Leveraging Information Systems for Enhanced Product Innovation

Transcription

1 Leveraging Information Systems for Enhanced Product Innovation Gordon Burtch, C. Anthony Di Benedetto and Susan M. Mudambi Abstract While firms have become more tech savvy, the leveraging of information systems for product innovation remains a challenge to firms, from large multinationals to the smallest start-ups. Successful practices vary, but one commonality is experimentation. As a result, firms are trying out a range of digital initiatives. This study explores three important methods by which firms are using information systems to improve the process of product innovation or new product development. These include: listening in to social media, crowd-funding, and virtual product teams. Keywords Information systems Product innovation New product development Listening in Crowd-funding Virtual teams 1 Introduction While firms have become more tech savvy, the leveraging of information systems for product innovation remains a challenge to firms, from large multinationals to the smallest start-ups. Successful practices vary, but one commonality is G. Burtch (&) Assistant Professor of Information and Decision Sciences, Carlson School of Management, University of Minnesota, Minneapolis, USA [email protected] C. A. Di Benedetto Professor of Marketing and Supply Chain Management, Fox School of Business, Temple University, Philadelphia, USA [email protected] S. M. Mudambi Associate Professor of Marketing and Supply Chain Management, Fox School of Business, Temple University, Philadelphia, USA [email protected] F. J. Martínez-López (ed.), Handbook of Strategic e-business Management, Progress in IS, DOI: / _9, Ó Springer-Verlag Berlin Heidelberg

2 212 G. Burtch et al. experimentation. Firms are trying out a range of digital initiatives. Three examples of the use of information systems for product innovation include: listening in to social media, crowd-funding, and virtual product teams. 2 Listening In To improve existing products and services, and to get new ideas about customer needs, firms often ask customers for their views. Yet, what consumers say to a firm in a market research study can be very different from what consumers say to each other. Although focus groups of customers can generate good consumer-to-consumer discussions, firms can gain even more insight by listening in to unstructured consumer discussions online on discussion forums, product review sites, and social media sites such as Facebook and Twitter. Perhaps the most difficult hurdle for firms to overcome is the acknowledgement that firms are not fully in control of brand image. A firm asserting in an advertisement that it is cool does not make it cool. Brand image is in the eye of the consumer, and is expressed in the words of the consumer. Online consumer conversations clearly indicate that consumer conversations can be more powerful than firms in shaping the perceptions of other consumers. Both tangible and intangible attributes of a product are open to consumer debate and discussion. Taken together they affect brand image and brand personality. Despite the availability of digital tools, most firms do not have a routine system implemented for monitoring what consumers are saying about them or their brands online. Even firms that pride themselves on their social media marketing savvy often fail to go beyond counting how many likes their site or posts generate. This can be partly explained by the volume and varying relevance of online comments. For many firms, the starting point is to track and respond to online comments that are critical of product or service quality. These comments can provide timely and relevant input for improving existing products and processes. In this area, listening in can be undertaken from several different perspectives. One limited goal may be to reduce the consequences of negative online word of mouth, and to correct misstatements. A broader, more challenging perspective is to utilize consumer online conversations to identify ideas for new product innovation. This requires a wider and more systematic approach of analyzing consumer conversations about the current products of a firm and its competitors, and examining expectations and areas of disappointment. Being a good listener online can also lead to improved conversations with customers. Firms are experimenting with online concept testing, where they float an idea and then encourage and gauge consumer reaction. With the constraint of not wanting to tip one s hand to potential competitors, firms seek and tap a number of creative ways to get the crowd to share views on new ideas and innovations.

3 Leveraging Information Systems for Enhanced Product Innovation 213 Many new opportunities exist for firms to listen into, and respond to, customer comments. Customers also can effectively interact with each other to identify and invest in new entrepreneurial opportunities. The next section explores how entrepreneurial activity can be stimulated through such crowd-funding activities. 3 Crowd-funding Crowd-funding has been defined as a collective effort by individuals who network and pool their money together, usually via the Internet, to invest in or support the efforts of others (Ordanini et al. 2010). In crowd-funded marketplaces, any individual can propose a project, and others can then provide their funds in support. These markets are quite novel in that they simultaneously offer entrepreneurs the dual benefits of access to early stage funding and preliminary feedback and input from potential users or customers. This allows entrepreneurs to reduce the costs of new product development and to increase customer awareness. In this sense, crowd-funding draws variously on aspects of micro-finance, open innovation and crowdsourcing (Chesborough 2006; Howe 2008; Schwienbacher and Larralde 2012; Terwiesch and Xu 2008). Research into crowd-funding is comparatively recent. Lin et al. (2013) studied lending behavior on Prosper.com, finding that lending is greater when the borrower exhibits greater social capital. Other recent studies examined the potential for herding among lenders (Zhang and Liu 2012) and contributor motivations in donation-based crowdfunding (Aitamurto 2011; Burtch et al. 2013). A given Crowd-funded markets can be classified into one of four types: (1) lending-based, (2) reward-based, (3) donation-based or (4) equity-based. Amongst these, donation- and lending-based platforms are the longest standing. Well-known examples of these types of markets include Kiva.org and Prosper.com, respectively. Reward-based platforms, where individuals receive perks from the entrepreneur for exceeding associated contribution thresholds, have recently come to the fore. Perhaps the most notable example of this funding format is Kickstarter.com, which has seen extensive media attention of late. Lastly, equity-based platforms, where individuals receive equity in the entrepreneur s business in exchange for their funds, are common in much of the world, but are virtually nonexistent in the United States, due to legal restrictions. GrowVC is perhaps the bestknown example of this funding format at the moment. As crowd-funded markets have boomed in recent years, their economic potential has become apparent. Crowd-funding helped new ventures to raise nearly $2.7 billion in 2012, and that number is expected to surpass $5.1B in 2013 (Massolution 2013). This explosive growth has resulted in significant attention, from both the media and U.S. legislators, whose discussions have maintained a persistent call for informed regulation and design of crowd-funded markets; a necessary effort to ensure the protection of crowd-funders and entrepreneurs, as well to enhance the efficiency and sustainability of the industry.

