Traditional vs. Open Innovation

Patricia Seybold, in her new book Outside Innovation: How Your Customers Will Co-Design Your Company’s Future, explains the difference between traditional “inside-out” innovation and “outside in” or customer-focused innovation:

Traditional innovation: “Traditional ‘inside-out’ approaches to innovation assume that our subject matter experts (within our company) invent and design innovative new products to meet needs customers may not even realized they had. Then our marketing and advertising departments make prospective customers aware of those needs, wrap a brand experience around our innovative products, package and price those offerings… and bring them to market.”

Outside-in/customer-focused innovation: “The ‘outside-in’ approach is to flip the innovation process around and assume that customers have outcomes that they want to achieve, they have deep knowledge about their own circumstances and contexts, and they are not happy about the way they have to do things today. They will innovate – with or without your help – to create better ways to do things or to design products and services that meet their specific needs.”

There’s obviously a big difference in these two approaches, but the impact to organizations who don’t understand that the game has changed is much larger.  Just as the Consumer has begun to take control of media, they will also demand a starring role in co-creating your company’s products & services.

This is an evolution that makes perfect sense.  In traditional innovation, we don’t really know what our customers want – we may think we do, but at best we’re shooting in the dark, and hoping we hit something. From a marketing and sales standpoint, our new products are “pushed” through the sales channel to the customer, who often has to be incentivized with discounts, rebates and other creative “carrots” to persuade them to buy. The result?  These programs cut into gross margins and profits, and usually aren’t very effective.

In contrast, if you really understand not only your customers’ needs, but the critical outcomes they want to achieve, you can then work shoulder-to-shoulder with your key customers to “co-create” products that meet those needs.  There’s no need to “push” your offerings, because customers will gladly pay a premium for products and services that make their lives easier and more profitable.  The result?   Higher margins and profits for the company.

I am just starting to read Patricia’s new book, but I can already tell I’m going to like it. Open innovation is one of the key trends in the world of business right now, and this book looks like a terrific guide to what it is and how to implement it in your company.  This concept goes way beyond creating products that meet customer’s needs.  Embracing the customer as a partner is a way to transform and elevate your brand.  As competition  increases and the ability to differentiate yourself decreases, are you asking your customers to help define your brand’s experience???


Z-Meme Me

squidoo1.JPGOK, this may get a little confusing, so pay attention….

A couple of weeks ago, Mack Collier over at The Viral Garden blog decided to try a little experiment.   The idea was to create a meme built around giving link-love to the blogs that deserve it, and hopefully turn Technorati’s system of using a blog’s # of links to determine its ‘authority’, on its ear.  Mack started with a small list of blogs that he links to and asked his readers to pass the list on, adding their favorites to it.  (BTW, Mack’s initial list of 5 blogs included fellow WordPress blogger Becky Carroll’s excellent Customers Rock)

The list grew, and the “Z-listers” began getting the links they deserved.  Then, best selling marketing guru and blogger, Seth Godin got a hold of it and created a Squidoo “Lens” for it.   Mack Collier noted just before Christmas that a number of the “A-List” blogs (like Seth’s) had been added to the lens, thereby moving the list beyond it’s original intention.  This makes sense given the caption that Seth has placed on the page which reads:

Worth a look! There is no A list, so there can’t be a Z list. There’s just good blogs.

Today was the first I had heard of Squidoo, and I’m still not sure I fully understand the concept other than it is a single web page, dedicated to a particular topic that you are passionate about.  It contains content and links to content.  In Seth’s Z-List lens, you can vote for or against a blog on the list to change its rank.

Having a rather obscure blog, I felt compelled to add myself to the list today to see if it would generate any traffic.  And whaddyaknow, it did!!  I’m currently sitting at #74 #127 and the total list is up to 312 340. Of course the spam blogs have also discovered the list and are inserting themselves.  Fortunaltely, people are voting them to the bottom.

