salo 2015 university of patras greece new product development trends in the digital age

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P.O. BOX 4600, 90014 University of Oulu • tel. (08) 553 2905, fax (08) 553 2906 • www.oulubusinessschool.fi

New product development in the digitalage

Jari Salo,Professor of Marketing (Digital Business & Marketing)

Head of doctoral programAdjunct Professor (Aalto University School of Business)

Associate Editor of Journal of Information Technology ResearchOulu Business School

University of OuluDepartment of Marketing

Agenda

• Digital marketing – organizing framework

• New product development

• The digital age

• Examples and cases (Starbucks, Dell,Threadless, Volvo, Lush, Dominos Pizza, UKIarchitects, Apple)


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Research:

• Industrial marketing (innovation, services, relationships,digitization)

• Digital retailing (Facebook in clothing retail, click streamanalysis – big data, e-newsletters, FB addiction)

• Advertising and branding (industrial/digital context)

• Role of technology in marketing (e.g. avatar creation, virtualworld spending behavior, mobile advertising)



Company references

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Simula, Lehtimäki, Salo, & Malinen 2010


Commercializing new B2B products


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Digital Marketing – OrganizingFramework

A working definition for digitalmarketing

• Digital marketing aims at creating, demonstrating, documenting,

communicating and delivering value in digitized way to customers (B2C

and B2B) and for managing customer relationships in ways that enhance

digital joint value creation of customers, organizations and stakeholders.

(Journal of Digital Marketing)

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Value

Value equation = Benefits (tangible/intangible) –Costs (price, total costs)

+ CALT (comparison of alternatives)+ Over life time evaluations (e.g. CLV)

Holds for all people - organizations, individualsand employees


Digital Marketing Framework


SCM

CRM

INNOVATION & NPD

Online

metrics

BusinessStrategy

CustomerStrategy

BusinessStrategy

CustomerStrategy

Valuecreation

Value co-creation

Value capture

Valuecreation

Value co-creation

Value capture

Performanceassesment

process

a) Shareholderresults

b)Performancemeasuring

c) KPI

Performanceassesment

process

a) Shareholderresults

b)Performancemeasuring

c) KPI

Multichannelintegration-FB, Instagram

Twitter-YouTube-Email &

newsletters-Companywebsites

SEO/SEA…Web advertising-Blogs, pods, -

Vpods, webcasts-Mashups, widgets

-Location basedservices

e.g. tabletcomputers

Multichannelintegration-FB, Instagram

Twitter-YouTube-Email &

newsletters-Companywebsites

SEO/SEA…Web advertising-Blogs, pods, -

Vpods, webcasts-Mashups, widgets

-Location basedservices

e.g. tabletcomputers

Information systems- Data storaging & mining

- Front & back office applications- Big data and cloud applications

Information systems- Data storaging & mining

- Front & back office applications- Big data and cloud applications

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New product / service development(NPD/NSD)


NPD phases


Basics:- Two strategies: Acquisition ordeveloping (traditional)

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NPD vs. innovation

Incremental Radical


?

NPD vs. innovation


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Level/type of innovation / NPD

• Product

• Process

• Technology

• Business model


Business model innovation


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The digital age


Trends

1. User generated content (UGC) – source ofinformation

2. Social media – communities3. Virtual worlds4. Crowdsourcing5. Interacting with customers


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1. UGC: From broadcasters toaudience driven content

19Turban et al

1. User generated content (UGC)

Places to share content and publish your own content

• Webopinions• CNN (iReport)• YouTube, Vimeo• Flickr (photo management and sharing)• Helsingin Sanomat, other magazines (send a picture)• Creating a blog (see e.g. blogs.com)• Twitter• Slideshare (consulting, teaching – demonstrating

experience)• FB etc.

Digital Marketing - Salo20

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2. Social media, communities andNPD• Social media and online communities provide new ways for companies

to digitize business:• Front end of Innovation - ideas• NSD/NPD• Testing

• Creating own communities (Philips healthcare) / participate establishedcommunities• Inform about new products• Ask review and recommendations

• Competitions and games

• Press events & education virtually21

2. Taxonomy of communities (Salo & Härkönen 2009)

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YouTube MySpaceFacebook

Second LifeLinkedInClassmatesservices

Flickr

Social orientation

Low

Hig

h

High

Con

tent

crea

tion

and

shar

ing

Low

Habbo Hotel

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2. Case Starbucks (2012)

• Starbucks created a platform “My Starbucks Idea”

• The site allows users to submit suggestions to be voted on by Starbucksconsumers, and the most popular suggestions are highlighted andreviewed. Starbucks then took it a step further and added an “Ideas inAction” blog that gives updates to users on the status of changessuggested.

