Customer Reviews

Outside Innovation: How Your Customers Will Co-Design Your Company's Future

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Excellent Primer for the Core Competency of the 21st Century

Outside Innovation is an in-the-trenches manual for evolving your company to embrace the innovation imperative.

To thrive in the Knowledge Economy, companies will have to learn how to innovate at warp speed. Ultra low costs and exceptional quality feature sets are merely expected, and they no longer differentiate. Conventional wisdom holds that "innovation" cycles reappear every five years, when companies have exhausted the then-current cost-cutting approaches and need to focus on driving the top line.

However, the Knowledge Economy doesn't call for your father's innovation. The 21st century kind will require that companies turn themselves inside-out. Winners will learn to engage and catalyze their customers' creativity. As author Patty Seybold aptly puts it, "Companies with the smartest customers win."

BOOK OVERVIEW

This book is inspiring, insightful and infectious! Patty Seybold has been a guiding light who burst on the scene in a big way with customers.com in the late 90s. Her insight and commitment cut wide and deep, and you'll be hard pressed to find a book that delivers on customer-driven innovation as well as Outside Innovation.

In the hope that an in-depth look will compel you to buy the book, I've provided the basic outline of each chapter as well as key takeaways.

CHAPTER ONE: How to Harness Customer Innovation

Gives an overview of what outside (customer-led) innovation is, terminology and some basics about how to go about it.

*Briefly defines what customer scenarios are and how to use them to understand customer realities. How to adopt a customer outcome-focused approach to business design and how to design from the outside-in, rather than the Industrial Economy inside-out.
*Give customers important roles to play in sharing your business: lead customers (including lead users), contributors, consultants, guides and promoters, and how these customer roles work together.
*How to expand the breadth and depth of your interaction with customer-innovators.

CHAPTER TWO: LEGO® MINDSTORMS® NXT

LEGO® MINDSTORMS® is widely acclaimed for its powerful example of customer-focused innovation, and this chapter takes an in-depth look into how the company turned itself around by collaborating with customers. It reflects several best practices for customer-led innovation.
*LEGO® case study
*National Instruments case study

One of the most insightful aspects of the story is how it depicts the interaction between the company and its very diverse customer groups (school kids, math teachers, professors, hackers, hobbyists). the Mindstorms product is a new category for LEGO®, which makes the world-famous interlocking plastic building blocks. Mindstorms is a programmable "brick" that can control objects that are built of LEGO®. A vital part of the offering, however, is a computer-based software program in which the customer programs the commands that will be executed by the brick and object.

*At first, the company inspired its customers by launching the Mindstorms offering.
*The offering attracted software hackers, engineers, teachers and hobbyists, who began collaborating to improve the software. They hacked some of the company's information and processes, and the company embraced it and encouraged it.
*The interaction took off, and the book shows how the energy built to produce a blockbuster offering.
*The company and customers created online communities, global contests (who can make the most extraordinary robot).
*Extending the success with a key partnership with National Instruments, a company with virtual instrumentation offerings.
*The chapter also takes a look at the LEGO® partnership from NI's perspective, and how it extended customer innovation it developed with LEGO® to its customers in general.

CHAPTER THREE: Help Customers Reach Their Goals

This chapter addresses how to capture end customers' "context" and "desired outcomes."

*Staples case study. How the company took a deep dive into customers' experience in stores, online and at home. They used their discovery to create differentiating value.. in a "commodity" business! An interesting aspect was how Staples took over part of the couponing process from a partner, making it work better for everyone in the process.
*Stories about using Communispace, an online community vendor, to understand customers interests and passions; Hallmark, Kraft, RC2, Schwab and Unilever examples.
*Koko® Fitness case study. The concept behind the business was customer-driven from the start. Takes you through how co-founders conceived and built their business.
*Zopa case study. A digital business that's taking the world by storm. Puts you behind the wheel and shows how the founder followed customer pain points to create a business in which individuals lend money to other individuals--without banks.

By culling examples from a wide variety of businesses, the book shows the wide applicability of the concepts while getting your imagination going.