So here is the deal (2 parts):

  1. If you read my blog and think it is worth your time, do me a favor and vote for me on the Z-List Lens.  You will need to register on Squidoo in order to vote, but that is painless. 
  2. Check out the current Z-Lister (from Mack Collier) after the jump.  If you are a blogger, you can participate in the experiment.  Simply cut and paste the ENTIRE list below to a post on your blog. That’s it. You’ll get a ton of happy bloggers suddenly coming to YOUR blog to thank you, you’ll get a ton of great new blogs to read, you’ll likely get a ton of links yourself, but most of all, you’ll feel good about making a whole lot of other bloggers feel good about themselves. All by taking a couple of minutes to leave a simple post. Not a bad deal, eh?

    PS: Check out this list of Z-Listers from Christine Kane’s blog. Notice that her list is almost as long as the one below, and at least HALF of them are different!

Continue reading “Z-Meme Me”

Best Buy’s Home Automation Innovation

connectedhome.JPGBest Buy is going to sell a packaged solution of Media Center plus home automation. Literally, it’s a package — a box. A customer walks into a Best Buy store, delights in the demo, buys the package, and waits for its arrival in a big box about four-foot cubed.  The package costs $15,000.  For that you get a Media Center PC, Lifeware automation software from Exceptional Innovation, an Xbox 360, IP surveillance cameras, automated light switches, a thermostat and installation.  It’s a complicated business model, called ConnectedLife.Home, and it’s bound to pit the new group against other Best Buy factions like Geek Squad.

Click here to read the very long and detailed article on this new innovation.

<via Slashdot>

The Customer Relationship Ladder

Shaun Smith over at The Perfect Customer Experience has a great post today in which he discusses Apple and Harley-Davidson as being Brands that have reached the Customer Advocate stage.

Advocacy at this level is rare and beyond the reach of most consumer companies let alone professional services firms. Yet, the principles hold true whatever the nature of your industry and customer base. The fact is that delighted customers have an affiliation for the brand that translates into bottom line growth.

So how do you create a level of customer satisfaction that is so strong that customers become your best sales people? The answer lies in creating a customer experience that is so distinctive and valuable that it goes beyond satisfaction. Jerry Gregoire CIO for Dell computers says “The customer experience is the next competitive battleground” Michael Bray Chief Executive Officer for Clifford Chance said this about customer experience “… equally relevant for the leaders of professional services firms looking to build ‘trusted advisor’ relationships with their key clients.” Jill Griffin, in her book ‘Customer Loyalty: How To Earn It, How To Keep It’ suggests a useful ladder of customer relationships which brings clarity to this issue.

Stage 1: Suspect. Suspects include everyone who might possibly buy your product or service. We “suspect” they might buy; we do not know enough yet to be sure.

Stage 2: Prospect. A prospect is someone who has a need for your product or service and has the ability to buy. Although a prospect has not yet purchased from you, he or she may have heard about you, read about you, or had someone recommend you to him or her.

Stage 3: Disqualified Prospect. These are prospects about whom you have learned enough to know that they are not the best fit for your products and services and so you may choose not to target them.

Stage 4: First-Time Customer. First-time customers are those who have purchased from you one time. They are customers of yours but are almost certainly still customers of your competitor as well.

Stage 5: Repeat Customer. They have purchased from you two or more times. They may have bought the same product twice or bought two different products or services on two or more occasions. They will buy from you but will also continue to give their business to competitors. In professional services you may be one of a number of firms on their panel.

Stage 6: Loyal Customer or Client. A loyal customer or client buys from you rather than anyone else. You have a strong, ongoing relationship that makes him or her resistant to the pull of the competition. For professional services firms this is where you begin to make the transition from being a supplier to trusted advisor. You are ‘top of mind’ and the first firm that a client calls when they need help.

Stage 7: Advocate. Like a client, an advocate buys everything you have to sell and purchases regularly. In addition, an advocate encourages others to buy from you. An advocate talks about you, does your marketing for you and brings customers to you. >p>Brands like Virgin, Apple and McKinsey all have advocates who are happy to be unpaid sales people for these companies. For professional services firms this is when you create a relationship for ‘life’. You are likely be the preferred supplier for this customer whichever company they happen to work for. You may have a seat at the planning table when they think about their longer term strategy but will certainly get advance notice when the client is thinking about a deal.

