Social implication of Innovation

1. The Great Battle (2): Are organisations ready for the new generation
of customers?
Author: Koen Klokgieters
Published: 2007
In part I of the Great Battle, I discussed the struggle between the Robber Barons
and the Knight Innovators, or the struggle between the hedge funds and the
organisations of the future. While the Robber Barons see human capital as a cost
entry, in the (near) future the difference between consumers, manufacturers,
owners, financiers and developers will blur. The new organisational forms are
borne up by the concept of Mass Participation: innovation as a social, cumulative
and collective process. Linux and Wikipedia are the first examples of these types
of ‘new’ organisations. However, things have a way to go yet. But companies are
already seeing a change in consumer behaviour. In part II of the Great Battle, I
will explain the changing customer, the new relationship between the customer
and the organisation and a new form of organising.
A new customer relationship
Different forms of community, communication, consumption and experience have
clear repercussions for the customer. The modern customer wants his very DNA to be
spoken to, the ‘genetic blueprint’ of his behaviour. An organisation must be capable
of understanding this DNA and of translating it into a new value proposition. The
survival chances of the organisation will be determined by two crucial factors: insight
into the specific customers and the speed of reaction to the continuous changes within
the target groups. The survey by Capgemini, Trends in Retail (2006), shows that only
a few companies are successful in this.
In their book, ‘Generatie Einstein’ (The Einstein Generation; see www.keesie.nl),
Jeroen Boschma and Inez Groen describe a new generation of customers. Where the
previous generation focused on the individual – pleasure, convenience and benefit –
the new generation acts in a smarter, faster and more social way. For companies, this
means a huge change in the relationship with the customer:
 Communication changes from one-way traffic to two-way traffic
 (Marketing) communication cannot be used as a stopgap for mistakes or
shortcomings, but must be based on concrete evidence
 Customers are smarter, demand equality and punish arrogance mercilessly
 Companies’ conflicting interests and poor reputations must make way for
entirely logical and transparent messages.
This new generation of customers wishes to be actively involved in change, renewal
and innovation. They will no longer allow an organisation to push new products on
the market without their participation. The new generation will confront us with a
fresh role distribution among those involved in our society. Differences between
consumers, manufacturers, owners, financiers and developers are blurring. In
Capgemini terms, for organisations this means that they can no longer choose a role
independently (manufacturer, owner) but that they will become part of so-called
‘Mashups’ (see article Visie op Innovatie [Vision on Innovation] at
www.Capgemini.nl ).

2. Difficulty with the changing customer
In general, big companies are relatively slow-changing organisations. These
organisations are built up with a number of rigid characteristics:
 Certainty obtained via procedures and regulations (standardised and
bureaucratic)
 Political stability through the establishment of clear tasks, powers and
responsibilities (clearly delineated organisational borders, internal ‘silos’)
 Strong historical company culture (little room for free thinkers)
 Classic (legacy) back-office information systems aimed at productivity.
Innovation within a company requires the organisational capacity for working
innovatively across the internal borders (from R&D to Marketing and Customer
Service). In view of the large organisation’s rigid characteristics previously
mentioned, this is a huge challenge. Not to mention co-operation beyond the
company’s borders. Despite all these challenges, ambitions for innovation are being
created that require us to work intensively with partners outside of our own
organisation, so-called Open Innovation (see www.openinnovatie.nl ). We see
companies busily carrying out window dressing (client-centric front-office, multi-
channel contacts, etc.). However, in many cases, feasibility and the ability to keep the
promise to the customer defy reality.
But there are companies who have successfully tackled these challenges. Philips is a
good Dutch example of how parties outside of the traditional organisation have
managed to deliver the first successes. In the beginning, these successes were mainly
the result of chain integration (innovating with suppliers). At the moment, within the
concept of Open Innovation, Philips has gone a step further and is actively engaged in
customer participation (End User Driven Innovation Cycle). An international example
is the so-called ‘co-creation’ at Lego. Children (customer perspective) are actively
involved in the development of new Lego building blocks. The children work via the
Internet together with R&D (technological perspective), Marketing & Sales (market
perspective) and Operations (business process perspective). The top three best-selling
Lego building blocks were created in this way (see www.lego.com).
Mass Participation
The new generation of customers will force organisations to take part in their adaptive
and self-organising communities. In his new book, Charles Leadbeater describes the
concept of Mass Participation (see www.wethinkthebook.net). This concept is a way
of innovating through active participation by people at extremely low cost and on a
global scale. As Henry Ford created a new logic for mass production, so will the new
concept create a new logic for business innovation. Organisations will lose part of
their control over innovation, but will gain an entire army of strongly motivated
innovators in return. Besides Lego, other examples that apply Mass Participation
include Wikipedia, Linux, OhMyNews and WaveMarket. Charles Leadbeater
mentions a number of basic rules for implementing the new concept:

3. 1. Create the core of a basic idea: enough to work on, but with enough
possibilities for additions.
2. Motivate and entice participants: treat the participants as ‘peers’ and not as
employees or suppliers. Participants see their contribution as representing
personal development and status. They are looking for concrete and practical
benefits. Besides this, low entry barriers and user-friendly tools are essential.
3. The need for meeting places: a place where people can work together
interactively and where clear rules of ownership (getting, using and returning)
are established.
4. Self-distribution of work: an open working method based on high acceleration
of the peer-to-peer review process that quickly identifies the good ideas and
that can be elaborated upon.
5. Think LEGO: innovations are split into a series of modules that fit together and
can be integrated. The integration is regulated on the basis of clear, simple and
centrally created design rules. These rules and protocols make it possible to
allow mass innovation.
6. A new form of leadership: these are no traditional corporate chief executives,
but leaders with characteristics such as modesty, willingness to remain in the
background, self-confidence, strong norms and values, passion and
attachment. Their specifically top-down style of leadership makes large-scale,
decentralised, bottom-up innovation initiatives possible.
The new generation of customers, employees, suppliers, owners, etc., will be in their
element in this organisational form. But it is a giant leap from the present situation
towards a full Mass Participation form. Possibly too big a leap for many
organisations. A company might start with organising its employees along the lines of
this new concept. Dutch companies, such as KLM, DSM, Philips, Police (KLPD),
Reaal and Achmea are already making great strides in this direction. The next step is
to involve various parties outside of the immediate organisation. The question is
whether the traditional companies will have time to adapt their organisational form.
Organisations that are not able to develop quickly into this new organisational form of
Mass Participation will be confronted with very severe continuity issues. For the new
generation will create the products and services they want themselves, within their
existing communities.