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WisconsInnovation

ThoughtsonInnovationfromtheWisconsinSchoolofBusiness

CustomerCocreation:ATypology andResearchAgenda

WorkingPaper42008 By:MatthewOHern&AricRindfleisch

CUSTOMERCOCREATION:ATYPOLOGYANDRESEARCHAGENDA
December1,2008 MatthewS.OHern DoctoralStudentinMarketing UniversityofWisconsin SchoolofBusiness 975UniversityAvenue Madison,Wisconsin53706 Phone:6082626519 Fax:6082620394 Email:msohern@wisc.edu AricRindfleisch ProfessorofMarketing UniversityofWisconsin SchoolofBusiness 975UniversityAvenue Madison,Wisconsin53706 Phone:6082621942 Fax:6082620394 Email:aric@bus.wisc.edu

CUSTOMERCOCREATION:ATYPOLOGYANDRESEARCHAGENDA ABSTRACT Traditionalmarketingthoughtandpracticelargelyviewsnewproductdevelopment(NPD)asan internalfirmbasedprocessinwhichcustomersarerelativelypassivebuyersandusers.This traditionalparadigmiscurrentlybeingchallengedbyanewperspectiveinwhichcustomersare activecocreatorsoftheproductstheybuyanduse.Inthispaper,weidentifytheoriginsofthis paradigmshift,presentaconceptualtypologyoffourdifferenttypesofcocreationactivity,and offeranagendaforfutureresearchofthisemergingparadigm.

Newproductdevelopment(NPD)isanimportantdriverofcorporategrowthand profitability(Sorescu,Chandy,andPrabhu2003;WindandMahajan1997).Unfortunately,most newproductsfailtodeliverontheirobjectives(Christensen1997).Hence,marketingscholars andpractitionershavedulydevotedsubstantialattentiontowardimprovingNPDprocesses. Thisattentionhasleadtoseveralimportantadvances,includingthespecificationoftheStage Gatemodel(Cooper1990),theformulationofsophisticatedNPDtoolssuchasconjointanalysis andpremarketlaunchforecasting(RangaswamyandLilien1997),andadvancesinknowledge abouthowbesttoorganizeandmanageNPDteams(Sethi,Smith,andPark2001). ThesecoretopicsofNPDresearchandpracticeshareanimportantbutoftenunstated assumptionthatNPDisessentiallyaninternal,firmbasedactivity.Asrecentlyobservedbyvon Hippel(2005,p.19),Theideathatnovelproductsandservicesaredevelopedby manufacturersisdeeplyingrainedinbothtraditionalexpectationsandscholarship.Hence,NPD researchandpracticelargelyoperatesunderafirmcenteredparadigmandcustomersare viewedashavinglittleactiveinfluenceuponNPDactivity.Whilethisparadigmmayhaveserved academicsandpractitionerswellinthepast,itiscurrentlybeingchallengedbytheemergence ofempoweredcustomersseekinggreaterinputandcontroloverNPDactivity(Seybold2006). Thischallengeisusheringinanewparadigminwhichfirmscanenhancecorporategrowthand profitabilitybyallowingcustomerstotakeamoreactiveroleintheNPDprocess(Prahaladand Ramaswamy2000;vonHippel2005). Inthisnewlyemergingcocreationparadigm,customersarecentralandvital participantsintheNPDprocess,andinsomecases,arecapableofcreatingnewproductswith littlehelpfromfirms.Forexample,manyoftodaysmostsuccessfulcomputerapplications,

includingApache,Linux,andFirefoxareopensourceprojectsthataremanagedbyself organizingcommunitiesofvolunteerprogrammers.AsshowninFigure1,theopensource movementhasexperiencedtremendousgrowthinrecentyears.Likewise,manycomputergame modificationsaredevelopedbyplayersratherthanmanufacturers(JeppesenandMolin2003). Customersarealsobecomingactivelyinvolvedinthecreationoftraditionalmanufactured products.Forinstance,over120,000individualsaroundtheworldservedasvoluntarymembers ofBoeingsWorldDesignTeamandcontributedideasandinputregardingthedesignofitsnew 787Dreamlinerairplane(www.newairplane.com).Likewise,Arduino,anItalianmicrocontroller manufacturerprovidesopenaccesstoitssoftwareandschematicsandactivelyencouragesits customerstotinkerwithitsproductdesign(www.arduino.cc).Althoughtheliteratureonthis topicissparse,theevidencemarshalledthusfarsuggeststhatcustomercocreationispositively associatedwithseveralNPDmetrics,includingincreasednewproductcreativity,decreasedtime tomarket,andreduceddevelopmentcosts(Grewal,Lilien,andMallapragada2006;Shah2006; vonHippel2005). ThisnewparadigmhasattractedtheattentionoftheMarketingScienceInstitute,which hasidentifiedcustomercocreationasatopresearchpriority(MarketingScienceInstitute 2008).Likewise,VargoandLusch(2004)recognizecustomercocreationasafoundational premiseunderlyingmarketingsnewservicedominantlogic.Moreover,theimportanceof encouragingandutilizingcustomergeneratedsolutionshasbeennotedbyseveralleading innovationresearchersandpractitioners,includingCook(2008),EvansandWolf(2005), PrahaladandRamaswamy(2004),Seybold(2006),andvonHippel(2005),amongothers. However,todate,marketingscholarshavedevotedscantattentiontocustomercocreation,

andinstead,continuetofocusonNPDaslargelyafirmbasedactivity.Consequently,littleis knownaboutthenatureofthisphenomenonoritsimplicationsformarketingthoughtand practice.Todate,thelimitedbodyofmarketingscholarshiponcustomercocreationhaslargely focusedonspecificexemplarsofthisphenomenonsuchasassemblingastoreboughtbookshelf (BendapudiandLeone2003),modifyingacomputergame(PrglandSchreier2006),or developingopensourcesoftware(Grewaletal.2006).Althoughthesestudiesprovidean importantcontributionbyexaminingthemotivesandmechanismsunderlyingcustomerco creation,afocusonspecificexemplarsprovidesonlyanarrowlookatacomplexand multifacetedphenomenon(Cook2008;Seybold2006). Ourresearchseekstoaddressthisgapbyofferingabroaderexaminationofvarious formsofcustomercocreation,whichwedefineasacollaborativeNPDactivityinwhich customersactivelycontributeand/orselectthecontentofanewproductoffering. 1 In accordancewiththisdefinition,customercocreationinvolvestwokeyprocesses:(1) contribution(i.e.,submittingcontent)and(2)selection(i.e.,choosingwhichofthese submissionswillberetained).Usingthesetwoprocessesasourfoundation,weoffera conceptualtypologyoffourdifferentformsofcustomercocreationaswellasanagendafor futureresearchinthisdomain.Webelievethatthistypologyandagendahasthepotentialto enhancebothmarketingscholarshipandpractice.Specifically,weprovidescholarswitha nuancedunderstandingofthecommonalitiesanddistinctionsamongthesevarioustypesofco creationwhileofferingpractitionersanexaminationoftheirpayoffsandchallenges.Inorderto

For ease of exposition, we employ the term product. However, we acknowledge that customer co-creation is highly congruent with marketings service-dominant logic, which posits that collaborating with customers creates value by harnessing the power of customer learning and leveraging the service-based benefits embedded in products. (Vargo and Lusch 2004).

provideacontextualbackdrop,ourthesisbeginswithanexaminationofthetrendsfuellingthe riseofcustomercocreation. THERISEOFCUSTOMERCOCREATION SuccessfulNPDrequirestwoessentialtypesofinformation:(1)informationabout

customerneedsand(2)informationabouthowbesttosolvetheseneeds(Thomkeandvon Hippel2002;vonHippel2005).Typically,customers(orusers)havethemostaccurateand detailedknowledgeaboutthefirsttypeofinformationwhilemanufacturers(orproviders)have themostaccurateanddetailedknowledgeaboutthesecondtype.Thisdisparitycreatesa conditionofinformationasymmetry(vonHippel2005). Traditionally,firmshaveattemptedtomanagethisasymmetrybyengaginginvarious formsofmarketingresearchtoobtainbetterinformationabouttheircustomersneeds.Under thisapproach,Successfulinnovationrestsonfirstunderstandingcustomerneedsandthen developingproductstomeetthoseneeds(Hauser,Tellis,andGriffin2006,p.3).Unfortunately, customerneedsareoftenidiosyncraticandtacitinnatureand,hence,hardtoaccurately measureandcoherentlyimplement(FrankeandPiller2004;Simonson2005).Assuggestedby vonHippel(2005),consumershavedeepandcomplex(highfidelity)needs;however, traditionalmarketresearchmethodsoftenprovidemanagerswithonlyacursory(lowfidelity) signalofwhatcustomerswantorneed.Asaresult,mostnewproductfailuresareattributedto afirmsinabilitytoaccuratelyassessandsatisfycustomerneeds(OgawaandPiller2006). AsrecentlynotedbyvonHippelandcolleagues(ThomkeandvonHippel2002;von

