User involvement in new product innovation and commercialization

¶ … Sell Product Innovations Effectively

It is not a new phenomenon to include users in new product design and development. However, academic research in this area is still rather novel. Since the start of this new millennium, there has been a multiplication in the involvement of users in the innovation process. This increase of involvement by users indicates that the firms who include users as an active part of the innovation process can greatly benefit from this approach. However, there is also research that warns that there are dangers of customer involvement in the process of innovation. The holistic approach to innovation suggests that there should be a wide range of established interactions between various participants in the process of expansion and development of methods, tools, and approaches for the refinement of innovation. This work focuses not only on approaches addressing customer/consumer involvement in the innovation process, but also specifically makes recommendations that are useful for firm managers. It is important to provide recommendations for firm managers, so that they can usefully make decisions that will enhance the innovation process.

Table of Contents

Introduction 3

Conceptual framework 5

Literature review 6

Experimental Measurements 10

Innovation Characteristics 10

Adoption of/Propensity to Adopt Innovations 10

Geographical Innovations 11

Market Characteristics 11

Conclusion 12

References 13

Introduction

In order for a firm to have constant sustainability new products are very important. However, these new products also involve risks and costs. New product development is an essential driver of shareholder value, and is one of the three fundamental business processes. Also, product innovation in today's extremely competitive business environment has become an important source of sustainable growth, financial success and competitive advantage (Sorescu & Spanjol 2008). It should also be noted that the percentage of success of new product initiatives within the market is generally very small; this further proves the point that there is a need for extensive research into the factors that play a part in successful commercialization of new products (Fu et al. 2010).

Generally speaking, it has been confirmed by research that market (e.g., demand) and product (e.g., differentiation) are characteristics that are essential determinants of any new product. Unfortunately however, often new products fail to perform very well and/or fail completely, even though the products are of a superior nature and there are attractive markets for the products. This poor performance or failure of the products could be a result of the simple but crucial truism that 'new products can't sell themselves'. Indeed, it is at least partially the responsibility of the sales force of a firm to facilitate the exchange and diffusion of new products (Fu et al. 2010). Therefore, the fate of any new product depends greatly on the way that the sales force of the company reacts to it and how the product is accepted and 'owned' by the sales force. These are the prime factors that ultimately add up to the success or failure of a product (Zablah et al. 2011)

Salespeople that work in the field have a great deal of freedom concerning which products and/or services that they focus their efforts and energies on. This is at least in part because their day-to-day activities aren't monitored all that closely by the managers. Such a lack of focus can prove to be quite troublesome for the management, especially in cases of tactical initiatives such as the introduction of a new product. The manner in which a new product performs in a market greatly depends upon the efforts made by the salespeople in trying to introduce and sell the product to the target customers (Fu et al. 2010). However, it should also be pointed out, that, if the salespeople are not focused on selling the new product, this is at least partially due to a failure of management to effectively sell the product to the salespeople.

It has become crucial for the companies to improve their innovation performance due to the interactive environment of innovation and the way that the external knowledge is being absorbed. Today companies often feel that the conventional approach where research and development (R&D) was solely responsible for innovation is very deterministic and narrow. Hence, many other resources are being used by firms in order to improve their innovation skills. There are presently a number of ways through which innovation solutions are being created. This approach is a part of the 'open innovation concept' that enables firms to assign ideas that come from external sources (Rocheska et al. 2014).

According to research, the success of a new product largely depends on the market and the orientation of the customers present in that market. Therefore, it is important for firms to focus on their market and their customers' needs and desires when coming up with new ideas and products and performing innovation. Market research is often performed by companies to find out about market trends and to determine the needs and wants of the customers. However, there are limitations present in the typical market research that include the following:

1. Due to functional fixedness, customers find it difficult to communicate their new needs.

2. Often, the 'wrong' types of questions are being asked by market researchers in trying to determine new needs, as they are focused on finding out what the "average customer" wants. This often leads to innovation being of mediocre standards and limiting the chances of further and better innovation (Weber et al. 2012).

3. Equally often, instruments such as surveys fail to include open-ended questions and/or comment boxes so that consumers expressing opinions have more options to express their needs and/or wants and concerns.

Conceptual framework

The availability of resources to exchange knowledge and reviews about various products has made users and customers more aware; this has ultimately resulted in their asking for higher quality requirements in services and products. It is important for companies to have open innovation processes, and to have open and straight-forward channels of communication with users and customers. What this means is that the firms should be able to know about user behavior, and they should take note of these behaviors during the innovation process, so that the needs of the customers could be more readily 'catered to'. Users are actually the beginning of the innovation process, as, they help the firms in determination of problems with existing products. As well, users provide information concerning what could be done to not just eliminate the problem in a new product(s) but make such products fit more closely with the present and future needs and desires customers (OECD 2009; Rocheska et al. 2014).

It is not just the innovations designed by the companies with regards to their proposals, ideas, and requirements that the customers play a role in. Customers are also essential to the innovation of the companies on the whole. This happens when the involvement of the customers leads to value co-creation and collaboration. Therefore, the following factors play a role in determining the innovation of companies:

a. Identifying the tastes, needs, and requirements of customers and using them to form suitable innovative solutions;

b. Value co-creation with the users with the help of instituting interactions;

c. Conducting the implementation of innovation that is generated by the users (Rocheska et al. 2014).

