1. Co-Creation for Innovation A Spectrum of Consumer Involvement for Innovation Laura Hufschmidt Center for Brand and Product Management Wisconsin School of Business October 24, 2008

2. Consumers’ Expectations are Changing. Across all industries, Consumers expectations are changing… they expect to be a part of the Innovation process Yet, for the most part, their only option is limited personalization of existing goods Consumers don’t just buy M&Ms, they customize them with messages and colors Consumers don’t just buy a teddy bear, they Build-A-Bear Consumers don’t just buy shoes, they personalize them

3. Companies Need To Change Their Approach Towards Innovation. Current Practice: Innovation Validation: Asking consumers to provide feedback on a select group of options that the company developed Ex: Asking a focus group to rank concepts A Philosophical Shift & A Necessary Build: Uninhibited Innovation: Asking consumers to tell us what they want Ex: Asking consumers to start with a blank piece of paper Innovation Validation Uninhibited Innovation

4. Communities Vary In Their Level Of Consumer Involvement In Innovation. ** Note: Website grouping and criteria analysis based on intern’s research and findings. Website Titles developed by intern LowHigh Launch Pad Suggestion Box Source of Empowerment Repository Vested Panel Spectrum of Community Involvement for Innovation Repository – Brand provides information for consumers to obtain. Brand does not openly solicit feedback. Iams provides consumers with information on products, nutrition, and pet care. Suggestion Box – Brand provides opportunity for consumers to submit ideas. Consumers receive little follow up. Mystarbucksidea.com allows consumers to post, vote, and discuss ideas. Source of Empowerment – Consumers act as an extension (and on behalf ) of the brand to educate / influence other consumers. Virgin Mobile leverages its Insiders group to educate other consumers on the brand, promote local venues, and provide feedback back to the brand. Vested Panel – A consistent group of consumers primarily used as a standing focus group to contribute and react to ideas. Kraft’s online community provided insights on product development, advertising, and in-store execution for the South Beach Diet product line. Launch Pad – Consumers participate in a major function of the brand (design, advertising). The brand would not exist without consumers and consumers’ ideas would not come to fruition without the brand. Threadless empowers consumers to upload and vote for their favorite t-shirt designs. Winning designs are mass produced and sold.

5. Communication Flow Brand’s Relationship With Consumer Consumer Activities Level Of Community Involvement In Innovation Depends On 3 Criteria. Increasing Consumer Involvement in Innovation 2 Way ALL Way1 Way Partner ListenTalkRely Advocate Give OpinionGather Info / Play Co-Create Criteria is fluid and works together to increase Community Involvement in Innovation

6. Communities Can Be Strategically Incorporated Into The Entire Innovation Process. Brainstorm Ideas Develop Product. Commercialize Launch Evaluate and Incorporate Feedback 3 Approaches to Leverage Communities: A - Brainstorm Ideas Only B - Develop Product & Commercialize; Launch; Evaluate and Incorporate Feedback C - Entire Innovation Process ** Depends where you are in the Innovation process and how you set up community

7. There Are Challenges With Involving Consumer Communities In Innovation. Easier to Implement: Companies with limited product scope, which does not require complex and differientated capital investment. Threadless.com only manufactures t-shirts Not for Everyone: Some industries will struggle to implement Uninhibited Innovation, while still managing consumer expectations. The food industry requires different manufacturing lines to develop different product offerings. Because capital investment is high, a company may not be willing to invest in new machinery for potentially small batch sizes. In order to manage consumer expectations, food manufactures would need to limit the scope of Uninhibited Innovation to things that would require little additional investment. This can ultimately lead the manufacture to invite consumers to develop the next line of energy drink, but put so many constraints on it, that they essentially only allow the consumer to come up with the next flavor.