Hippel2005;vonHippelandKatz2002),analternativeandemergingmeansofbridgingthis asymmetryistoprovidecustomerswithinformationandtoolsthatenablethemtotakeamore 5

proactiveroleintheNPDprocess.Aswedetailsubsequently,anincreasingnumberoffirmsare employingthisnewapproachinvariousmanifestations.Thismovementtowardsproviding consumerswithgreateragencyovertheNPDprocesshaswitnessedtremendousgrowthin recentyearsduetotheriseofcustomerempowerment.Intheremainderofthissection,we brieflydiscussthisimportanttrendanditsimplicationsforcocreation. Asnotedearlier,thetraditionalNPDparadigmlargelyviewsconsumersasratherpassive entitieswhoarehighlydependentuponfirmstohelpsatisfytheirneeds(Carpenter,Glazer,and Nakamoto1994;Simonson2005).Althoughmanyindividualsstillconformtothistraditional roledefinition,recentculturaldevelopmentsareempoweringagrowingnumberofendusersto playamoreactiveroleindevelopingtheproductstheybuyanduse.Oneimportantcultural developmentisconsumersgrowingsuspicionanddistrustofmarketingcommunications.For example,aconsiderablebodyofresearchsuggeststhatconsumersarequiteskepticalof marketingcommunicationingeneralandclaimsaboutnewproductperformanceinparticular (DarkeandRitchie2007;ObermillerandSpangenberg1998;Wright2002). Inrecentyears,thisinherentskepticism,fuelledbyincreasednewscoverageof corporatescandals(e.g.,Enron,ImClone),muckrakingdocumentariesofbigbusiness(e.g., SuperSizeMe,TheCorporation),andanticorporatewebsites(e.g.,adbusters.org, spacehijackers.org),hasignitedmoreactiveformsofconsumerresistancesuchasanti corporateblogging,brandavoidance,andculturejamming(Klein,Smith,andJohn2004; KozinetsandHandelman2004;Thompson,Rindfleisch,andArsel2006).Hence,anincreasing numberofconsumersareengagingindirectactiontoaltercorporatemarketingactivitiesthat theyfindobjectionable.Thisincreasedconsumeragencyrepresentsasignificantstrategic

challengeandhasledseverallargefirms,includingWalMart,Nike,andMcDonalds,tobemore cognizantofandopentocustomerinput(KalaignanamandVaradarajan2006).Forexample,in ordertoappeaseconsumeractivists,Nikehastakenstepstoactivelyengagecustomersinmany facetsoftheirstrategicplanningandexecution(Seybold2006). Inadditiontogrowingsuspicionandheightenedactivism,consumersalsoappeartobe

increasinglylessfulfilledbytheactofconsumptionitself(Firat,Dholakia,andVenkatesh1995). Thenotionthatmaterialobjectsareunabletosatisfyintrinsicpsychologicalneedshasbeen stronglyestablishedbyconsumerresearchers(Belk1985;RichinsandDawson1992),andthese findingshaverecentlybeendisseminatedtothebroaderpublic(Kasser2003;Kohn1999;Schor 1998).Accordingtocognitivepsychology,intrinsicneedsaremorelikelytobemetviacreative pursuits(Csikszentmihalyi1996;DeciandRyan1985).Thus,throughtheircreative contributions,cocreatorsmayreappsychologicalbenefitstheywouldnormallybeunableto achieveviaconsumptionalone.Indeed,manyoftodayspopulartelevisionprogramsglorifythe creativeprocess(e.g.,AmericanChopper,TradingSpaces,ThisOldHouse),andcreativepursuits suchascooking,crafts,andhomeimprovementarerapidlygrowinginpopularity(Ebenkamp 2005;Pietrykowski2003).Moreover,recentresearchoncustomerledinnovationrevealsthat usersoftenfindthisactivityhighlyenjoyable(LakhaniandWolf2005;Shah2006). 2 Spurredbytheseculturalinfluences,anincreasingnumberofconsumersareseekinga moreactiveroleinthecreationoftheproductstheyconsume(Handelman2006;Roberts, Baker,andWalker2005).Forexample,arecentsurveyfoundthatnearlyonethirdofthe membersofextremesportscommunities(e.g.,sailplaning,canyoning,andsnowboarding)
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Although we make no claim that these creativity-based benefits supersede consumption-based benefits, the extant literature on customer co-creation nevertheless suggests that benefits that are based on the creative work of customers can play an important role in enhancing customer satisfaction (Lakhani and Wolf 2005; Shah 2006).

engagedinsomeformofproductinnovationandthatalmostaquarteroftheseinnovations werelaterincorporatedintoexistingproductsbymanufacturers(FrankeandShah2003). Moreover,researchonthecreativepotentialofbrandcommunitiessuggeststhatconsumers arewillingandabletointroducenewofferingsevenafteraproduct(e.g.,AppleNewton)islong abandonedbythefirmthatsoldit(MuizandSchau2005). TheabilityofconsumerstotakeamoreactiveroleinNPDhasbeensignificantly enhancedbyrecenttechnologicaladvances,mostnotably,thedevelopmentandgrowthofthe Internet.Accordingtoseveralresearchers,consumershavetraditionallylackedthetechnical skillsandcapabilitiesthatNPDrequires(Christensen1997;Randall,Terweisch,andUlrich2005; Simonson2005).However,theInternethashelpedamelioratethisdeficiencyandempower customersinatleastthreeways.First,theInternetincreasesaccesstoknowledgethatcan enhanceconsumersabilitytoengageincreativepursuits.Forexample,consumersinterestedin learninghowtobuildanelectriccarcanfindseveralwebsitesthatcontaindetailedtechnical informationanduserfriendlytutorialsonthistopic(e.g.,www.evadc.org;www.makezine.com; www.evsupersite.org).Hence,throughtheseelectronicarchiveddatasources,knowledgethat wasoncetacitandremotehasnowbecomecodifiedandproximate(JeppesenandMolin2003). Second,theInternetalsofacilitatesconsumersabilitytoapplytheirknowledgeby providingaccesstoavarietyofonlinedesigntools(PrahaladandRamaswamy2004;Thomke andvonHippel2002).Forexample,fansofpopularcomputergamessuchasHalfLifeandThe SimscanaccessInternetbasedprogramsthatenablethemtocreatetheirownmodifications andextensionstothesegames.Similartypesofonlinedesigntoolscanalsobefoundfor websitedevelopment,podcasting,anddigitalaudio/videoproduction.AccordingtovonHippel

(2005,p.123),thesetoolsareoftenasgoodasthoseavailabletoprofessionaldesigners,and researchsuggeststhattheyareinstrumentalinencouragingenduserstoexperimentwithand improvetheirownproducts(PrglandSchreier2006).Asaresult,inmanyfields,anincreasing numberofconsumersareacquiringskillsandknowledgethatnearlyequalthoseofafirms internalNPDteam(LeadbeterandMiller2004;PrahaladandRamaswamy2004). Third,inadditiontoenrichingthecreativecapabilitiesofindividualconsumers,the Internetalsoenhancescollectivecocreationbyconnectingindividualconsumerswithothers (bothconsumersandmanufacturers)inamannerthatallowsthemtoparticipateeffectivelyina cocreationcommunity(MoonandSproul2001;PrahaladandRamaswamy2000;Sawhney, Verona,andPrandelli2005).Thesecommunitiesenableconsumerstolearnfrom(andteach) otherconsumercreators(PrglandSchreier2006)andhelpformcollectiveknowledgeand memorysystemsthattranscendtheinformationandskillsofanysingleindividual(Jeppesen andMolin2003;LeadbeterandMiller2004).Forexample,opensourcecomputersoftwareis typicallydevelopedviaselforganizedcommunitiesofthousandsofcontributorswhoworkina highlycollaborativemannerandplayavarietyofdifferentroles.Thiscollectiveinformation exchangeenablesthesecocreationcommunitiestocreateofferingsthatcanequalorsurpass traditionalfirmbasedNPDactivityintermsofdevelopmentspeed,creativity,andmarketplace success(Shah2006). Insum,growingcustomerempowermentappearstoberapidlypromotingcustomerco

creationbymotivatingconsumerstoplayamoreactiveroleintheNPDprocess,enhancingtheir NPDknowledgeandskills,andconnectingthemwithproactivecommunitiesoflikeminded individuals.Thisemergingtrendpresentsanexcitingopportunityformarketingresearchersand