Verdino to SecondLife Marketers: Guiding Principles

“I’m sitting in the chic lobby of Aloft, the groundbreaking Starwood hotel that has opened in the virtual world long before one opens in the real world. I’m alone at the bar, last stool on the left. I’d order a drink, but there doesn’t seem to be a bartender on duty. I’d complain to the manager, but I can’t find her, either. In fact, there isn’t another soul in sight. No guests. No staff. It has been this way every time I’ve come for a visit.”

This is how Greg Verdino starts a really great article over at sharing his insights on what big brand marketers are doing wrong in their approach to SecondLife. He offers a number of guiding principles for those looking to get into SL including:

  • Be a Resident before trying to be a Marketer
  • The practice of setting up dedicated islands doesn’t work
  • The world is virtual but your expectations should be realistic

I highly recommend that you read Greg’s article here

Greg Verdino is an expert on emerging media and new marketing; he blogs about them at his Greg Verdino 2.0 blog ( and plies his trade as VP/Emerging Channels at DIGITAS.

It’s All About You!


It’s official.  Time has named “You” as the person of the year.  Good call.  Time recognized what many of us already know:  Millions of people have embraced the technology, personal media and the internet to create, co-create, share and produce content. 

I look at my family as a really small microcosm of the phenomenon.  We used to watch TV, network TV.  Now, my 12 year old daughter creates websites and entertaining spaces on Disney’s Virtual Magic Kingdom.  I joined with millions of others and began blogging this year.  I also have embraced SecondLife.

It’s your new world.  Have you jumped in?

Circuit City Joins The Virtual World


Circuit City and IBM have teamed up to launch a prototype virtual store in Second Life. The store, which will be open to SL residents on 12/18, is designed to be a virtual extension of Circuit City’s existing multichannel design and will be used as a learning lab.

SecondLife residents can purchase items such as iPods TVs, and Computers in the store for use in SL, but they can can also link to Circuit City’s website to purchase the real world version of the product. There are other extensions of the e-commerce site into virtual space such as forum discussions for particular products, a store locator, and a display that helps you decide what size TV to purchase based on how far back your sofa is.

“Teaming with IBM in the virtual world is as much about sensing and learning from the community as it is about commerce. These immersive environments provide an interactive forum for testing and feedback as we focus on the next generation of customer service”, said Bill McCorey, senior vice president and chief information officer of Circuit City. “Our ultimate goal is to understand the implications of virtual 3-D worlds on multi-channel retailing and to extend the connection we have with our customers to new spaces.”

I think the big thing here is that Circuit City is starting to experiment with 3D web as a commerce channel. I believe this is the future of ecommerce. The combination of an immersive 3D environment with the social networking aspects of an environment like SecondLife will give the customer a rich experience that transcends today’s 2D experience. Granted, we are in the embryonic stages of this transformation and the experience is not “all that”, but at least Circuit City is putting their toe in the water and that’s a step ahead of where most retailers are.

Read more about the launch here and here.

Full Disclosure: I am a Circuit City employee and am part of the SL team.

Customer’s Rock Blog: Costco’s Response to a Customer Need

Customers Rock is a new WordPress blog which is getting quite a boost due to being referenced on a number of popular marketing blogs.  The latest post on Customers Rock is about Costco and their new free technical support. 

Costco has been listening to the frustrations of their members and has entered the realm of providing technical support to help ease their pain.  According to a store supervisor that I spoke with, Costco will provide free technical support for televisions, cameras and camcorders, as well as desktop and notebook computers.  The service has been available for about one week now in the Southern California area.  It is part of their existing Concierge Services, which Costco started testing for high-tech TV installs this past summer.

The real reason that Costco is doing this is that the returns are killing them.  Costco has an amazingly liberal return policy.  They have expanded their Home Entertainment offering and a pretty good computer business, and all that new technology is difficult for customers to manage.  As a result, they have seen returns skyrocket and profits erode. 

