An open door policy

Innovation was once confined to the R&D room, but easy access to ‘creative consumers’ eager to get involved, and new methods from research and insight agencies, is changing that. By Alicia Clegg

Societies that are open to the world are almost always more innovative and a lot more interesting than those that keep their borders shut. Contrast the sterility of economic life in China over the long decades before the Chinese government’s adoption of the Open Door Policy with the energy of China today. What is true of countries with open doors is also, to a large extent, true of people with open minds. But, what about businesses? To grow profitably companies must innovate. In the past, businesses have looked to the scientists in their research and development departments to take care of new product development. Open innovation, a novel way of thinking about NPD, challenges this cosy convention of relying on experts. At its heart is a belief that the seeds of innovation are more likely to be found outside businesses than within.

Procter & Gamble, which famously declared that 50% of its new products will come from external sources, is one of open innovation’s best known champions. Lego has taken the concept further still, enlisting customers around the world to feed its ideas pipeline. Other companies, in a less structured way, are dipping toes in the same water, by inviting customers to help them “co-create” the future. But where does open innovation leave the market research industry, which has traditionally been the go-between that mediates between company and consumers? Innovation is a thorny subject for market research. Businesses often complain that while NPD looks forward, market research mostly looks back. To counter this charge, the research world, some while ago, hit upon the idea of recruiting “creative consumers”, the logic being that creative consumers get excited about new ideas while mainstream consumers tend to like what they already know.

Super power
Research International’s Super Group – which places consumers selected by mental tests in business innovation workshops – is a prime example of the creative consumer approach. Now, however, the pendulum may be swinging back towards involving a broader mix of people in early-stage product development.

The force democratising innovation is the internet. Just look at the huge lengths to which people will go to crack problems that really matter to them – finding a cure for a sick child or a “Heath Robinson fix” for an urgent domestic emergency. This clearly demonstrates that what often inspires inventiveness is not so much being creative as needing to be creative. Connect with consumers about a product that intersects with an issue they care passionately about, or so the argument goes, and you create a nursery for breeding new ideas.

Highly engaged consumers have, of course, always existed. In the past, however, finding those individuals has been like panning for gold in a swirling river. Now, with the growth of online user-generated communities, where people gather to talk about their passions and hobbies, brand owners know exactly where to find them.

Market research firms, not unnaturally, hope to turn the phenomenon of social networking to their own and their clients’ commercial advantage. Among them is MarketTools, a US company, now expanding internationally, which builds and manages online networks for the benefit of brands. The networks operate much like normal user generated communities, focusing on lifestyle issues of consuming interest to their members – motherhood, sports, pet-care, etc. The quid pro quo, however, is that in return for providing sponsorship the commercial backers are able to eavesdrop on what community members chat about, float topics for discussion and invite participants to suggest ideas for new products.

For businesses used to viewing consumers through the sober-hued lens of focus groups and structured surveys, the sheer quirkiness of what people chat about can be off-putting. But, therein may lie the strength of the approach, since the most unlikely threads can lead to ideas that brand managers and NPD specialists would never, in the normal way of things, have dreamed up.

Listening in
As an example, Georges Berzgal, MarketTools vice-president for Europe, cites how dog owners on a network, which MarketTools manages for the US pet products division of Del Monte Foods, started talking about the practical problems of travelling with a dog. On the strength of what was said, Del Monte spotted a budding market for portable pet food and went on to develop several new products. “A lot of traditional research begins with a question; but that question could be quite irrelevant to what consumers are really bothered about.”

While just about everyone on the planet agrees that innovation is important, marketers still manage to fall out over the sort of innovation that brands should target. One tack is to forget about breaking the mould and settle, instead, for innovation through small steps. The approach may not be heroic, admits James Osmond, a founding partner at Clear Ideas, but it shouldn’t be sneezed at. “The truth is that line extensions and short-term innovations that play to business capabilities are very successful for many companies and drive an awful lot of profit.”

Not everyone is convinced that tweaking and embellishing the standing stock of products – which is what most companies practise, even if they don’t preach it – is good for a company’s long-term health. Studies by consultants McKinsey suggest that in the long run businesses that achieve “breakthrough” innovations that offer something genuinely new and valuable, gain significantly greater market share than competitors which invest in lots of small enhancements.

So why, if bold is best, do so many firms plump for innovation in bite-sized chunks? First, as TNS UK’s head of NPD, Carlos Michelsen, points out, achieving a big win is difficult and never guaranteed. Second, to pull off a major coup in the long term usually requires you to fail, and fail repeatedly, in the short term. If you are a brand manager eager to make your mark quickly that is not an attractive option, since the triumph, if there is one, is likely to come after you have moved on, or out. So what needs to change? To begin with, at the risk of stating the obvious, companies need to adapt their culture. For example, suggests Michelsen, companies might motivate staff to spend a limited proportion of their time cultivating projects that operate on a longer timescale than the normal product launch. Second, they may need to think again about how and where they look for inspiration.

Cast your net wide
One course – based on the principle that the wider you trawl, the more chance you have of netting a pearl – is to take the search for ideas beyond the online communities that brands sponsor to the wider Web-connected world. The downside of this approach, which Added Value director Ben Dunn describes as both “the holy grail” of marketing and a recipe for “mental constipation”, is that while automated tools exist to capture what people say about brands, no one has yet worked out how to sift the commercially valuable wheat from the chaff. “It’s reckoned that about 60% of feedback on brands is given outside any websites that brands sponsor themselves. But the volume of what is out there is quite simply overwhelming.”

Another option, favoured by Michelsen, is to seek out the people who seem best qualified to help you create the future. Dubbed “future shapers”, such individuals allegedly unite the creative consumer’s appetite for imaginative innovation with the extrovert’s ability to sway the brand choices of friends. “If, as market researchers, we can identify these people then we can start to engage them in developing products that are likely to appeal to mainstream consumers in the future.”

But consumers aren’t the only people who influence what others buy. Matt Coles, a partner at Cardinal, the drinks division of HPI Research, thinks drinks brands would gain hugely from involving staff from leading-edge bars in NPD work. “There are certain types of bars where you see trends starting. Very often it’s their staff who are the source of new ideas, and the distinction between staff and consumers becomes very blurred.”

Companies are also looking to their own workforces for inspiration. As the long tradition of employee suggestion boxes shows, bosses have always had a hunch that gems lie hidden in their midst. What has been lacking has been a way of unearthing them. Now businesses, helped by insight agencies, are setting up online forums to bring ideas to light and turn the best of them into marketable products.

The inside track
In the US, for example, FritoLay operates an employee insight community that fuses market research with open innovation and market-based prediction. To help generate discussion around topics of commercial interest, MarketTools feeds the community with a digest of hot issues mined from a monthly sweep of online conversations. As staff suggest ideas for new products, fellow employees, armed with virtual cash, lay bets to predict their market potential.

Ever since businesses grew too big to talk to their customers personally, product developers have had to strain to hear what consumers are saying – hence the need for market research. With the rise of online communities, the risk for firms is no longer being starved of external stimulus but being deafened by a deluge of opinion. The context may have changed, but the moderation skills of professional insight firms have never been more needed.