practitionerstoemploycocreationasapotentialenhancementtothetraditionalNPD paradigm. ATYPOLOGYOFCUSTOMERCOCREATION Inrecentyears,theriseofcocreationhasgarneredconsiderableattentionacrossa broadrangeoffields,includinginformationsystems,economics,management,andmarketing (e.g.,Sharma,Sugumaran,andRajagopalan2002;Etgar2008;EvansandWolf2005;vonHippel andKatz2002;Pittetal.2006;PrahaladandRamaswamy2004;VargoandLusch2004).This researchhasuncoveredavarietyofdifferentformsofcocreation,rangingfromenhanced customersensingtechniquesembeddedwithinlargelyfirmdrivenNPDprocessestoopen sourceinnovationoccurringbeyondtheboundariesofthefirm.Inthissection,weconceptually synthesizethisdiversearrayofcocreationinitiativesintoacoherenttypology. Aspreviouslynoted,agrowingnumberofconsumersareseekingincreasedautonomy anddisplayinghigherlevelsofempowermentovertheNPDprocess.Accordingtothe organizationalcreativityliterature,ahighdegreeofautonomyenhancescreativity(Amabileet al.1996;Velthouse1990;Woodman,Sawyer,andGriffin1993).Forexample,Amabileetal. (1996)findthatmidlevelmanagerswhoenjoyhighlevelsofautonomyareconsiderablymore likelytogeneratecreativeprojectscomparedtomidlevelmanagerswholackautonomy.The positiveeffectofautonomyislargelybelievedtobeduetoitsabilitytocultivatehighlevelsof intrinsicmotivationandpsychologicalownership,whichinturn,facilitatescreativitybymaking thecreativetaskmoreenjoyableandrewarding(Csikszentmihalyi1996;DeciandRyan1985).A releaseofcontrolshouldhaveasimilar(andperhapsevengreater)effectoncustomerco creation,ascustomers(unlikeemployees)typicallyreceivelittleornodirectfinancial 10

compensationfortheircreativeefforts,andthus,mustpossesshighlevelsofintrinsic motivationinordertoengageinandsustainsuchactivity(Seybold2006).Hence,releasing controlofNPDactivitiesshould,theoretically,leadtomorecreativeandsuccessfulofferings. AlthoughafewfirmsarebeginningtorecognizethepotentialbenefitsofreleasingNPD control(Seybold2006),manyarereluctanttoenhancecustomerautonomyduetoconcerns aboutleakingvaluableproprietaryinformation,cedingmanagerialpower,andlosingcontrol overtheirbrands(Pittetal.2006;vonHippel2005).Forexample,Intuitschairman,ScottCook recentlyrevealedthatupperlevelmanagersathisfirmresistedcustomercocreationbecause ofitschallengetolongunquestionedbeliefsabouttheroleofmanagement,thevalueof experts,theneedforcontrolovercustomerexperience,andtheimportanceofquality assurance(Cook2008,p.68).Thistypeofreluctancemaybewellplaced,asthemarketing strategyliteraturesuggeststhattightandsystematicmanagerialcontrols(e.g.,theStageGate model)enhanceNPDsuccess(Cooper1990;SongandParry1997).Consequently,cocreation initiativesdisplayconsiderablevarianceonthedegreetowhichtheyempowercustomersby allowingthemgreaterautonomyovertheNPDprocess,especiallyatitsearlystages(i.e.,fuzzy frontend). TheNPDliteraturesuggeststhattheearlystagesofdevelopinganewproductentails twoessentialactivities:(1)thecontributionofnovelconceptsandideas,and(2)theselectionof whichspecificconceptsandideasshouldbepursued(Kahn2005).Inmanyfirms,bothofthese activitiesarecloselyguardedandtypicallyconductedbyasmallnumberofemployees(i.e.,a NPDteam)(Sethietal.2001;SongandParry1997).Inmostcases,customersarenotactively engagedineitheractivity.Thus,firmscanengageincustomercocreationbyreleasingcontrol

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ofeitherthecontributionsmadetotheNPDprocessand/ortheselectionofthesecontributions. Consequently,thedegreeofcustomerautonomyacrossthesetwoactivitiesformsthe conceptualbasisforourtypology. OurtypologyisdepictedinFigure2.Asshowninthisfigure,wedepictcontributionand selectionastwodistinctNPDactivitiesthatvaryinthedegreetowhichafirmreleasescontrol andempowerstheircustomersasactiveparticipants.Ourdepictionacknowledgesthatthe balancebetweencontrolandempowermentliesalongacontinuumfromlowtohigh. Specifically,wesuggestthatthetypeandformatofNPDcontributionscanrangefrombeing essentiallyfixedbyafirmtowhollyopentocustomerinputandthattheselectionofthese contributionscanbeeitherdirectedbyafirmordirectedbycustomers.Whenarrangedalong twodimensions,theseactivitiesallowustoderivefourdistincttypesofcustomercocreation: (1)Collaborating(2)Tinkering,(3)Codesigning,and(4)Submitting,withsubmittingatone extreme(i.e.,fixedcontributionandfirmleadselection)andcollaboratingattheother(i.e., opencontributionandcustomerleadselection).Althoughnonexhaustive,webelievethatthis typologyclassifiesaconsiderablebodyofcocreationactivity. 3 Intheremainderofthissection, wedefineeachofthesetypesofcocreation,identifytheirkeyfeatures,providerelevant exemplars,anddiscusstheirbenefitsandlimitations(seeTable1forasummary). Collaborating
3

Some scholars also identify lead users as a form of co-creation (e.g., Urban and von Hippel 1988). Our typology does not explicitly consider lead users as a specific form of co-creation unto itself. Instead, we highlight the role that lead users play in some of the types of co-creation identified in our typology. In addition, while a few scholars view mass customization as a form of co-creation (Wind and Rangaswamy 2001), a large number of scholars disagree and feel that mass customization does not sufficiently incorporate customer input into the actual creative process (e.g., Jeppesen and Molin 2004; von Hippel 2005). Thus, our framework does not explicitly consider mass customization as a form of co-creation.

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Wedefinecollaboratingasaprocessinwhichcustomershavethepowertocollectively developandimproveanewproductscorecomponentsandunderlyingstructure(i.e.,source code).AsshowninFigure2,weconceptualizecollaboratingastheformofcocreationthat offerscustomersthegreatestpowertocontributetheirownideasandtoselectthe componentsthatshouldbeincorporatedintoanewproductoffering. Atpresent,thebestexamplesofcollaboratingcanbeseeninopensourcesoftware initiativessuchasLinux,Apache,andFirefox.Incontrasttocommercialsoftware,whichplaces considerablerestrictionsonconsumerusage,opensourcesoftwareempowersuserstomake fundamentalchangestoaprogramsbasicstructure(i.e.,sourcecode).Thisopennessalso influencesthewayintellectualpropertyismanaged,asmanyopensourcelicensesdictatethat programchangesbemadefreelyavailabletootherusers.Inrecentyears,opensource applicationshavegainedwidespreadadoptionandmarketsuccess.Forexample,Apache,an opensourceapplication,dominatestheworldwidemarketforwebserversoftwarewithovera 70%marketshare(Grewaletal.2006).Inadditiontosoftwaredevelopment,collaboratorsare alsomakingimportantandinnovativecontributionsinseveralotherareas,including biotechnology(www.bioforge.net),pharmaceuticalproducts(www.tropicaldisease.org),and medicaldevices(www.designthatmatters.org). Whilemanycollaboratorbasedprojectsaremanagedbynonprofitorganizations,the principlesunderlyingthisformofcocreationmaybeusefullyemployedbyforprofitfirms (EvansandWolf2005;Shah2006).Infact,somesoftwarefirmsreleasethesourcecodefor selectedcommercialproductsintotheopensourcecommunityinhopesofestablishinga dominanttechnologicalplatform.SunMicrosystems,forexample,employedthisstrategywhen

