests companies need to rethink the role of the customer, and see them as potential knowledge partners in the development of new products. Co-creation shows high potential for significant benefits: faster and more effective product development, increase brand recognition, and improved customer relationships. It is a challenging process, but one more than worth the effort involved.

Maaike Spoor studied Management and Organisation at the University of Groningen (Netherlands). This article draws on her final thesis, which was based on the experiences of Philips Electronics.

Aad Streng is senior management consultant, KM and quality, for Philips Electronics. He can be contacted at aad.streng@philips.com.

Paul Louis Iske is senior vice president, ABN AMRO Intellectual Capital Development. He can be contacted at paul.iske@knocom.com.

Co-creation and Philips Pronto

During the development of a new release of a Philips Pronto product, the question arose as to how to find a suitable testing environment. Normally, developers and marketers use their own network to select people to help with testing. In this instance, however, the owner of the Remote Central community was asked which community members he regarded as being the most experienced. The members that were identified as ‘lead users’ were then invited to join the beta testing of the new product. They accepted, and in the event helped to eliminate a number of bugs. Application issues were also raised, discussed and solved.

When the product was released, Philips made the announcement on the Remote Central community. To the company’s surprise, the community members who participated in the beta testing began to answer the many questions about the new product that appeared on the site. While these users appreciated the peer recognition they received for their expertise, Philips saved both valuable time and resources.

Peugeot’s customer-led design contest

Peugeot’s internet-based design contest (www.peugeot-avenue.com) is an example of co-creation. The theme of the third contest is to design ‘the Peugeot of your dreams for the near future’. Peugeot began its involvement with co-creation in 2000, however, when the company invited design and car enthusiasts to propose car designs for ‘the Peugeot of 2020’. In 2002, the theme of the contest was ‘retrofuturism’.

The design contests have been a tremendous success. The second contest rendered 2,800 proposals from 90 countries. During the contest, 1.15 million people visited Peugeot’s website and 93,000 votes were cast over the web to select the ten finalists from the 30 designs selected by Peugeot. A full-scale model of the winning design was built and exhibited at the Frankfurt Motor Show.

The contributions allow Peugeot to identify trends in design styles and to generate ideas for new car models, drawing on a geographically and culturally diverse customer base. As Philippe Houy, head of the Concept Car Project at Peugeot’s products department, says, “The submitted designs are visually very successful, original and coherent in their approach. They grapple with real automotive problems.” Crucially, the votes that follow also provide unique insight into consumer preferences, which Peugeot is then able to incorporate in the product-design process.