The model of production most established companies will be familiar with involves a series of basic steps. Beginning with market research – to identify gaps and test ideas – new products and services then move through phases that include research and development, creation and manufacture, and launch. The drivers are external and each element of the process is protected. However, this model is changing. Supported by enhanced access to information via the internet, low cost materials and tools, the development of online communities, and new technologies such as 3D printing, consumers can now play a much greater role in production. This article explores how, rather than seeing this as a threat to their bottom line, producers can benefit from this creativity and innovation.
In 2016, personal consumer expenditure – or spending on goods and services – was 58% of gross domestic product in Canada and 65% in the UK. Almost 70% of what the United Stated produces is for the consumer market, amounting to nearly $13 trillion in 2016. Research led by Eric von Hippel from the MIT Sloan School of Management suggests that 6.1% of all consumers in the UK, 5.2% in the US, and 5.6% in Canada act as consumer innovators, spending time and money to “develop and improve products to make their own lives better”. This adds up to over 20 million people in total. At the same time, companies invest significant funds on both research and development and market research, so it is essential that they spend these sums effectively.
With markets of this size, it is essential that producers make the most of all the opportunities. But why are all these innovators so important? Firstly, they’re not concerned about the size of the market. The drive to innovate comes from the desire – or need – to solve a problem, for themselves, their friends or family, or for others in society. For commercial organizations, this means that they are provided with insights into market demand and the foundations for developing a range of products and services. Next, innovators often come together to collaborate on a new idea. This brings different perspectives and experiences to the problem, resulting in even more – and potentially better – ideas. And finally, these innovators are motivated by factors beyond just financial compensation. These combine to make the consumer-led innovation process much more open, collaborative and, potentially, more effective.
Customer co-creation may be just one form of open innovation, but it is an increasingly important one. It enables organizations to direct their R&D spend more strategically, and for greater results. The case studies below provide examples of how some companies are doing just this, in a variety of ways.
Mobilizing the gamers
Data from recent research show that, globally, there are 2.2 billion gamers who are expected to generate revenues of nearly $109 billion in 2017. The market is also expected to continue to grow, resulting in revenues in the region of $128.5 billion in 2020. Steam Workshop, from Valve, is exploiting the size of this market, with 15 million active users and over 1500 consumer creators. The Workshop provides an online space and tools so that players can create and publish their own content. If that content is incorporated into a game, then the developer will receive a financial reward. Of Valve’s estimated $3.5 billion revenue in 2015, around £57 million was paid to developers. The platform has now launched Steam Direct, to provide “ streamlined, transparent, and accessible route for new game developers from anywhere in the world to bring games to Steam.”
Building brand support for life
We all know that different marketing techniques have been developed to target the emerging generations, from generation x to the millennials. But have you thought about the next wave, generation z? This refers to those born after 2002, soon to be reaching adulthood, and already tech and brand savvy. Recent research suggests that brands “need to think about being more useful, being innovative and creating partnerships to add value”. LEGO Ideas has found a way to engage with this market right from the start. Fans are invited to develop ideas for new LEGO sets. They post their projects online, so that they can gather support from other fans. Once a threshold has been reached (10,000 supporters), a review team decides whether the project has commercial value. If selected, the LEGO set goes into production, with the original developer included in the design process, recognized as the product creator, and rewarded through a royalty on sales. LEGO is consistently identified as among most powerful brands in the world, with revenues that continue to grow.
Supporting consumer innovation
Other firms – from logistics, to electronics, to brewers – provide tools and support for their customers to engage in the innovation process. Heineken Innovators Brewhouse, for example, is an online space where people from the around the world – entrepreneurs, inventors and ‘great beer minds’ – can come together to find solutions and develop new products. DHL holds Innovation and Trend workshops, to generate and test ideas with their consumers, resulting in a new type of delivery drone that has cut down delivery times significantly. And the Electrolux Ideas Lab encourages consumers to participate in a competition to develop solutions to specific questions.
Open innovation – in all its forms – is playing an increasingly important role for businesses around the world, be that through collaboration with external partner organizations, enlisting the services of people through the crowd, or working with customers to develop new products and services. These case studies demonstrate how organizations are benefitting from consumer co-creation, for ideas generation, design, and even development. By building new ways for their customers to engage with their company, they are enhancing consumer loyalty, strengthening their brands, and driving revenue. As people across the globe become more connected – and the problems more complex – drawing on a greater range of ideas to find solutions makes real business sense. The next step? Find ways to get your consumers involved in your innovation processes and you’ll start to reap the rewards.
 OECD (2017), ‘National Accounts at a Glance’, OECD National Accounts Statistics (database). http://dx.doi.org/10.1787/data-00369-en (Accessed 28 August 2017)
 Bureau of Economic Analysis, GDP & Personal Income. https://www.bea.gov/iTable/index_regional.cfm (Accessed 28 August 2017)
 Eric von Hippel, Free Innovation by Consumers—How Producers Can Benefit, Research-Technology Management, Volume 60, Issue 1, 2017
 ’The global games market will reach $108.9 billion in 2017 with mobile taking 42%’, https://newzoo.com/insights/articles/the-global-games-market-will-reach-108-9-billion-in-2017-with-mobile-taking-42/ (Accessed 28 August 2o17)
 ‘Steam paid revenue flat in 2016 despite escalating releases’, http://www.gamesindustry.biz/articles/2017-01-06-steam-paid-game-revenue-flat-in-2016-despite-escalating-releases-steam-spy (Accessed 28 August 2017)
 ’Steam Direct Now Available’, http://steamcommunity.com/games/593110/announcements/detail/1328973169870947116 (Accessed 28 August 2017)
 ’New Gen Z study explains “Pivotal” generation for marketers and brands’, http://www.thedrum.com/news/2017/01/26/new-gen-z-study-explains-pivotal-generation-marketers-and-brands (Accessed 28 August 2017)
 ‘Lego Brand Value Grows 68% in a Year’, http://brandfinance.com/press-releases/lego-brand-value-grows-68-in-a-year/. (Accessed 28 August 2017)