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itmadethesourcecodeforitsNetBeansdevelopmenttoolfreelyavailable.Today,NetBeans hasbeendownloadedmorethaneightmilliontimesandenjoyscontributionsfromover 300,000collaboratorsaroundtheworld(www.netbeans.org).Similarly,IBMusescollaborating asakeypartofitscompetitivestrategybyemployinghundredsofopensourceprogrammers dedicatedtoenhancingtheLinuxoperatingsystem(Harris2004).IBMalsoactivelyencourages opensourcedevelopmentoutsidethefirmbyservingasafoundingmemberoftheOpen InventionNetwork,acompanythatsupportsopensourceinnovationbypurchasingsoftware patentsandmakingthemavailableonaroyaltyfreebasis. Wesuggestthatcollaboratingprovidescustomerswithahighdegreeoflatitudeto contributetheirownnewproductimprovementsandgivesthemsubstantialfreedomtoselect thenewproductimprovementstheyfindmostvaluable.Inthecaseofopensourcesoftware development,theunderlyingofferingisbasedonopenstandardsthatgrantallcustomers(who havetherequisiteskills)theabilitytofullycustomizetheproducttobettersatisfytheirown uniqueneeds(LakhaniandWolf2005;Shah2006).Hence,collaboratinggrantscustomers almostunlimitedfreedomtoaltertheunderlyingproduct,therebytransformingcustomers frompassiveuserstoactivecontributors(Pittetal.2006;EvansandWolf2005;vonKrogh, Spaeth,andLakhani2003).Moreover,collaboratorsareoftenresponsibleforformingtheirown projectteams.Theseteamsexistoutsidethetraditionalboundariesofthefirm,areorganizedin anonhierarchicalfashion,andrelyonacommunitybasedgovernancesystemtoevaluateand selecttheinputsmadebyfellowcollaborators(Grewaletal.2006;LakhaniandWolf2005;von Kroghetal.2003).Hence,thiscustomerledselectionmechanismstandsinstarkcontrastto

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traditionalNPDteamsinwhichtheselectionprocessislargelyconstrainedtoafewselect employees. Althoughsomeindividualsengageincollaboratingforextrinsicrewards(e.g.,enhancing theircareeropportunitiesorgainingstatusorrecognition),mostcollaboratorsappeartobe intrinsicallymotivatedbyastrongphilosophicalbeliefintheimportanceoftheirworkaswellas byadeepenjoymentofcontributingtheirthoughtsandideas(EvansandWolf2005;Hertel, Niedner,andHerrmann2003;Sharmaetal.2002).Duetothishighlevelofintrinsicmotivation, collaboratinghasthepotentialtogeneratehighlevelsofcocreatorinvolvement(Lakhaniand Wolf2005;vonHippel2005).Moreover,recentresearchsuggeststhatcollaboratingcan improveNPDperformancebyaccessingnovelsourcesofcustomerheldknowledgeheldacross adiversesetofindividualcontributors(Grewaletal.2006). Bygeneratingahighdegreeofinvolvementandaccessingdiverseknowledgedomains, collaboratingappearstobeahighlyeffectivemeansofgeneratinginnovativeandsuccessful newproducts.Forexample,theopensourcebasedFirefoxwebbrowsercompetessuccessfully againstMicrosoftsdominantInternetExplorerandiswidelyregardedasthemostinnovative browsercurrentlyavailable(Vogelstein2008).Inadditiontospurringinnovation,collaborating canalsodramaticallylowerthecostsofNPD,byusingunpaidcustomerstoreplacesalaried employees.Moreover,unliketraditionalNPDprojects,whichhavefinitestartandenddates, collaboratingisanongoingprocess.Thisqualityshouldhelpfirmsstayontheleadingedgeby providingamechanismforcontinuousproductimprovementandenhancecustomerwelfareby acceleratingthepaceatwhichnewinnovationscanbecreatedanddistributedtousers(von Hippel2005).

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Whilecollaboratingmayproducesubstantialbenefits,thisformofcocreationalsofaces

anumberofchallenges.Mostimportantly,collaboratingappearstobestsuitedforinformation richapplications(e.g.,softwaredevelopment,medicalresearch,digitalgraphicdesign),and thus,maybethemostchallengingformofcocreationformoretraditionalindustriessuchas packagedgoodsorconsumerdurables.Moreover,inordertodriveinnovationinNPD, collaboratingrequiresthatatleastasmallcadreofcocreatorsobtainahighlevelofskilland knowledge.Thisentryrequirementmaydiscouragelowerskilledandlessknowledgeable customers(whomayneverthelesshaveinterestingideas)fromfullyparticipatinginthe innovationprocess.Moreover,successfulcollaborationrequiresfirmstocedemanagerial authorityoverNPDandloosentheircontrolovertheirintellectualproperty(Cook2008).Hence, collaboratingmaybeespeciallydifficultforfirmswithhighlycentralizedorganizational structuresandlargeinvestmentsinproprietaryassets.Thus,firmsmaybeforcedtostrikea difficultbalancebetweencontrolandopenness.Forexample,Shah(2006)findsthatwhenfirms engagedincollaborationinitiativesrestrictindividualsfreedomtoalterandsharenewproduct improvements,customerswillingnesstocontributedecreasesandtheriskofcustomer defectionsincreases. Tinkering Wedefinetinkeringasaprocessinwhichcustomersmakemodificationstoa commerciallyavailableproductandsomeofthesemodificationsareincorporatedinto subsequentproductreleases. 4 Tinkeringissimilartocollaboratingintermsofallowing

Many examples of lead-user alterations (e.g., the first homemade windsurfers developed by surfing enthusiasts) bear a resemblance to tinkering. Although these modifications may result in creative outcomes, firms rarely if ever assist end users in making these alterations (Franke and Shah 2003; Luthje, Herstatt, and von Hippel 2002). In

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customersarelativelyhigh(butsomewhatlower)degreeofautonomyoverNPDcontributions. However,firmsthatemploytinkeringusuallyretainaconsiderabledegreeofcontroloverthe selectionofthesecontributions. Atpresent,tinkeringismostapparentinthecomputergameindustry,whereuser generatedcontributions(i.e.,modifications)arenotonlywidelytolerated,butactively encouraged.Forexample,manygamemanufacturersinviteuserstomakealterationsranging fromincrementalchangessuchaseditstoacharactersphysicalappearancetomoreradical innovationssuchasthecreationofacompletelynewcomputergame.Inordertoassist tinkerersinmakingthesechanges,severalcomputergamemanufacturersprovidecustomers withfreeorlowcostdesigntoolsthataresimilarorevenidenticaltothoseusedbytheirin housesoftwaredevelopers(MoonandSproul2001;Nieborg2005).Thisstrategyoftenleadsto unexpectedandinnovativecreations,widespreadadoptionbyothergamers,andmarketplace successforthefirmthatproducedthebasegame.Forexample,over90%ofthecontentofthe widelysuccessfulcomputergame,TheSims,isderivedfromtinkererbasedmodifications(called modsintheparlanceofgamers)(LeadbeterandMiller2004). Thecontributionsoftinkerersarenot,however,limitedtocomputergaming.Tinkering isalsoquitecommoninotherinformationbasedproducts,suchascustomizeddigitalmusicand individuallytailoredwebbasedapplications.Forexample,leadingInternetfirmssuchas Google.comandAmazon.comofferopenaccesstotheirapplicationprograminterfaces(APIs). ConsumerscancombinetheseopenAPIswithdatafromthirdpartiesorselfcreatedcontentto generateinnovativehybridcreationsknownasmashups.Oneimpressiveusergenerated
contrast, firms engaged in tinkering actively encourage customers to alter their products, establish forums for tinkerers to share their creations, and specifically design their products to allow for easy customer modification.

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mashupisthewebsiteChicagocrime.org,whichmeldsinformationfromtheGoogleMapsAPI withadatabasefromtheChicagoPoliceDepartment(CPD).Thiscocreatedwebsiteallows userstocreatetheirowncustomizedvisualdisplayofreportedcrimesforanystreet, neighborhood,travelroute,ortimeperiodtheywishtoselect.Thismashupisconsiderably morevisuallyappealingandinteractivethanCPDstraditionaldatabaseandprovidescustomers withenhancedproductfunctionalityandamoreenjoyableonlineexperience.Atpresent, Chicagocrime.orgreceivesover500,000hitspermonth.Googlealsodirectlybenefitsfromthe effortsoftinkererslikethecreatorsofChicagocrime.org,asthechangestheymakeprovidea nearlycontinuousstreamofnewcontentthatenhancesproductfunctionalityandhelps differentiateGoogleMapsfromitscompetitors. Likecollaborating,tinkeringbeginswiththereleaseofabasicbuildingblock(e.g.,base commercialproductanddevelopmenttools).However,incontrasttocollaborators,tinkerersdo nothaveunfetteredaccesstoaproductssourcecode.Thisisanimportantpoint,becausefirm basedcontrolovertheunderlyingproductanditssourcecodelimitsthescopeoftheproduct improvementsthattinkererscandevelop.Inaddition,tinkerersmusttypicallysignenduser licensingagreements(EULAs).Thismeansthatfirmshavethepowertorevoketinkerersrights tousedevelopmenttoolsandcanlimittinkerersabilitytosharetheircreationswithother users.Forexample,customercreatedcontentthatwasoncefreelyavailablemayberestricted afterthefirmlaunchesanewproductreleasethatincludestheseimprovementsinanew commercialoffering.Asaresult,tinkeringallowsafirmtoexertsubstantialcontrolin determiningwhichnewcustomergeneratedproductimprovementsareselectedtoappearin itsofficialnewproductreleases.ThesecharacteristicsaredepictedinFigure2,whichpositions

