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Cecilia Weckstrom The LEGO Group
C e c i l i a @ l e g o . c o m
CONSUMER DRIVEN: The role of consumer affinity in selecting consumer-‐centered innovation methods at the LEGO Group.
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Consumer Driven: The role of consumer affinity in selecting consumer-centered innovation methods at the LEGO Group. by Cecilia Weckstrom
is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License.
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INTRODUCTION
Much has been written about the need for companies to become better at understanding the consumers of their products and services. Methodologies such as co-‐creation and lead-‐user innovation offer a promise of turning product development in companies inside out by unleashing the creativity of consumers. Through orchestrating a creative collaborative process companies can better understand the often un-‐articulated needs and wants of consumers, and based on this insight develop value propositions that combine products and services in new ways for improved differentiation and return on investment. To realise the full value of consumer co-‐creation we need to understand how the levels of affinity consumers have for a brand determine their willingness and ability to contribute to different methods like co-‐creation and lead-‐user innovation. Another pre-‐requisite to successfully involving consumers in the innovation process is an open, internal dialogue about the innovation profile of the value proposition being developed, which will determine the choice of methodology, timing and extent of consumer involvement in the development process. Building on examples of practice at the LEGO Group, we illustrate how consumer-‐centred innovation methods can be a set of powerful tools that when applied in combination with an in-‐depth understanding and pursuit of an innovation objective will likely not only result in an innovative and differentiated offer, but transform the company in order to deliver it.
DEFINING APPROACHES TO USER INVOLVEMENT
Co-‐creation has become a very popular term and appears to define a range of different practices, from a way of conducting research by co-‐creating solutions with consumers, to a new business model where the value proposition relies on the active participation and contribution of consumes for the business model to function. Some even go as far as arguing
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that business models built on the co-‐creation of value are will be the ones that survive in the future (Ramaswamy and Gouillart, 2010). Co-‐creation research was arguably popularised by IDEO, whose ‘Human Centred Innovation’ methodology and toolkit have inspired many others to realise the power of involving consumers in a creative activity and exploration. The co-‐creation activity, combined with ethnographical interviewing and observational techniques is used to uncover needs, wants and motivations that are relevant for defining the value proposition. This insight then forms the foundation for a design process where internal stakeholders participate in synthesising the findings and developing concept directions based on the material. Other authors refer to co-‐creation as a type of product or service where consumers’ participation and contributions make the value proposition more relevant and valuable to its users. Arguably, any product that enables customisation is a platform for co-‐creation of value, other examples include platforms like Nike+, Youtube and Twitter. However, to be able to co-‐create value on the platform requires the platform to be in existence, thus this definition insinuates that co-‐creation is not possible prior to the launch of the platform. However, when considering the term co-‐creation in more broad terms, also as a research activity, co-‐creation can thus happen as part of the development process prior to launch, as well as after launch on the platform itself. The lead-‐user method, originally developed by Eric von Hippel at the MIT, is built on the notion that innovation and new opportunities in using a product is explored by those most intensely invested in using it, rather than the manufacturer (Hippel, 2005). Thus lead users’ expertise and ideas are likely to be far more significant when considering innovating a product, than what manufacturers are likely to come up with on their own. Some argue that lead users are heavily feature-‐, function-‐ and product oriented and may not be able to freely associate about what Clayton Christensen calls ‘the job to be done’ (Christensen, 2006) as they are already heavily invested in a particular way of getting the job done. Bearing this in mind, lead users are probably the most effective partners in innovating a product due to their deep domain expertise and experience in using the product and thus essential to include in the innovation process.
UNDERSTANDING CONSUMER AFFINITY Valencia and Westberg (2005) highlight the increasingly common practice among companies of using experiences to build and support a brand and they introduce the ‘affinity pyramid’ as a framework to model the impact of brand experiences on customers.
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Each company can segment its customers in different levels according to the affinity they have with the brand, starting from people who hate it or are indifferent to it, and ending with people who love the brand so much that they become brand ambassadors. As customers encounter experience(s), they can easily change their perceptions and feelings about the brand, moving further up the pyramid. People at each level of the pyramid have specific consumption patterns, thus generating different revenue for the company. As consumers move to a higher segment, they bring more value in the following ways: higher consumption rate and repeat usage; more willingness to pay price premiums; longer relationship with the brand (decreased churn); word of mouth/brand ambassadorship [and] community effects. (Valencia, Westberg, 2005)
At the LEGO Group the affinity pyramid framework has proven a useful tool not only to understand the evolution of consumers’ behaviour and interest in the brand, but also a segmentation tool for innovation purposes. The affinity pyramid for the LEGO Group is defined as follows:
Our research on this model confirms that consumers spend more on products and services (both on higher price points and by purchasing more frequently) at the higher levels of the pyramid, their propensity to promote the brand as measured by the Net Promoter Score (NPS)
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is higher, and their interest and willingness to engage with the company and in a community of like minds increases.