4 214 G. Burtch et al. A primary hurdle to this objective is an ongoing lack of understanding about participants behavior in these markets. There are at least two interesting directions for future research in this regard. First, to improve the design of these markets and their processes, the application of recent findings from the collective intelligence literature can likely be of great benefit. Woolley et al. (2010) suggest that gender and other forms of diversity in the body of crowd-funders, as well as the pattern and distribution of contributions and participation, should be important determinants of marketplace performance. Further, work by Lorenz (2011) suggests that independence of decision-makers is essential. Second, industry analyses have suggested that crowd-funding for financial returns (equity- or lending-based) is best applied with digital and information goods, such as software, films, music and literature, while donation- and reward-based crowd-funding work best with campaigns that appeal to crowd-funders personal beliefs or passions (Massolution 2013). However, these observations are anecdotal at present, and would therefore benefit from a theoretically informed, rigorous evaluation. 4 Virtual Teams Previous sections have outlined how communication between customers, and from customer to firm, can be facilitated through advances in information systems to result in new, innovative products. But firms also take full advantage of these systems to facilitate communication between new product team members, even those based in different parts of the globe. Such virtual global development teams (virtual GDTs) are extremely common now and used effectively by leading firms in many industries. GDTs face many serious challenges, including language and cultural barriers; nevertheless, with good communication systems in place, globally dispersed teams can be more effective and efficient than traditional ones (Hoegl et al. 2009). There are many early examples of notable firms that have successfully supported virtual GDTs. Boeing integrated rocket engine designers with partner firms throughout the world through Web-based new product systems, allowing them to cut design time and costs while also reducing the number of required parts (Sethi et al. 2003). Often, specialized tools need to be used to facilitate the meeting process (keep in mind that these virtual team members may rarely if ever see each other). For example, regular s or attachments may be good enough to communicate verbally, but would be inadequate for designers who need to discuss and provide input to three-dimensional models. Visual Issues Management software may be used to facilitate viewing of the model, allowing remote participants to make changes and flag problems easily (Bashada 2009). Since communication using these tools is very easy, there is little additional cost in bringing in designers and other specialists as early as possible in the development program to identify and correct likely problems while they are still easy and cheap to fix. Ultimately, development cost is reduced, and speed to market is accelerated.

5 Leveraging Information Systems for Enhanced Product Innovation 215 A couple of detailed examples illustrate the diverse ways in which firms have benefitted from virtual GDTs. Ford senior management claims to have cut new product engineering costs by 60 % from 2005 to 2008, while launching successful new cars such as the Ford Fusion during this time. Ford s strategy involves using global platforms unified by virtual GDTs. New product groups are assigned responsibility for one of the car s systems, say, the exhaust system or steering wheel design. Thus, one group will design the exhaust system applied to all Fords sold worldwide, resulting in great time and cost savings. Since all steering mechanisms are designed in one location, Ford steering wheels all have the same distinctive feel and Ford engines all have the same sound signature regardless of where the car was made. Extensive communication among Ford engineers, designers, and managers worldwide is essential for this platform strategy to work (Vasilash 2009). As another early example, Kodak used virtual GDTs to develop new chemicals used in movie film processing. Scientists from France, film systems experts from the U.S. and Europe, and U.S.-based product managers and marketing personnel were key members of the development team, while the launch team was truly worldwide, comprising members from North and South America, Asia, and Australia. In Kodak s case, some language- and culture-related difficulties they encountered were overcome by having infrequent face-to-face meeting in addition to the virtual meetings (Crawford and Di Benedetto 2010, p. 362). Virtual GDTs have been adopted by many firms, with mixed results in some cases as firms gain experience. As information systems continue to improve, and more firms seek global efficiencies, the success rate of virtual product teams will likely increase. Together with improved information systems for listening to consumer product discussions online, and the increased viability of crowd-funding initiatives, it is clear that management information systems have shaped, and will continue to shape, product innovation for the foreseeable future. References Aitamurto, T. (2011). The impact of crowdfunding on journalism. Journalism Practice, 5(4), Bashada, S. (2009). Visual issues management: Improving product development, Time Compression, Sept.-Oct., Burtch, G., Ghose, A. & Wattal, S. (2013). An empirical examination of the antecedents and consequences of contribution patterns in crowd-funded markets. Information Systems Research, articles in advance. Chesborough, H.W. (2006). Open innovation: A new paradigm for understanding industrial innovation, in Proceedings of Open Innovation: Researching a New Paradigm, pp Crawford, M., & Di Benedetto, A. (2010). New Products Management (10th ed). New York: McGraw-Hill/Irwin. Hoegl, M., Ernst, H., & Proserpio, L. (2009). How teamwork matters more as team member dispersion increases. Journal of Product Innovation Management, 24(2), Howe, J. (2008). Crowdsourcing. New York: Crown Business.

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