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tinkeringasexhibitinglessopenness(comparedtocollaborating)intermsofcustomer contributionandaheavilyfirmledselectionapproach. Althoughknowledgeregardingtheoutcomesoftinkeringisataformativestage,it appearsthatthistypeofcocreationmaydeliverseveralbenefitstofirms.Incrowdedmarkets withsimilarofferings,tinkererbasedcocreationmayprovideabasisforproduct differentiation.Forexample,thepowerfuldevelopmenttoolsincludedintheUnreal Tournament2004(UT2004)SpecialEditionDVDdistinguishedthisproductfromsimilar offeringsandhelpedUT2004becomeahighlysuccessfulcomputergame(Nieborg2005).Firms mayalsobenefitfromtheactivitiesoftinkerersintermsofenhancingcustomersatisfactionand extendingtheirmarketreach.Bysupportingandleveragingthecontributionsoftinkerers,firms canassistcustomersinsatisfyingtheirownneedsandsharingtheirsolutionswithother customerswhomayhavesimilarneeds. Firmscanalsobenefitfromtheactionsoftinkerersintermsofenhancingmarket acceptanceoftheirinhouseNPDefforts.Forexample,LucasArtsallowedimagesandmusic fromitsStarWarsfilmstobeincorporatedintothecustomerleadmod,GalacticConquest, eventhoughitwassimultaneouslydevelopingitsownproprietaryStarWarsthemedcomputer game(Nieborg2005).ByvisitingwebsiteswhereGalacticConquestdevoteescongregated, LucasArtswasabletoidentifyandcontactuserswhodownloadedthispopularmodand determinewhichcustomergeneratedcontenttheyfoundmostappealing.Thisapproach providedLucasArtswithbothdirectaccesstocustomercreatedinnovationsaswellasavirtual testmarketforitsfledglingcommercialproduct,whichultimatelyincorporatedmanyofthe modsmostpopularfeatures.

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Althoughtinkeringmayprovideanumberofbenefits,italsoposesseveralchallenges. First,inmost(butcertainlynotall)cases,theactoftinkeringrequiresaconsiderabledegreeof userknowledgeandexpertiseaboutboththeproducttobemodifiedaswellasitsunderlying technology.However,withtheincreasingavailabilityofuserfriendlydevelopmenttools, consumerswhoarenotexpertuserscanreadilyacquirebasictinkeringcapabilitieswith moderatelearningcosts. 5 Tinkeringalsopresentstheriskthathighquality(andfreelyavailable) modsmaydissuadecustomersfrompurchasingafirmsfuturenewreleases.Thus,firmsthat activelyencouragetinkeringmayfindthattheircustomershavebecomeaformidablesourceof competition(Cook2008).Inthissense,tinkeringcanraisetheNPDbar,asafirmmustensure thatnewreleasessurpassboththefunctionalityofitsexistingproductswhilealso demonstratingsuperiorityoverversionsthathavebeencreatedandmadefreelyavailableby tinkerers. Itisalsopossiblethattheactionsoftinkererscanhaveanegativeimpactonafirms brandequity.Forexample,sometinkerersmaymodifycomputergamesinwaysthatare especiallyviolentand/orsexuallyexplicit.Imagine,forinstance,thecaseofacustomer transformingaWorldWarIIcombatgameintoamodsetinanAmericanhighschool,inwhich playersamasspointsbygunningdowntheirfellowstudentsandteachers.Mostconsumers wouldbeappalledbysuchagameandthesurroundingmediaattentionwouldundoubtedly reflectverynegativelyonthefirmthatcreatedthebaseproduct.Thus,thelevelofcontribution autonomyprovidedbytinkeringmaybeadoubleedgedsword,asfirmsthatrelyheavilyon tinkeringmaybeparticularlyvulnerabletothenegativeactionsofroguecocreators.
It is estimated that approximately one-third of all computer games offer these types of toolkits to their users (Jepperson and Molin 2003).
5

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Codesigning Wedefinecodesigningasaprocessinwhicharelativelysmallgroupofcustomers providesafirmwithmostofitsnewproductcontentordesigns,whilealargergroupof customershelpsselectwhichcontentordesignsshouldbeadoptedbythefirm.Asshownin Figure2,codesigningischaracterizedbyarelativelyfixedcontributionapproachbutahigh degreeofcustomerautonomyovertheselectionofthesecontributions. Oneofthebestexamplesofcodesigningistheonlineclothingmanufacturer Threadless.com.ThisfirmactivelysolicitsoriginalTshirtdesignsfromcurrentandpotential customersandtheninvitesitsextensivenetworkofonlinecustomerstoevaluateandselecta shortlistofprospectivenewproducts(Chafkin2008).Similarly,boththeonlinenewsservice Digg.com(www.digg.com)andthecabletelevisionchannelCurrentTV(www.current.tv)acquire muchoftheircontentdirectlyfromtheirusers.Incontrasttothestandardapproachusedby commercialnewsorganizations,Digg.comeschewshierarchicaleditorialcontrolandinstead allowsitscommunityofover300,000registeredreviewerstovoteonthestoriestheydeem worthyfordisplay.Likewise,CurrentTVprovidesamateurfilmmakerswiththeopportunityto uploadtheirhomemadedocumentariesandgivesviewersthechancetoselecttheclipsthatair onthenetwork. 6 Thiscocreationapproachhasbeenutilizedacrossawidevarietyofproduct categoriesincludingsportinggoods,householdproducts,homeappliances,andconsumer packagedgoods(OgawaandPillar2006).Forexample,JonesSoda(www.jonessoda.com)uses codesigningtodifferentiateitsproductsbydisplayingcustomersubmittedphotographs(which areratedonlinebyitsusers)onitsproductlabels.
6

Current TV was founded in 2005 by former Vice President Al Gore. Its tagline (The TV network created by the people who watch it) nicely reflects its co-creation ethos.

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Thecodesigningprocessbeginswhencustomerscreatenewdesignsandsubmittheir originalcontenttoacentralhub(e.g.,companywebsite).Next,anetworkofinterested customersevaluatesthesesubmissionsandselects(typicallyviaonlinevoting)thosetheyfind mostappealing.Basedontheseevaluations,thefirmthendecideswhichproductsitwill produceandmarket. Incontrasttotinkering,wherecocreatorshaveconsiderablelatitudeintermsofaltering thebaseproduct,firmsengagedincodesigningusuallydictatethepreciseformatthatco createdcontributionsmustfollow.Forexample,contributionstoThreadlessmustbesubmitted usingacompanyissuedtemplate,cancontainonlylimitedtext,andcanchoosefromonlyeight sanctionedcolors.Duetotheseconstraints,codesigningcontributionsareconsiderablymore fixedandconstrainedcomparedtoeithercollaboratingortinkering.Incontrast,codesigning providescustomersconsiderableautonomyintermsoftheselectionprocess.Forexample,the contributionsthatThreadlessselectstoprintasnewTshirtdesignsarealmostexclusively determinedbyratingsprovidedbyitscustomers.However,attimes,Threadlessinvites particulardesignerstosubmitdesigns,andthus,bypassesitstypicalselectionprocess.Thus,it appearsthatcodesigningentailsalevelofcustomerautonomyovercontentselectionthatfalls somewherebetweencollaboratingandtinkering. Fromtheperspectiveofafirm,codesigningappearstoofferseveraladvantages.Most importantly,thisapproachshoulddramaticallyreduceafirmscostofdevelopingitsown originaldesignsorcreativecontent,asthisfunctionislargelyoutsourcedtocustomers.In addition,becausecustomersactivelyassistafirmbybothcontributingnewcontentand selectingthecontentthatshouldappearinfutureproductreleases,firmsshouldreducetheir