• By empowering their exceptionally web savvy consumer, Starbucksstrengthens their campaign to add a personal touch to coffee.

• Thinking of ways to build your company are great, but directly askingyour consumers what they want, is better. Acting on that information anddoing it publicly is key to the success of this campaign.


2. Case Starbucks


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2. Case Starbucks

• 70,000 Suggestions from Starbucks clients

• The top idea received over 95,000 votes and over 1,000comments

• Starbuck has over 28 million fans on Facebook

• The Facebook fans mostly engage in applications such asevent calendars, discussions and notes


http://www.slideshare.net/kholzapfel/social-media-success-stories

2. Case Dell

• Dell has developed and is cultivating a cross-platform community.They’ve created multiple Twitter handles, a network of blogs, and arevery active on Facebook and are used to provide additionalinformation

• Dell claims that Twitter presence led them to three million dollarsales, that can be tracked down on their efforts on the platform. Thismight not be huge, but it is above the costs of Dell’s presence at theplatform


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2. Case Dell

• The most active user has already posted over 20,000 replies.All of this for no cost for dell as he is not an employee. Hisposts have been read over 2 million times which led toadditional sales and huge savings in tech support

• Dell is also one of the few companies to publicly state thatthey created a return on investment from Twitter. Apparently,Dell’s social media efforts help create “$1 million in revenue”

• Social media isn’t all about ROI, but it is possible. Creatingcross-platform strategies can lead to the most success,especially when your demographic is already Internet andtechnologically savvy.


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3. NPD and Virtual worlds (WOW)



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3. NPD and virtual worlds

• Coke: Virtual Thirst ”send ideas for portable virtualvending machine”

• Steelcase: ”design new innovative executive chair”

• BMW: BMW series 1 Use Facebook applicationgraffiti wall to design new and customize your BMW1. Over 10.000 participated and 600.000 voted for abest design

Kohler 2008

Virtual world marketing (Tikkanen et al 2009)


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Virtual world marketing (Tikkanen et al 2009)


Virtual worlds views from industrialcompanies

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Generations online 2010


One of the leastused activities

4. User driven innovation

Use for innovation• Observation of consumer behavior - generating new ideas and

improving products, retail store layouts etc.

• Evaluation of the new product ideas

• Actively generating new ideas

• Concept testing and design


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4. Crowdsourcing

• Simply defined, crowdsourcing represents the act ofa company or institution taking a function onceperformed by employees and outsourcing it to anundefined (and generally large) network of people inthe form of an open call.

• This can take the form of peer-production (when thejob is performed collaboratively), but is also oftenundertaken by sole individuals. The crucialprerequisite is the use of the open call format andthe large network of potential laborers. (Howe, 2006)


4. Crowdsourcing

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4. Threadless - T-shirts


5. Interacting with customer in the innovationprocess – three archetypes

1. “Listen into” the customer domain

2. “Ask” customers

3. “Build with” customers

Piller et al., 2011+Könkkölä

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“Listen into”

• Products are designed on behalf of thecustomers

• Firms use existing customerinformation from diverse channels toidentify customer needs


“Ask”

• Firms explicitly ask customers for input for acompany innovation process

• (In the early stages of the innovation process)customers’ needs are identified

• Pilot customers/beta users


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“Build with”

• Active integration of customerparticipation in innovation

• Customer co-creation/openinnovation with customers

• “Active, creative and socialprocess, based oncollaboration betweenproducers and consumers”


“Build with” (cont.)

• User idea contests• Consumer opinion platforms• Toolkits for user innovation• Mass customization toolkits• Communities for customer co-creation


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Typology of customer innovation

Piller et al., 2011


Simula, Lehtimäki & Salo 2008

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Illustrative case and examples


Use of technology to innovate: Data richenvironments: Industrial perspective

• Trucks• Busses• Dumpers (e.g. used to carry iron ore in mines)

• Autonomous vehicles• Telematics (outsourced e.g. to Volvo)


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Process innovation:retailingexample


• Lush sales team can change thelayout of their stores in response toreal-time sales data.• "Not only has this helped to tap in to the ambitious spirit of staff -

competing over which store can do best in terms of sales andperformance - but it also gives them information to improve thecustomer experience."

• For example, if staff notice a particular bath bomb is selling wellwith a certain shampoo, they can change the store layout so theitems are closer together.

(Source BBC)

Business model innovation ?