Literature review

Unpredictable market conditions with considerable technological advancements are being faced by many companies. It is required by these organizations to push towards enhancing the capabilities of their New Product Development (NPD) so that customer preferences and market demands can be satisfied. In many organizations the NPD is one of many strategic activities so long as new products help in the generation of profit growth with emphasis on a higher rate of sale. In fact, one of the key determinants towards the success of an organization is its new products.

Although considerable research has been conducted on the roles of innovative strategies and NPD in the improvement of financial performance, and the formation of competitive advantages for firms, not much importance has been paid to the roles of new products and their expected goals. The research literature concerning the success of NPD focuses on a number of variables. The involvement of the supplier and the customer in the NPD processes have been two points of focus (Nazari-Shirkouhi et al., 2015).

In order to develop an effective design, there is a need for resources that either belong to the organization, or that can be accessed externally with the help of suppliers, customers and/or other sources. Involvement of suppliers or customers can prove to be a form of competitive advantage for the firm, as these sources can provide the firm with knowledge and resources that the company might be lacking. Concerning product design, customers may have many significant ideas (Crawford & Di Benedetto, 2011). Opinions and reviews of the customers can be obtained regarding the new product design and its functions, and customers can be asked to assess the prototype. Usually industrial designers start using hard models and drawings, instead of sketches and soft models. These drawings and hard models are known as renderings. Further use of these models is carried out in order to get more reviews of the customers with the help of focus groups (Menguc et al. 2014).

Successful innovation solutions can be formed by companies acquiring help from the users and customers in the form of reviews and opinions about the innovation process and how it could further be improved. According to some studies that have recently been conducted "firms must try to put in place interactive methods that would help them in absorbing and transferring the tacit, explicit, and implicit knowledge of the users and customers" (Fuchs et al. 2011). Hence, interactions between customers and companies has resulted in many innovative solutions in today's world. An approach of this kind where customers are asked to give their opinions and feedback about some product is called customer co-design or co-creation (Rocheska et al. 2014).

The involvement of customers in the process of innovation is one of the most significant resources that an organization has. By making use of these opportunities, the innovation capabilities of the organizations can be enhanced and risks related to the creation of innovation products can be reduced. Generally speaking, it has been noticed that successful companies spend a great deal of their time collecting and analyzing information related to their customers, such as finding out lead users and interacting with them, conducting market analysis, and finding out different types of learning activities, or other methods to access customer knowledge (Chou & Yang 2011).

A lot of companies have been making use of information systems to share and apply knowledge on their users and customers, or to take part in activities that help in the process of value creation such as new product development. Some of these organizations are: Bang & Olufsen, Cisco, Microsoft, Compaq, 3 Com, and Fiat, as well as UPS and AT&T. There are 3 roles that can be played by the customers in NPD. These roles are as a user, as a resource, and as a co-creator. Customer as a user deals with the customer testing out the product and giving his/her feedback; customer as a resource concerns idea generation and source of innovation; customer as a co-creator includes the customer being involved in the product while it is in the designing and development phase. Therefore, the close relationship of the firms with their customers, and the participation of the customer in the NPD process can greatly impact the success of the new product or innovative idea being worked on by the firm (Nazari-Shirkouhi et al. 2015).

Throughout the product life cycle, it is known that the launch of a new product is not a static event; rather, it is a dynamic process that takes place over time. In case of the launch of a successful product, there comes an introductory period where slow expansion takes place; this period is followed by the "tipping point" that results in a rapid and sustained growth phase; finally there is the point of widespread adoption. Therefore, most firms prefer that new product sales move quickly grow so that a competitive advantage can be achieved by them; this can also result in a more rapid pay-off of the start-up and development costs of the product. As well, rapid sales evade internal pressures of stopping the launch of the new product prematurely, and generate cash that can then be used for future growth. In some cases, the introductory phase may last for a long period of time and can vary across different markets and products. It is important to convey to salespeople that the length of this introductory phase can vary. Therefore, there are two elements within the life cycle of the new product that should be investigated:

1. The ways in which the success of the new product may be affected by the salesperson's intentions and perceptions, and

2. The slope of the sales growth curve (rate of growth of sales) for each salesperson (Fu et al. 2010).

Even with the focus on the NPD process, failure rates for new products in most organizations can be as high as 40%. In some countries, the success rate is lower than 60%. For instance: for Japan, the rates have been reported to be 59.8%; for England, 54.3%; for Spain, 49%; and for the U.S., the rates are 59%. It was noted from a survey conducted on 200 firms that only 23% were able to complete their new products on schedule. Research indicates that there are numerous factors that play a part in the development and success of a product. Generally, the key factors, taken from the literature, can be categorized as employee-oriented, information technology, process, and strategic management (Nazari-Shirkouhi et al. 2015).

From this perspective, it is also possible that the introduction of a new product might be perceived as very demanding by one salesperson while another wholly disagrees. Furthermore, there can be numerous demands of new product introduction that can all have different levels of intensities. The point that should be understood is that the various demands of new products will vary from product to product, and from salesperson to salesperson; these can be related to sales situations for the new product (Zablah et al. 2011).

It is the social, physical, psychological and organizational factors that play a role in the achievement of new product goals, reducing demands associated with products as well as the costs of those demands and the stimulating development and growth at personal levels that the new product selling resources refers to (Zablah et al. 2011).