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cycletimesandlaunchnewproductsmorequicklycomparedtotraditionalNPDprocesses.For example,ThreadlesstypicallyintroducesseveralnewTshirtseachweek.Moreover,incontrast tocollaboratingandtinkering,codesigningisanapproachinwhichbothhighlyskilled(i.e., designcontributors)andlowerskilled(i.e.,designselectors)customerscanfreelyparticipate. Thus,byprovidingitsbroadercustomerbasewithastrongvoiceinNPDselectionandasenseof collectiveidentity,tinkeringshouldallowafirmtoattainhigherlevelsofcustomersatisfaction andcommitment(Herteletal.2003).Inaddition,bysubjectingdesignstoprelaunchevaluation byalargenetworkofcustomers,codesigningshouldreducetheriskofproductfailure,avoid drasticpricemarkdowns,andminimizeinventoryholdingcosts(OgawaandPiller2006). Althoughthebenefitsofcodesigningareintriguing,therearealsosubstantialchallenges inimplementingthisapproach.First,firmsmayencounterdifficultyintermsofattractinga criticalmassofcocreatorslargeenoughtoensurethattheyobtainasufficientamountofhigh qualitycontent(Cook2008).Thischallengemaybeespeciallyacuteforfirmswhosecompetitors havealreadyestablishedcodesigninginitiatives.Inaddition,althoughcustomersmaybe initiallyintriguedwiththisapproach,thenoveltyofbeingabletosubmitandvoteondesigns mayquicklywearoff.Hence,afirmmayfinditspoolofevaluatorsshrinkingovertime. Moreover,becausethisapproachisrelativelyeasytoimitate,firmsthatbasetheirvalue propositionprimarilyoncodesigningmayenduplackingadistinctivecorecompetenceas competitorscopytheirapproaches.Tocombatthesechallenges,firmswhoemploycodesigning shouldestablishstronglinesofmutualcommunicationwiththeircodesignersanddevote substantialefforttowardsfosteringacollectivesenseofcommunity(Cook2008).

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Submitting Wedefinesubmittingasaprocessinwhichcustomersdirectlycommunicateideasfor newproductofferingstoafirm.Submittingisdifferentiatedfromtraditionalformsofcustomer inquiry(e.g.,focusgroups,satisfactionsurveys,trackingstudies,etc.)byboththedegreeof customereffortrequiredandbythenatureoftheinputthatcustomersprovidetothefirm.In contrasttomosttraditionalformsofcustomerinquiry,whichsimplyaskcustomerstoprovide responsestoasetofprearrangedqueries,submittingrequirescustomerstoexpend considerableenergydeveloping(eitherinisolationoraspartofateam)tangibleideasfornew productofferings.Inaddition,whiletraditionalinquiryapproachestypicallyinvolvecustomers solelyinconceptideationandevaluation,submittingoftenrequirescustomerstotranslate generalideasintowelldefinedprocesses,detailedgraphicdepictions,orworkingnewproduct prototypes.AsshowninFigure2,weconceptualizesubmittingastheformofcocreationthatis characterizedbytheleastamountofcustomerautonomyintermsofbothNPDcontribution andselection.Althoughsubmittingresemblescodesigning(i.e.,bothtypesofcocreationallow customerstodirectlycontributetheirownnovelideasandsolutions),itdiffersfromco designingbecauseinsubmitting,thefirmretainsfullcontrolovertheNPDselectionprocess. Firmsthatemploysubmittingbasedcocreationactivelysolicitinputfromeithercurrent orpotentialcustomers.Thissolicitationoften(butnotalways)occursintheformofonline invitationsforcustomergeneratedcontent.Forexample,theSwedishappliancemanufacturer, ElectroluxsponsorsanannualsubmittingcompetitioncalledDesignlabinwhichparticipants areaskedtosubmittechnicaldesignsandproductprototypesforcuttingedgehousehold appliances.Thisinitiativeattractsthousandsofentriesacrossdozensofcountries.Fromthese,

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Electoluxselectsasmallsetoffinalistsandinvitesthemtoasixday,companysponsored retreat,wheretheyparticipateinworkshops,presenttheirinventionsandcompeteforcash prizes(www.electrolux.com/designlab).TheItalianmotorcyclemanufacturer,DucatiMotors employedasimilarapproachviatheirrecentDesignYourDreamDucaticontestthat encouragedDucatienthusiaststosubmitinnovativeartisticandtechnicalideastoanexecutive team,whichthenselectedthewinningcontributions(Sawhneyetal.2005). Inadditiontothesefirmsponsoredinitiatives,submittingcanalsobebrokeredbythird parties.Forexample,InnoCentive(aspinoffofEliLilly)isabrokeringagentthatlinksfirms seekingsolutionstocomplexscientificproblemstoanetworkofthousandsofindividual scientists.FirmsanonymouslyposttheirNPDproblemsontheInnoCentivewebsiteandhighly trainedspecialistsfromaroundtheworldcansubmitsolutions.SuccessfulInnoCentive submittersreceivefinancialcompensationthatcantotaltensorevenhundredsofthousandsof dollarsandtheircontributionshaveledtoinnovativebreakthroughsforavarietyofmajor corporationsincludingP&G,Boeing,andDuPont. Asdescribedintheaboveexamples,submittingbeginswhencustomerscontribute detailednewproductideas,solutions,orprototypes.Basedontheseinputs,afirmthendecides whichconceptstofurtherdevelop,test,andeventuallylaunch.Comparedtothethreeprior typesofcocreation,submittingrepresentsthelowestlevelofcustomerempowerment(asthe firmdictatestheformatthatcontributionsmustfollowandalsohasfullpowertoselectwhich customercontributionstoadopt).Inaddition,manyfirmsseektoretaincontrolbyinsistingthat submittersreleasetheirlegalrightstotheproductimprovementstheyhelpdevelop(Wells 2005).Comparedtomoretraditionalformsofcustomerinput,however,submittingprovides

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consumerswithamuchstrongervoiceintheNPDprocessandallowsthemtosharetheir knowledgeandcreativeskillsdirectlywithfirmbasedNPDteams. Firmsmayderiveseveralbenefitsfromsubmitting.First,casestudyevidencefromlarge firmssuchasIntuitandProcterandGamblesuggeststhatthisapproachcanresultina significantreductioninthetimerequiredtodevelopanewproductandanincreaseinits degreeofinnovativeness(Cook2008;HustonandSakkab2006).Also,becausesubmittingoffers customerbenefits(i.e.,enhancedselfimageandincreasedsocialstatus)largelyabsentfrom moretraditionalcustomerinputmethods,thisformofcocreationshouldallowfirmstoengage inricherdialogueswithcustomerswhowouldnormallybeunresponsivetomoretraditional researchinquiries.Thus,thisengagementshouldresultinimprovedmarketsensingcapabilities andenhancedcustomerrelationships. Likeothercocreationapproaches,submittingalsoentailsanumberofchallenges.

Comparedtothethreeotherformsofcocreationinourframework,submittingmaybeleast likelytoresultintrulyinnovativeproductsbecauseofitsminimallevelofcustomer empowerment.Duetotheseconditions,submittersmayfeellessconnectedwithboththefirm andwithothercustomerscomparedtocollaborators,tinkerers,orcodesigners,andmaylack sufficientintrinsicmotivationtoactivelycooperatewiththefirmonanongoingbasis. Consequently,firmsinterestedinusingthisapproachmayexperiencedifficultyinretaining activecustomerparticipation.Hence,itisimportantthatfirmsdulyrecognizethecontributions ofsubmitters(e.g.,financialrewards,wordsofpraise,explicitrecognition).Withoutthistypeof reciprocity,itispossiblethatsubmittersmayfeelexploitedandcometoviewsubmittingasa

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onesidedexchange(Fournier,Dobscha,andMick1998)ratherthanasamutuallysatisfying bidirectionalrelationship(Oliver2006). Perhapsmoreimportantly,firmsseekingtoadoptthisapproachmayfinditquite

difficulttocontinuouslyattractnewcontributorstotheirsubmittinginitiatives.Becauseeach customermayonlyhavealimitednumberofnewproductsolutionstooffer,attractingnew contributorsmaybeevenmoreimportantthanretainingestablishedparticipants.Moreover, thesuccessfulretentionofexistingcontributorsshouldalsoenhanceafirmsabilitytoidentify andrecruitnewcontributorsviapositivewordofmouth(Mathwick,Wiertz,andDeRuyter 2007). FUTURERESEARCHAGENDA Asseenintheprecedingtypology,customercocreationrepresentsadramatic

departurefromtraditionalNPDpracticebothintermsofhowcustomersareviewedaswellas therolestheyplay.Inbrief,firmswhoabidebythetraditionalparadigmseektosolveNPDs informationasymmetryproblembyfirstresearchingconsumerpreferencesandthenusingthis informationtodevelopnewproductsinhouse.Incontrast,firmsfollowingtheemergingco creationparadigmseektosolvethisproblembyactivelysolicitingconsumercontributionsand incorporatingselectedcontributionsintotheirnewproductofferings.Asevidencedbyour manyexamples,aparadigmshiftiscurrentlyunderway.Whilethefullramificationsofthis transitionformarketingthoughtandpracticearenotyetclear,theyarelikelytobequite substantial.InthewordsofWindandRangaswamy(2001,p.20),theemergenceofcustomer cocreationhasthepotentialtoaltereverythingwetakeforgrantedinmarketing.Thisfinal section,weoutlineanagendaforfutureresearchinthisdomain.Thisagendafocusesonthe 27