CHAPTER FOUR: Let Customers Strut Their Stuff

Chapter four is replete with examples of companies leveraging customer-created content. The second best chapter is worth the price of the book alone.

*Tripod as an early example. Shows how fundamental the concepts are.. and how they've been around for many years.
*The American Institute of Physics example. AIP has a rich community of scientists that enthusiastically create offerings.
*How to make it easy for customers to create content for other customers (Snap-on, Cisco, Amazon, IgoUgo examples). Focuses on the vital role of online tools and how they can unleash customers' creativity.
*The world of blogs. It's not much of an exaggeration to say that your company must be blogging if you want to have a modicum of relevance in the emerging world. Some initial pointers on getting involved. This is not a handbook on blogging; rather it shows how blogs fit into the whole picture.
*Flickr case study. How Flickr founders created a vibrant community that is its own canvas. How customers are creating a world for themselves. Some parallels with Chapter Six.
*Mash-ups' importance. Mash-ups are reuse and packaging/integration of service-based software into Web 2.0 sites or pages. The relevance here is how you can make services available to customers who can mash them up. It's both metaphorical and literal.
*BBC case study. The main idea is how customers can tag and manipulate BBC content. BBC proposes, "Build your stuff with our stuff."

CHAPTER FIVE: Promote and Leverage Open Source Development

Another way to look at customer-led innovation is that many things will be "open sourced." Open source software development holds many lessons for "sourcing from the crowd" in your industry, so this chapter takes you through the similarities.

*Open source as customer-led innovation: an overview.
*Mozilla Firefox case study. Key aspect of the passion of the community, especially in marketing and promotion.
*Asterisk and Digium case study. Especially interesting in its discussion about how to hive off the ".org entity" from the ".com" business. The founder put together a phone system (as in "PBX") that's now open source. Digium is a company that services the software for those who want it, like Red Hat services Linux customers.
*Cohesive Financial Technologies example. Short but valuable example of open source commercial models and strategies.
*Open source biotech: the BiOS initiative. This is obvious and inspiring. Shows how the Industrial Economy mindset adds high cost that subtracts value in the current context. Open source biotech can and will be done.
*Wikipedia case study. This is well trodden ground but it's useful to integrate some of the concepts.

This chapter is valuable in two dimensions: if you have significant exposure to or experience with open source, it will make you aware of its wide applicability in the business world. If you've only heard about it but are not very familiar with how it works, you get to double dip: a good overview of what makes it tick as well as how the concepts apply to customer-led innovation.

CHAPTER SIX: Enabling Customer Co-Design

This chapter outlines some of the models, tactics and tools you can use to enable customer collaboration. It's not the main idea of the chapter, but I looked at it as a progression of adopting a customer-focused business model:

1. Launch configuration and/or DIY construction kits and workshops. Here, customers are ordering basic options of your existing offerings, using digital tools.
2. Create customer design tools. Here, customers are designing new features or offerings.
3. Offer open-ended design environments in which customers have control over a wide range of parameters.

As I read it through, I found myself itching for a graphic that showed the similarities of the models as well as their progression.

*Customized, build-to-order products. Very interesting examples of how customers who design offerings for themselves and/or other customers become more valuable. They constantly up-sell themselves. There is a premium for letting the customer satisfy him/herself, and it means higher margins because cost to serve goes down while amount of order goes up.
*The GE ColorXpress® case study. Shows GE Plastics' progression into customer-designed offerings. Context is global supply chain.
*SEI Wealth Network® case study. SEI is a service (wealth management) that achieved breakthrough with a very creative approach.
*Customer Scenario® Mapping: a tool and approach to enable customer innovation. This is a brief overview to one of the Patricia Seybold Group's consulting tools.
*National Semiconductor case study highlights how customers build on each other's designs. How NS created tools to enable customers.

A key insight is that when you connect customers with each other, they can collaborate with each other as well as your company. They become much smarter and more experienced. They can create "templates" and solutions for each other, which your company can offer to other customers. You can enable your customers to create solutions for themselves, while getting advice from your experts and other customers. Then you capture the work and enable other customers to find it.