Offering free support is a brilliant strategy, assuming that they can deliver a great experience.  They are well on the way to that by assuring members that when they call tech support, they will speak with someone in the US.  There is nothing more frustrating to me that to hear a thick accented CSR introduce themselves to me as “Bob” or “Mary” and then not be able to communicate with me.

In addition, Costco is offering the free tech support for the life of the product.  Now that’s an added value that’s easy to understand.

Costco intends to take on Circuit City and Best Buy for the Home Entertainment and Computer customers and they are coming out swinging by turning what was a problem for them into differentiated offering for their members.

SecondLife Firms “Not Yet Strong Enough”

In a statement that may qualify him for the”Master of the Obvious” award, Linden Labs marketing director Glenn Fisher told the Le Web 3 conference in Paris this afternoon,

“Most of the brands that have come in have not created a strong enough presence to create a significant business for them at this moment in time,”

Not a big surprise given the lack of understanding that most Real World business have of SecondLife specifically and social networks in general. 

Fisher also provided the group with some stats on business in Second Life:-

  • $7m is exchanged in trade by avatars every month
  • The SL economy is worth $84m
  • Not including land deals, there are $500,000 in monthly purchases
  • There are over 7,000 businesses in-world
  • The average revenue of the top 10 businesses is $25,000
  • The top 100 businesses gross $6,300 on average

(via e-consultancy)

RFID Your Life


The Loc8tor is a combination of radio-frequency emitting tags and a cellphone-sized signal decoder. Both tags and handheld transmit and receive radio signals. Each handheld device can monitor up to 24 tags, which can be attached to keys, kids, pets and anything else of value that has a tendency to get lost. When registering new tags, users can specify what they will be attached to: ‘Wallet’, ‘Favourite child’, ‘Prize-winning Poodle’, etc.

The system has a maximum range of 183 meters/600 feet, and the handheld will guide its holder to within 2.5 cm/1 inch of the lost possession, using fully directional signals: left, right, up and down. (Particularly useful when kitty-cat is hiding in the attic.)

Not just for finding things, Loc8tor’s alert mode also makes it easy to prevent them from becoming lost. Attach a tag to a child, and then set a safety zone. If the child strays beyond a specified distance, the Loc8tor sounds an alarm. The panic tag also acts as an alarm button that a tagged child can press to activate an alert on the Loc8tor. Obviously, as stated by Loc8tor, this isn’t a replacement for parental supervision. 😉

Why Brands Want a Presence in SecondLife


At a recent ClickZ forum on “Advertising in Social Media”, ElectricArtists CEO Marc Schiller offered his insights on why brands are entering SecondLife.  From ClickZ executive editor Rebecca Leib’s notes:

Second Life is an extension of the concept that social networking is becoming more common.  1 in 8 couples married last year met online.  It is a virtual world where thousands of communities work together in creativity; “it’s about sharing ideas and creating a better world”.  It is NOT in-game advertising, it is primarily a social platform.  1.6 million residents live in the virtual world and the median age is 33, 50/50 male/female and women use it more often then men.  Every piece of content is created by the makers users, Linden Labs only provide the platform and servers.  Users maintain ownership of Intellectual Property, not the software provider, Linden Labs make money by selling space and land.

Why would brands want to join the world?
You get to build a virtual connection with your real audience that makes sense and you’re able to experiment with prototypes and new ideas.  There’s no direct ROI (at least traceable), although it opens up a new channel of communication and deeper connections to the brand audience.  “Aloft” is a virtual Starwood Hotel and is a way to test design, user reactions and offer a virtual client base that can convert into a real world client base.  Scion is to create the first car manufacturer in Second Life, selling theirs cars to other users.  Don’t just do it because your competitors are; don’t do a hit-and-run; re-invent your brand – don’t just copy it.

