Tuesday, April 15, 2014

Innovating Products and Services with the Internet

Innovation occurs when individuals have a need for specific products and information. The internet has fostered a greater transference of information and we now see product innovation growing at a faster pace than at any point in history. This innovation isn’t always company fostered and can generate organically from consumers. A study by Takeyasu & Sotaro (2014) helps support the notion that innovation and consumption are related. In their study they reviewed 1,000 music users to determine how consumption and innovation are interrelated.

Innovation comes through companies or through consumers. The concepts of user generated content and user innovation have made their way into the field. Users actively engage in the creation process and further the development of products, concepts, and ideas. The Internet has raised the communication levels to new heights and allows users to build on existing products.

In the past, research was primarily focused on the innovation of individuals and organizations. Greater focus is now on how outside entities and inter-organizational relations produce innovation (Chesbrough, 2003). Organizations that work with other organizations and interested parties in the co-builder process may also experience higher levels of innovative development.

There are generally two ways to use the internet to gather information for product and service improvement. Innovators first need the tools which simplifies and assists users in developing products and services (Franke & von Hippel, 2003). Secondly, they need the feedback from other users to build knowledge (Mallapragada, et. al, 2012).

Organizations that seek to co-collaborate with either other organizations or with users need to have the proper platforms that create ease of use. This ease of use will encourage greater communication between members. Then they will need the users to actively engage in the process of sharing knowledge and building off of each others ideas.

The researchers found in their music and innovation study that those users who consumed music heavily also were more likely to innovate. In addition, as users interacted heavily with this music they either focused more on innovation or consumption. The implications of study help organization decision-makers find ways to allow consumers to become part of the planning and developing process.

The study lends support to two concepts. Companies may collaborate using electronic means to build better products for revenue generation (i.e. projects) or lowering transact costs (i.e. supplier networks). Companies should consider collaborating with other companies that have like needs or with consumers who use the products. These users are not passive but will often be actively engaged in the co-creation process. 

Chesbrough, H. (2003). Open innovation: The new imperative for creating and profiting from technology. Boston, MA: Harvard Business School Press.

Franke, N., & von Hippel, E. (2003). Satisfying heterogeneous user needs via innovation toolkits: The case of Apache security software. Research Policy, 32(7), 1199–1215.

Mallapragada, G., Grewal, R., & Lilien G. (2012). User-generated open source products: Founder’s social capital and time to product release. Management Science, 31(3), 474–492.

Takeyasu, I & Sotaro, K. (2014). The relationship between innovation and consumption of Internet Users. Annals of Business Administrative Science, 13 (1).

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