CHAPTER SEVEN: Let Customers Co-Design and Promote Your Products

My favorite chapter as it's the most visionary. Here, customers not only co-design companies' offerings; they also actively promote them. Examples show how entrepreneurs create companies with an outside-in model. The culture of each company is strong and often has a cause that is well articulated. The companies have strong communities imbued with lifestyle preferences.

*Threadless case study.
*Muji example. My favorite part of this case study is how the company asks customers to pre-commit to buying the product. Then managers decide whether to produce it.
*Karmaloop case study.
*Gaming: the ultimate customer-created offerings.
*Key points for how to adopt a customer-centric innovation model. Five steps to becoming outside-in focused as well as five pitfalls.

In conclusion, I highly recommend this book as it is an excellent guidebook for starting to create highly valuable customer relationships--for innovation. As I've written elsewhere, individuals will continue to adopt Web 2.0 tools like blogs, social networking sites, audio (podcasts), video (YouTube, vlogs), etc., and it will be easier for companies to collaborate with them and their groups. If your company isn't collaborating with customers to innovate, you will be out-innovated by a competitor that is.

I didn't wholly enjoy this book but I enjoyed it on the whole. One third describes concepts of deep engagement and the intertwining of brand experience and customer experience and feedback, one third is a scrapbook of internet-driven or created businesses, and one third is a sales pitch for the author's consulting methodology.

The first third I enjoyed, because exploring branding in the context of task-driven lead customers, and particularly the youth market, is an area which I have not found well articulated before. Seybold starts the job, doesn't go very deep in this aspect, but held my attention. Although if you're familiar with the Staples reinvention or what's happened at Lego in the last few years then you may not get much extra out of this part.

Seybold explores categories of customers and how to engage and work with different groups in her inside-out innovation. I like her definitions of innovation, which is about creating wealth. Personally I didn't think that this was a ground-breaking work, it simply extends the business of working with your customers in the creation of your value propositions. For a consultant, it builds on the technique of working with your customer's customers. And we know that value is emotional and perceptual and personal, and the book frames those ideas back into the author's technique. That is all done well, it's useful, its important, and it is built on the back of lots of related work.

The second one third is a compendium of reasonably well-known interent business success stories, and their customer interaction or "design" methods. It also has a big section on open source. If you're a business person who has not been engaged in studying these models, or is not familiar with the usual stories and open source, then you'll find this section worthwhile. It's the kind of Wikipedia story from free form to chaos to moderated-control that is one of the themes of this part of the book. My implication here is not entirely fair as there are some less commonly known cases that surprised me - such as the KoKo fitness machine which is an inspiring illustration of business development.

The other what I call "one third" of the book is the constant punctuation of trademarked common words which pepper the exposition of the author's methodology and her showcase customers. That bit kind of annoys me, but objectively this methodology is well explained. There is nothing particularly new but it is nicely brought together as a process, and the author gives guidance and insights, and clearly with the right participants and motivation the methodology works well and has delivered good results. If you are on the lookout for a well explained approach, as either a consultant or an actual business operator, then you'll appreciate this component of the book.

In summary - the book does a good job of motivating the understanding of customers co-designing your services and products, and brand image. However if you are already familiar with the Staples story, the Lego story, and the National Semiconductor story, and with general internet business snapshots from the media, then you might find it less valuable. The author's methodology is well-explained for the intended objective of the book. In terms of value for money, it's not expensive and for around $20 it is certainly well worth a read on an airplane for almost anyone interested in the direction of business. I rated it 4 stars because of the value for money, otherwise 3.

In "Outside Innovation", Patricia Seybold provides one of the first general-management books on co-creation of value between firms and customers. Her book is full of great and very up-to-date case studies that make the idea of value co-creation really lively and accessible. She describes (in great detail and with plenty of background information) many classic examples like Lego's co-development of the new Mindstorm toy, Threadless, Flickr, BBC Backstage or National Semiconductor, but has also some great new (at least for me) examples of customer-centric innovation like the development of a new fitness machine (Koko Fitness - great story and concept) or SEI Wealth Networks.