impactofcustomercocreationonsixdistinctdomainsofinquiry:(1)organizationalculture,(2) organizationallearning,(3)organizationaldynamics,(4)resourcesandcapabilities,(5)customer valuation,and(6)brandcommunities. 1.OrganizationalCulture.Becausecocreationisfundamentallydifferentthantraditional NPDpractice,successfulimplementationofthisnewparadigmwilllikelyrequiresignificant changesinorganizationalculture(Sawhneyetal.2005;VargoandLusch2004;vonHippel2005). AccordingtoThomkeandvonHippel(2002,p.78),Turningcustomersintoinnovatorsrequires nolessthanaradicalchangeinmanagementmindset.Specifically,cocreationshighly interactivenaturemayrequirefirmstoadoptanopencultureinwhichtheirgoals,activities, andprocessesarehighlytransparentandcollaborative(OgawaandPiller2006;Prahaladand Ramaswamy2004).Inparticular,firmsseekingtoharnessthebenefitsofcocreationmayfindit necessarytorelaxcontrolovertheirintellectualproperty.Forexample,in2005,IBMtookthe radicalstepofdeclaringthatitwouldnotenforcehundredsofitssoftwarepatentsinaneffort tostimulateopensourceinnovationandincreasethemarketsizeforitsLinuxbasedservers (Lohr2005).Thistypeofopennessshouldencouragecocreationactivityandenablecustomers tocontributeinnovativesolutionstohelpafirmmeetitsgoalsandobjectives.However,many firmswithtraditionalorganizationalculturesarequitereluctanttorelaxcontrolovertheir intellectualproperty(Cook2008;vonHippel2005).Thesefirmsmaybewillingtoentreat customercontributionbutwilllikelyseektoretaincontrolovertheselectionofthese contributions.Thus,thedegreetowhichthebenefits(e.g.,increasednewproductcreativity, decreasedtimetomarket,andreduceddevelopmentcosts)ofcustomercocreationdepends

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uponreleasingorganizationalcontrolovereachofthesetwokeyprocesses(i.e.,contribution andselection)isanimportantissueforfutureresearch. Alongwithincreasedopenness,firmsseekingtoreapthebenefitsofcustomerco creationwillalsolikelyneedtoadoptamoreemergentstrategicperspective(Mintzberg1994). AccordingtoJeppesenandMolin(2003,p.377),undercocreation,Themanagementissueis nottoenforceideas,buttomakeroomforthemtoemergeandchannelthemintoan innovation.Thisdiminishedfocusonplanning,forecasting,andcontrolrunsdirectlycounterto thewellplannedlogicofthetraditionalNPDparadigm,andthus,islikelytomeetwith considerableresistancefrommanagerswhostronglybelieveinamoretraditionalapproach. Indeed,theirresistancemaybewellfounded,asthesubstitutionofimprovisationforplanning canbepotentiallyharmfultoNPDsuccess(MoormanandMiner1998).Ofthefourtypesofco creationidentifiedinourtypology,codesigningappearstostrikethebestbalancebetween improvisationandplanning,asitencouragesactivecustomerparticipationwithindefined constraints.Futureresearchisneededtodeterminetheeffectivenessofplannedformsofco creationsuchascodesigningandsubmittingversusmoreemergentformsofcocreationsuch ascollaboratingandtinkering. 2.OrganizationalLearning.Researchonthedriversofinnovationsuccesshasalong traditioninmarketingscholarship(seeHenardandSzymanski2001andHauseretal.2006for reviews).Historically,thebulkofthisresearchhasfocusedoninternal(i.e.,firmbased)drivers ofNPDsuccess,suchasafirmsdegreeofmarketingandtechnologicalskills,levelofmarket orientation,andamountofcrossfunctionalintegration.Inrecentyears,thisresearchhasbeen supplementedbyagrowingnumberofstudiesthatexaminedriversofsuccessfulinnovation

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beyondtheimmediatefirm,suchastheinfluenceofacquiredentitiesoralliancepartners(e.g., Chandy,Prabhu,andEllis2005;RindfleischandMoorman2001;SividasandDwyer2000).This researchbroadlysuggeststhatthesuccessofthesecollaborativeNPDeffortsstronglydepends uponthedegreetowhichafirmisabletoacquire,assimilate,andapplyinformationandknow howfromitspartners.Insum,collaborativeNPDhasbeenlargelyviewedfromtheperspective ofafirmsabilitytolearn. Customercocreationaddsanewdimensiontothisemergingliteraturebysuggesting thatNPDsuccessstronglydependsnotonlyonafirmsabilitytolearnbutalsoonitsabilityto teach.Specifically,successfulcocreationrestsheavilyuponthedegreetowhichafirmisableto enhanceitscustomersNPDrelatedknowledgeandskillsviasuchactionsasallowingaccessto itssourcecode,providingtoolkitsthatallowcustomerstodirectlyaltertheirproductsin creativeways,andengagingindirect,twowaycommunicationwithcocreators.Thiseducation imperativeshouldbemostimportantforcollaboratingandtinkering,asthesecocreation approachestypicallyrequireahighleveloftechnicalskill.However,cocreationeducationmay alsobevaluableinenhancingthequalityofthecontributionsofcustomersengagedinco designingandsubmitting.Theimportanceofcustomereducationhasreceivedsomeattention withintheemergingliteratureoncustomertoolkits(e.g.,FrankeandPiller2004;Prgland Schreier2006;ThomkeandvonHippel2002).However,severalintriguingquestionsremain unanswered.Forexample,whatistherelativevalueofeducatingexistingcustomersversus recruitingnewcustomerswhoalreadypossesscocreatingskills?Likewise,whattypesof customereducationeffortsaremostvaluableforeachofthefourtypesofcustomercocreation identifiedinourtypology?

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3.OrganizationalDynamics.Thesenseofempowermentthatcocreatorsenjoy, combinedwiththeincreasedknowledgeandskillstheyarelikelytoacquire,maygivecustomers astrongsenseofpsychologicalownershipovertheircontributions(Pittetal.2006;Prahalad andRamaswamy2000).Inturn,thissenseofownershipmaycomplicateafirmsinternalNPD plansandactivities.Becausecocreationshiftstasksthatwereformerlyconductedbymanagers downtocustomers,itmayblurtheboundarybetweenthesetwogroups(EvansandWolf2005; PrahaladandRamaswamy2000).Thus,customersmaybegintoseethemselvesnotonlyas consumersbutalsoasproducers.Researchonorganizationaldynamics(i.e.,stakeholdertheory) suggeststhatfirmsthatareheavilyengagedincustomercocreationcouldfinditmoredifficult toquicklyaltertheirproductlinesorradicallychangetheirNPDprocessesinordertorespond tocompetitivepressures(DonaldsonandPreston1995).Inessence,cocreationinitiativescould createanewclassoforganizationalstakeholders,manyofwhommayvigorouslyopposeNPD relatedchangesthattheydisagreewith. Thesechallengesarelikelytobeespeciallypronouncedforthoseformsofcocreation thatinvolveahighdegreeofcustomerledcontributionactivity(i.e.,tinkeringand collaborating).However,anecdotalevidencesuggeststheycanalsooccurincodesigning settings.Forexample,Threadlessiscurrentlyfacingasenseofownershipstruggle,asseveral membersofitsonlinecommunityareupsetaboutitsselectionproceduresandtherecent openingofabrickandmortarstoreinChicago(Chafkin2008).Futureresearchisneededto shedlightonboththepositiveandnegativeimpactthatempoweredcocreatorstakeholders haveuponNPDperformance.Inparticular,theabilityofthesestakeholderstoeffectively

