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Customers as Innovators: A New Way to Create Value

Customers as Innovators: A New Way to Create Value By: Stefan Thomke and Eric von Hippel Presented by: Michael Bench and Micheal Justice Costly Problem and Radical Solution

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Customers as Innovators: A New Way to Create Value

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  1. Customers as Innovators: A New Way to Create Value By: Stefan Thomke and Eric von Hippel Presented by: Michael Bench and Micheal Justice Michael Bench & Micheal Justice

  2. Costly Problem and Radical Solution Traditional approach: “Listen carefully to what your customers want and then respond with new products that meet or exceed their needs.” – Very costly Counterintuitive approach: Tool kit for customer innovation – Let them design and develop their own products Michael Bench & Micheal Justice

  3. Tool Kit Capabilities • Complete design cycles • User-friendly • Libraries of pre-tested components & modules • Information about capabilities and limitations of process that are useful Michael Bench & Micheal Justice

  4. An Industry Transformed • Tradition: Development engineers held all knowledge • New era: Customer Tool Kits based on gate-array technology Michael Bench & Micheal Justice

  5. Customers know what they need Designed faster 1st time manufacturing Small customers Serve large customers better Change in mind-set Loss of competitive advantage Evolve sales and marketing functions Example: GE Plastics Benefits Challenges Michael Bench & Micheal Justice

  6. A Pattern of Migration • Company must continually reposition itself to capture value. • Loss of leverage by customers • One long-term result: Manufacturers lose a portion of the value they have traditionally delivered Michael Bench & Micheal Justice

  7. Questions of Value • B2B spreading to B2C • Product configurators • Examples: • Danger to software companies, but not all • Example: • Outsource innovation task to customers Michael Bench & Micheal Justice

  8. When Customer Innovation Makes Sense • Market segments are shrinking and increase in customized products • Many iterations before a solution. You restrict customization. Erodes loyalty • Computer production process to manufacture custom products Michael Bench & Micheal Justice

  9. Five Steps 1. Develop a user friendly tool kit 2. Increase flexibility of production processes 3. Carefully select the first customers to use it 4. Evolve continually and rapidly to satisfy leading-edge customers 5. Adapt your business practices accordingly Michael Bench & Micheal Justice

  10. Mass Customization • R&D Problem ( how to design specialized products efficiently) • Cost of manufacturing has dropped, but not the cost of designing such items • Production problem • Example: Michael Bench & Micheal Justice

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