Reference: Stephen P. Anderson (2006) http://www.poetpainter.com/thoughts/file_download/7 Importantly, consumers’ expectations also change as they move higher in the pyramid. Initially highlighted by Stephen P. Anderson (2006) in his experience hierarchy of needs model (see above), subsequent research by the LEGO Group confirms that similar changes in expectations also occur among our consumers. Using the affinity pyramid for the LEGO Group, the Active households (at the base of the pyramid) first and foremost care about a superior quality product experience, whereas when moving to the 1:1 layer consumers not only expect the superior product experience, but also that the company knows them (and their preferences) and actively show this when interacting with them (leading to pleasurable, personally relevant and enriched experiences), whereas lead users at the top of the pyramid care about all the aspects consumers lower in the pyramid do, and to the extent that they want to have an active role in running the company. The affinity pyramid makes it possible to segment consumers according to the very different ways they engage with the company, their differing levels of experience with the company’s products and services, combined with their different expectations of the company. If we turn around Anderson’s definition of experience needs to explain the kinds of insights the company
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can gain when involving consumers at these levels in the innovation process – the value of early involvement of consumers in the innovation process becomes obvious.
Reference: C.Weckstrom, The LEGO Group, 2008. When designers and marketers are able to take a starting point in understanding what is meaningful and pleasurable to those most familiar with the company’s offers, and its brand, a more focused exploration becomes possible. Therefore the higher levels of the affinity pyramid (1:1 level and lead users) are naturally more able to contribute to more explorative co-‐creation sessions to define entirely new value propositions, and lead-‐users are often skilled and experienced enough to contribute significantly to designing and developing the solution itself. Concepts arising from this phase can then be validated with users in lower parts of the pyramid to assess whether the proposed solutions address the needs of this (much larger) audience, i.e is the solution convenient, usable, reliable and functionally useful. Ultimately piloting the business becomes an opportunity to gain valuable feedback from all segments in the pyramid, and the Net Promoter Score, combined with questions a way to ensure continuous improvement of the value proposition.
UNDERSTANDING THE INNOVATION PROFILE OF A VALUE PROPOSITION
A company that has tens of product lines and hundreds of individual products on the market, combined with products and services online, is naturally challenged by a proposition to involve consumers at every step of its development process. The logistics are simply unrealistic. In this situation a more strategic approach is required, combined with an open dialogue within the company to establish the areas where early co-‐creation with consumers would reduce risk and help provide focus for the development process, or where lead users are essential to involve, in order to achieve a breakthrough innovation.
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To address this issue proactively, the LEGO Group uses the LEGO innovation model to create a shared understanding of the objectives and approach to deliver the outcome. Early opportunity areas are discussed and assessed in terms of their required innovation level (see below) on four dimensions: the business model, product, process (for manufacturing and delivery) and communication. The innovation levels are as follows:
• Level 1 -‐ Adjust – minor changes and optimisation of known parameters are used to update products or modify processes in order to improve performance
• Level 2 -‐ Reconfigure – known and often of multiple parameters, are put together in a new way in order to better meet existing business and/or customer needs
• Level 3 -‐ Redefine – an entirely new approach and offering are introduced in a business area or market sector – existing products and processes may undergo quite fundamental modifications
Even if the early opportunity area and value proposition is largely undefined, this simple framework enables an open dialogue about the requirements for success, and from a portfolio management perspective it makes possible a balancing of innovation activities to mitigate risk in the development portfolio. Moreover, assigning innovation profiles to all development activities also serves as a useful guide to proactively discuss user involvement in the development process and determine appropriate consumer segment(s), timing and methods to use when involving consumers. For example, a value proposition that is classed largely as an Adjust profile (Level 1) will benefit from more traditional market research approaches such as surveys and focus group testing with consumers lower down in the affinity pyramid to validate solutions proposed. Opportunities with a largely Reconfigure (Level 2) or Redefine (Level 3) profile across the four areas of assessment, will benefit from ethnography, co-‐creation, and lead-‐user methods to define the value proposition in collaboration with 1:1 and lead-‐users. Consumers with higher levels of affinity, experience and expectations of the brand are also often more extreme users, and as such have the capacity to inspire and provoke designers and developers to better understand the dimensions that the value proposition will need to address. As the concept becomes more refined through an iterative process, consumers from connected and active households will be essential to validate the appeal and relevance of the concept beyond extreme users.