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respondtomarketchallengessuchastheentryofanewcompetitorortheemergenceofa discontinuoustechnologicalisatopicripeforempiricalinvestigation. 4.ResourcesandCapabilities.Theabilityofafirmtoachieveandsustainacompetitive advantageiswidelybelievedtorestuponitsresourcesandcapabilitiessuchassensingmarket trends,developingstrongcustomerrelationships,andcreatinginnovativenewproducts(Day 1994;HuntandMorgan1995;MoormanandSlotegraaf1999).Theseresourcesandcapabilities havebeenbroadlyviewedasassetsthatareinternaltoafirmandresideinitsorganizational culture,operatingprocedures,andhumanresources.Forexample,Day(1994,p.38)suggests that,Capabilitiesaredeeplyembodiedwithinthefabricoftheorganization. Theemergenceofcustomercocreationsuggeststhatthisstrictfocusoninternalbased resourcesandcapabilitiesignoresanimportantsourceofpotentialcompetitiveadvantage:the knowledgeandskillsembodiedinafirmscustomerbase(JeppesenandMolin2003;Prahalad andRamaswamy2000;vonHippel2005).AssuggestedbyPrahaladandRamaswamy(2000,p. 80)whenfirmsadoptcocreation,consumersbecomeanewsourceofcompetenceforthe corporation.Inessence,firmsthatsucceedinestablishingcocreationcangainaccesstoarich externalsourceofNPDrelatedresourcesandcapabilitiesthatcansupplementtheirinternal valuecreationability.Thus,theemergenceofcustomercocreationsuggeststhatmarketing scholarsshouldviewafirmsresourcesandcapabilitiesfromabroadernetworkbased(i.e., embodied)perspectiveratherthanfocusingnarrowlyonitsinternal(i.e.,embedded)assets.As withtheirinternalcounterparts,thevalueofcocreationbasedcapabilitiesislikelytodepend uponthedegreetowhichtheyaredistinctiveandnonimitable.Thesequalitiesmaybe especiallydifficulttoattainviaasharingapproachbecausethisformofcocreationappearsto

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havefewbarrierstoentry.Futureresearchcouldmakeanimportantcontributionbyidentifying thedegreetowhichourfourtypesofcocreationpossessthesedesiredqualities. 5.CustomerValuation.Understandingandassessingcustomervalueiscurrentlyan extremelyimportanttopicofmarketingscholarship(MarketingScienceInstitute2008).Todate, researchonthistopichasprimarilyfocusedonidentifyingthecharacteristicsofprofitable customersbasedlargelyupontheirpurchasebehaviorovertime(e.g.,Gupta,Lehmann,and Stuart2004;ReinartzandKumar2003;Rust,Zeithaml,andLemon2001).Thisfocusreflects marketingstraditionalbeliefthatthetransactionitselfistheprimarymechanismofvalue exchange(VargoandLusch2004).Accordingtothisbelief,firmsareresponsibleforcreating valueandcustomersrewardthisvaluebypurchasingtheirproducts(Srivastava,Shervani,and Fahey1998).However,thisperspectiveseemsinconsistentwiththelogicofcocreation,which suggeststhatcustomersarenotonlytargetsofafirmsvalueproposition,butalsoactivevalue creatorsintheirownright(PrahaladandRamaswamy2004;VargoandLusch2004).Insum,it seemsasiftheboundarybetweenproducersandconsumersisclearlyshifting. Theemergenceofcustomercocreationisaprimeexampleoftheseshiftingboundaries, asconsumersprovidefirmswithvaluebothintheformoftheirpurchaseactivityaswellastheir productionactivity.Thus,itispossiblethatacustomer,whoisaninfrequentandlowvolume purchaser,butahighlyactivecontributororselectorofnewproductideas,maybeoneofthe firmsmostvaluableassets.Unfortunately,theworthofthiscustomerwouldgounrecognized byexistingcustomervaluationperspectives,whichdonotaccountfortheproductiveaspectsof customerbehavior.Hence,theemergenceofcustomercocreationcallsforupdatedand enhancedcustomervaluemetricsthatadoptabroaderviewofconsumersandthespectrumof

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valuetheybringtothefirm.Forexample,newmetricsthatfocusonassessingthevalueofa collaboratorscontributionsusingmarketbasedcriteriasuchasthenumberoftimestheir contributionshavebeendownloaded,viewed,orfurthermodifiedbyfellowcollaborators wouldbeanimportantrefinementoftheexistingcustomervaluationframeworks. 6.BrandCommunities.Historically,marketingscholarshavefocusedonconsumer behaviorfromtheperspectiveoftheindividual.Inrecentyears,however,researchershave highlightedthegrowingphenomenonofcollectiveconsumerbehaviorintheformofbrand communities(McAlexanderetal.2001;MuizandOGuinn2001;MuizandSchau2005).These communitiesbringtogether(eitherphysicallyorvirtually)individualswhoshareacommon affinityforaparticularbrandsuchasApplecomputers,Saabautomobiles,orHarleyDavidson motorcycles.Thusfar,thisliteraturehasemphasizedthepotentialofthesecommunitiesas vehiclesforforgingdeepandenduringcustomerbrandrelationships.However,these communitiesmayalsoserveasespeciallyfertilegroundforcocreationactivity.Recentresearch byMuizandSchau(2005)touchesonthispotentialbyobservingthatmembersofthe abandonedAppleNewtoncommunitydevelopapplicationsforthisproductandactivelyshare theircreationswithfellowmembers.Indeed,thebasicfeaturesofbrandcommunities(e.g.,a collectionofdedicatedandknowledgeableindividualswhoexchangeinformationabouttheir beliefs,interests,andinsights)shouldprovideameansofincubatingcustomercocreation. Moreover,becausecustomersmayengageincocreationasbothcontributorsaswellas selectors,communitybasedappealsmayresonatewithonekindofcocreatorbutnotthe other.InthecaseofThreadless,forexample,customerswhoregularlyengageinselectingt shirtdesignsareperhapsmorelikelytofeelagreatersenseofcommunitythanthosewho

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contributethesedesigns,becausethislattergroupmaybemoreselfdirectedandextrinsically motivatedbyThreadless$2,000cashrewardandthechancetogarnergreaterprofessional exposure.Thus,theroleofbrandcommunitiesasacatalystforcocreation(andviceversa)isan intriguingtopicforfutureresearch. CONCLUSION Intodayshighlycompetitivemarketplace,agrowingnumberoffirmsareplacing

increasedrelianceuponinnovationasameansofachievinggrowthandprofitability. Unfortunately,mostnewproductsfailbecausetheydonotadequatelysatisfycustomerwants orneeds.Thus,anincreasingnumberoffirmsareactivelyinvolvingcustomersinNPDasa meansofminimizingmarketfailureandenhancingfinancialperformance.Aswehaveshown, thiscustomerinvolvementcantakeanumberofdistinctforms.Ourtypologyclassifiesfour emergingformsofcocreationdelineatedbythedegreetowhichcustomersareempoweredto contributeandselectnewproductideas.Althougheachofthesecocreationtypeshasitsown potentialbenefitsandchallenges,theyalllieoutsidetheboundaryofNPDstraditional worldview,andhence,arecontributingtotheemergenceofanexcitingnewparadigm.Millions ofempoweredcustomersaroundtheworldhaveembracedthecocreationethos.Thus,firms shouldlookbeyondtheconfinesoftheirtraditionalNPDapproachesanddevelopeffective strategiesforidentifyingandharnessingtheideas,skillsandtalentsoftheircustomers.We hopethistypologyandresearchagendafostersgreaterappreciationforandinvestigationinto thisimportantphenomenon.

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TABLE1 CHARACTERISTICSOFCOCREATIONTYPES
Typeof Selection CoCreation Activity Collaborating Customer Led Contribution Activity Open Key Payoffs Reduced developmentcosts Continuous product improvement Enhanced differentiation Virtualtestmarkets fornewproducts Reduced developmentcosts Decreasedriskof productfailure Shortenedproduct development cycles Increasedaccessto novelcustomer ideas Key Challenges Protectingintellectual property Attractingacritical massofcollaborators Policingthecontentof roguecocreators Creatingnew competitors Attractingacritical massofdesigners Defendingagainstnew entrants Acquiring knowledgeablenew cocreators Retainingand motivatingexistingco creators Prototypical Application Opensource software Key Studies Grewaletal.(2006) LakhaniandWolf(2005) vonKroghetal.(2003)

Tinkering

FirmLed

Open

Modified computer games Onlinevoting oncustomer generated contentand designs Company sponsored design competitions

JeppesenandMolin(2003) Nieborg(2005) PrglandSchreier(2006)

Codesigning

Customer Led

Fixed

OgawaandPillar(2006) Cook(2008)

Submitting

FirmLed

Fixed

Flleretal.(2004) Sawhneyetal.(2005)

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FIGURE1 GROWTHOFTHEOPENSOURCESOFTWAREMOVEMENT

1800000 Number of Registered Users 1600000 1400000 1200000 1000000 800000 600000 400000 200000 0 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08
Source:SourceForge.net 44

FIGURE2 FOURTYPESOFCUSTOMERCOCREATION

Collaborating

Customerlead
Co-designing

SELECTION ACTIVITY

Tinkering

Firmlead

Co-Designing Co-Designing
Submitting

FixedOpen CONTRIBUTION ACTIVITY

45

46