And her pitch line why her book is important tackles one of the main problems of integrating customer and users in a firm's innovation process:

The good news is that customer-led innovation is one of the most predictably successful innovation processes. The bad news is that many managers and executives don't yet believe in it. Today, that's their loss. Ultimately, it may be their downfall."


I hope that her books can support more mangers to consider customer/user integration not only as a nice add-on pilot initiative, but to make it a crucial part of the company's core strategy. The book, however, offers no recipes or frameworks how a manager could do so. Its core contribution is to document and describe what is happening in a world that is not any longer dominated by companies creating things FOR users. And as Seybold does this in great detail and style, this record of promising practices may convince managers to turn away from old prejudices.

Seybold uses the term "lead customer" to describe a group of a firm's current customers who are truly innovative: "These may not be your most vocal customers, your most profitable customers, or your largest customers. But they are the customers who care deeply about the way in which your products or services could help them achieve something they care about."

My conclusion: A book very worthwhile to buy and read. Its great collection of case studies will inspire you to look for more and deeper information on this topic - or to start to brainstorm immediately how you can benefit from the creative potential of your customers.

The advent of the information age has truly empowered the customer and placed the end user in a power position regarding purchasing decisions. Their ability to comparison shop, raise customization and service expectations as well as demand lightening-like deliver of goods continues to cut into operating margins. To keep up, organizations are forced to innovate in the face of this ever-changing and growing demand base. Business author Patricia Seybold believes the continual tension between dynamic demand and shifting supply creates an opportunity for a concept that she calls Outside Innovation. In her book of the same title, Seybold defines Outside Innovation as a living process that harnesses the passion of customers and the vision of producers to generate truly collaborative solutions that optimally meet the needs of those vested parties. Soundview likes this book because it has the potential to shift the way business has typically been done by actively engaging customers in a variety of ways to help companies re-invent their procedures, products and ultimately their way of doing business. Companies that embrace the concept of consumer-led innovation are destined to thrive in any economic or competitive environment - this book can show you how.

The book, `Outside Innovation' deals with co-designing led by customers. Even though many managers know how important it is to listen and observe customers, but they do not always carry it out. To make the company more profitable, managers have to know how to utilize customer's opinions: this is the main argument of Patrica B.Seybold. She is the author of ` and `The Customer Revolution'. She also founded `The Pactrica Seybold Group' which is based in Boston. By her broad knowledge and experience in this field, the book has rich contents and case studies: LEGO MINDSTORMS NXT, Flickr, and Wikipedia etc.

School kids, math teacher, computer hackers, all of these groups are fans of Lego. Lego represents customer-led innovation. I'd like to point out that Lego is the company that produces toys but they also have various segments of customer. Regardless of age, jobs, customers like Lego. The company attracts different types of people who remain fans of the company. This is why Lego keeps interactions with their customers who lead trends and considers commercializing their opinions. The company also observes emerging audience such as adult hobbyist. This is the point. I believe that companies need to care about customers who are current and also the prospective ones to extend their segment group. Besides, Lego actively uses online community. A lot of business look at Lego as an example as to how to operate reader's understandings.

In the second case study, the author suggests `Flickr'. This site offers the service that users can not only store and organize their photos but also show off in the Internet. Flickr is excellent at online business that is designed by customers who enjoy something creative like Lego. In this book, there are several comments of users who love Flickr. One of the users, Thom Watson told that "I'm amazed at how quickly Flickr staff make changes and fixes....". The site listens to user's advices that result from inconveniences when browsing the site. I think the advantage of online business is the swift feedback from customers. Flickr always tries to make uploading user pictures easiest and simplest.

The book mainly describes practical study cases. Most of the examples are quiet specific and practical. Therefore, these case studies are complete enough to be applied to other companies' businesses. Every reader already knows about the importance of communication with customers. The author explains the detailed steps that managers take, adds the comments of current customers, and imagines customer scenarios for each case study. However, some of the companies that were used for case studies might not be familiar to every reader; there are not enough introductions of those. So I had to figure out those companies in the Internet to understand deeply; for example, Lego Mind storms NXT, and GE Color Xpress.