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TOWARDS CONSUMER-‐CENTRED INNOVATION A deliberate practice of defining the innovation profiles of value propositions, and proactively involving consumers in developing the solution not only contributes to a more focused innovation process, but also works actively to eliminate risk from each step. An essential element of this way of working is the participation of the stakeholder in the process. The research function plays a significant role at the outset in defining the relevant consumer segments to involve and ensuring that the process is in place for this to occur, but an equally important dimension is the active involvement and participation of the internal stakeholders in order to prevent the ‘not-‐invented-‐here’ syndrome. Value propositions that originate from a highly consumer-‐centric approach often entail substantial changes to the internal processes and practices of the company and without a broad involvement of those affected, the outcome will likely not live up to the promise.
At the LEGO Group a four-‐stage process of collaboration around consumer co-‐creation is applied to ensure its full potential when developing opportunities with the Reconfigure (Level 2) or Redefine (Lever 3) innovation profiles. The process takes a starting point in immersion into the consumers’ lives, understanding their reality and through this defining the opportunity areas for co-‐creation. Co-‐creation research with users helps further uncover needs and wants, and the findings from the research becomes the foundation for a co-‐creation process with the internal stakeholder to define relevant concepts. The prototyping phase serves both the purpose of improved internal communication and feedback, but also provides the opportunity to involve consumers in providing further input to iterate the
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solution. Implementation then enables improvements based on further consumer tests, and piloting the business live in the market place and using the Net Promoter Score to systematically gain an understanding from all consumers on the experience helps refine the solution further. The collaborative approach between internal stakeholders, researchers and developers ensures that wide-‐spread learning takes place within the organisation and requirements to the process innovation is the product of an in-‐depth understanding by all contributors to the value chain.
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BIBLIOGRAPHY:
Anderson, S., P. (2006). Experience hierarchy of needs model. Retrieved 7th August 2011 from http://www.poetpainter.com/thoughts/file_download/7 Christensen, C. (2006). What customers want from your products. Retrieved 14th August 2011
from http://hbswk.hbs.edu/item/5170.html Design Council (2006). The evolution of design at LEGO. Design Council. Retrieved 14th August from http://www.designcouncil.org.uk/case-‐studies/lego/the-‐evolution-‐of-‐design-‐at-‐lego/ Gouillart, F. (2011). Engagement platforms must enable co-‐creation. HBR Blog Network. Retrieved 22nd July 2011 from http://blogs.hbr.org/cs/2011/03/engagement_platforms_must.html Von Hippel, E. (2008). Let the users take the lead. HBR Blog Network. Retrieved July 22nd 2011 from http://blogs.hbr.org/hmu/2008/02/let-‐the-‐users-‐take-‐the-‐lead.html Leonard, D., Rayport, J., (1997). Spark Innovation Through Empathic Design. Harvard Business Review. Retrieved 22nd July 2011 from http://hbr.org/1997/11/spark-‐innovation-‐through-‐empathic-‐design/ar/pr Thomke, S., Nimgade, A., (1998). A note on lead user research. Harvard Business School Case Study. Retrieved 22nd July 2011 from http://hbr.org/product/note-‐on-‐lead-‐user-‐research/an/699014-‐PDF-‐ENG?Ntt=note%2520on%2520lead%2520user%2520research Pine, J. (2011). Beyond Mass Customisation. Harvard Business Review Blog. Retrieved 22nd July 2011 from http://blogs.hbr.org/cs/2011/05/beyond_mass_customization.html Ramaswamy, V., Gouillart F. (2010). The Power of Co-‐creation. Build it with them to boost growth, productivity and profits. Free Press. Valencia, J.P., Westberg, T., (2005). Experience and the brand. London Business School AIM Research.
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Consumer Driven: The role of consumer affinity in selecting consumer-centered innovation methods at the LEGO Group. by Cecilia Weckstrom
is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License.