• Public and private (company) internal data mashups(data and functionality integrated, possibility tointegrate different apps/functionalities, databases topresent information in one seamless service tocustomer

• Single view Dominos Pizza (Pizza builder forcustomers + mobile apps, Pizza Tracker).

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Process innovation: Context / locationawereness

• Apple's iBeacon technology - in-storeBluetooth location trackers designed tointeract with smartphones - enablesretailers and app publishers to identifypeople individually the moment theyenter a shop

• iBeacon available with many vendors

• Similar to iJack service developed byTeliasonera in early 2000 which theyabandoned in 2004


Sales/deals80%

Content relevant to interest/Location 62%

Swirl 2013

Process perspective•Last month, Urban Research, a fast-growing and popular fashion, home andlifestyle retailer, launched an experimentin Tokyo’s Parco Ikebukuro.•Allows customers to stand in front ofone of two 60-inch screens, selectclothing items they want to try on andsee themselves dressed in the productswithin seconds.•Customers’ movements arerepresented fluidly on the screen in 3Dand customers can use an integratediPad to take pictures of themselves andshare them with friends on socialnetworks.


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Case Apple

Music players and Itunes


Stage of the business – late 1990s

• Few clumsy hard drive music players• Designed by and for technical experts – geeksChallenges:- Memory capacity limited- Difficult to use- Extremely expensive- In order to use you have to be expert


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Apple gathers information on musicbusiness – late 1990s early 2000s• Mixed methods and netnographic approach

(Kozinets)• Newsgroups, discussion and bulletin boards

are used as information source• Analyzing these information sources• Identifying influential groups and boards• Identifying lead users – appreciated experts• Analysis• And collection other related information


Enter iPod and iTunes


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Commercialization time line 2001-2012


Case: UKI architects

Using 3D 1:1 virtual cave environment forhospital design


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Project parties

• UKI architects (architect company) www.ukiark.fi

• Ludocraft (technology partner, 3D and virtualworld expert, builds realxtend virtual worldtechnolgy- platform) www.ludocraft.com/

• Intercircum – business partner (our company)


Construction business

• Customers and users have differentexpectations

• Multiple technological and architectural options

• Varying business models and governmentinvolvement

AS a result 3D Valo™ was born


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• Case SeinäjokiHospicaseY Y-house

• Target: Seinäjoki Centralhospital extension

• Multiple users• Many agents (city, hospital,

government rules etc.)

• Idea: User involvement, usercentered design, functionaldesign

• Valo™ utilized

Intercircum Ltd.

Virtual 3D 1:1 design and presentationtool for architects – Valo™

• Customer, user and architect and construction team experience the

space in virtual environment

• Helps customers and users alike to experience the building before

it is even built with 3D 1:1 design

• Changing solutions in the design are cost effective as the design is

virtual and house is not actually build yet


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Virtual 3D 1:1 design and presentationtool for architects – Valo™

• Spaces are user designed for and

with users

• In future if needed all parties

involved can be in different places

assuming they have connection via

relevant technologies to the virtual

design environment


Illustrative video clip

• http://www.youtube.com/watch?v=smC-rvzSph4

• YouTube search – “UKI Architects - user-orienteddesign - Seinäjoki Y-hospital emergency center”


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UKI architects

• 3D virtual 1:1 design tool Valo™ is also used ininternally and also in different types of customerprojects

• New hospital project in Tampere• Valo™ is now commercially available to

construction business


To summarize

• NPD/NSD/ Innovation is a group level activity wheremultiple organizational units, customers other stakeholders and even competitors are involved.

• Digital age offers wide array of possibilities to collect,disseminate, analyze information, test “innovation” andharness that to create wisdom.

• Digital tools (online communities, social media sites,blogs, big data, internent of things, industrial internet,virtual worlds, mobile technologies etc.) provide suitabletools to enhance effective ”innovation”.


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Comments / questions?


[email protected]@aalto.fi+358 50 4675154

Task 1: Personal DM + NPD mind map

1) Take a sheet of paper and pencil

2) Think - What comes to your mind from DM+NPD ?

3) Write your topics into boxes and form ahierarchy i.e. mind map.

4) Save the sheet of paper


DM &NPD

4

3

2

1

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Task 2: Sharing the personal DM & NPDmind map

1) Pair up with any student in the class

2) Share your thoughts with each other on thesimilarities and differences in the mind maps

3) Group similar issues under a theme and writethose into individual sticky notes

4) As a group lets draw unified map !


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salo 2015 university of patras greece new product development trends in the digital age

Business

marketing organizingframeworka

marketing frameworkp

digital age examples

customers b2cand b2b

new b2b productsp

customer relationships

avatar creation

people organizations