(image courtesy of

Would You Buy a Game Console From These Guys??

real-ps3-front-2.jpgYou know that bad reputation that used car guys have.  They have it for a reason.  They don’t deliver on their promises and the customer usually feels taken for a ride.  So here comes Sony with their exploding batteries, proprietary formats and over-engineered & under-delivered PS3, making a claim that is truly hard to believe.  The same Sony that could not meet its launch target of 400,000 systems, is now reporting that all manufacturing issues have been overcome and the company is full on target to have a million systems shipped by the end of the year.  Really…. that’s straight from the mouth of Sony’s communications boss David Karraker…

While initial day-one launch shipment goals weren’t achievable due to early manufacturing issues, those problems have been resolved and we do remain focused on having one million PS3s in the pipeline by December 31, 2006.

Now, if you don’t read that carefully, you might get the impression that the availability is going to pick up by the end of the month.  “We do remain focused” means that this is our official position.  It may or may not be something they we actually accomplish.  “In the pipeline” may mean all the way back at the factory, waiting for blue diodes. 

So what what does that statement actually say.  Not much!!!  Sony may not be able to build great technology anymore, but they sure can spin.

 PS3 problems now resolved – Sony []


Here’s some gamer trivia….  November, 2006 was the first time all three new home systems would be available to consumers, along with three established portable game devices.  And which company wont the month hands down????  I’m not gloating, but you can’t say I didn’t say so….

The month belonged to……..wait for it…….Nintendo!!!

According to NPD, who keeps track of this kind of stuff, Nintendo sold 55 percent of all video game systems in November, led by the launch of the Wii(TM) home system and the incredible continuing success of the Nintendo DS(TM) portable.  While the Wii sold an average of 70,000 per day during the first 7 days,  the biggest sellers for the month were the Nintendo DS, at almost 920,000 units, and Game Boy® Advance, with nearly 642,000 portables sold.  With Wii and Nintendo GameCube(TM) totals included, Nintendo sold through more than 2.1 million of the 3.9 million systems purchased for the month.

The data also reveals that the Wii title The Legend of Zelda®: Twilight Princess achieved sales of 412,000, representing 87 percent of all Wii purchasers, the highest industry rate of sale for any launch title since introduction of Super Mario® 64 with the Nintendo® 64 a decade ago.

In addition, despite the inclusion of Wii Sports software with every system sale, Wii buyers also purchased an average of two additional games, compared to approximately one game per system for the installed bases of either competing new home system.

Now tell me again what’s so great about the PS3???

Source: Nintendo

Interactive DVD/Gift Card from Circuit City


Circuit City is offering a new interactive DVD/Gift Card just in time for the holidays. It looks like a gift card (rectangular, etc), but it has this hole in the middle and the magstripe is on the front. You can get one for any value and it spends just like a gift card should. BUT, pop this baby into you DVD drive and you get:

  • 5 free emusic downloads
  • Access to an additional 50 free downloads from emusic
  • A snowball fight video game
  • Ideas of what to redeem the gift card for – scrolls through 24 hot product where users can click on the product and go directly to the product page on to read customer reviews, get more info or redeem their gift card and purchase the product
  • Downloadable holiday screen saver, wallpapers and gift tags

Because of availability limitations, these cards are only available in Circuit City stores locations (not on the website). 

Full Disclosure: I work for Circuit City, but not in a marketing capacity.  I just thought this was cool and different.

2006 In Picture – Follow-Up


Click here to view the slides on SlideShare
Download printable version (PDF) 

 Last week, I told you about a project that David Armano was launching on his blog,  Logic + Emotion  called “2006 In Picture”.  Yesterday, David posted 2006 In Your Words.  His original question was:

What was the most significant event/aspect of 2006 in regards to marketing, advertising or user experience?

Over 50 responses came in within a couple of days. Some were from bloggers with high readership and some were from relative unknowns like me.  And that, to me, really is the  story:  That anyone can connect and take part in the conversation.  David segmented the responses as follows:

2006: The year of…

  • PC (Power Consumer)
  • Connection
  • 2.0
  • Business + Design
  • Video
  • Creativity
  • People

But his personal observation was that 2006 was about Re-Discovery.  Discovering things about yourself through the connections that you can make within our hyper-connected world.  I couldn’t agree more.  There are some great insights in the slide deck, so do yourself a favor and give it a read. 

P.S. You can find my comment on slide 5.