Read the pages and make a brief summary of them with your own words, please. Don't make copy-paste, please. Mention important parts only. Also, you will put your comments and ideas about the topic. Write your comments and opinions briefly on the subject in a separate paragraph at the bottom. Please don't write item by item. Write the summary in paragraph form. innovations. The user-friendly tools, often integrated intoa package we call a "tool kit for customer innovation,"deploy new technologies like computer simulation andrapid prototyping to make product development fasterand less expensive."When the Innovation Partnership ApproachIs Appropriate5. Adapt your business practices to accommodate theinnovation partnership. Don't outsource productdevelopment and then keep doing everything elsein your business in the same old way. Change yourbusiness practices to match the new approach. Also,change your customers' communication practices tosuit the new approach. For example, you might havemore computer-to-computer interaction with cus-tomers that are innovation partners and less face-to-face interaction.CUSTOMERS AS INNOVATIONPARTNERSObviously, the innovation partnership approach is a conceptwith limitations. It is not appropriate or even advisable inevery case. Thomke and von Hippel identified the follow-ing signs that indicate when the innovation partnership ap-proach makes sense:Involving customers in the design, prototyping, and testingphases of product development is no longer considered aninnovative strategy. The best companies in the global arenaapply this strategy as a matter of course. However, a muchsmaller number of companies are taking the customer in-volvement strategy to the ultimate level by actually makingthem innovation partners-full partners in the developmentof new products and the modification of existing products.5According to Stefan Thomke and Eric von Hippel,The driver behind the move to partner with custom-ers in the area of product innovation is what we refer to asthe customization revolution. Customers have come a longway in their expectations since Henry Ford quipped thathis customers could have any color Model T they wantedas long as it was black. Today's customers demand prod-ucts that are customized to suit their individual needs.1. An organization's market segments are shrinking, andcustomers are becoming more vocal in demanding cus-tomized products.Unfortunately, determining what those needs are is aninexact and expensive science at best. This is why someforward-looking companies have stopped involving cus-tomers in only the product development process and havebegun to actually give them a real voice in the process thatproduces the product.According to Thomke and von Hippel,2. An organization and its customers need many iterationsbefore coming to agreement on the right solution.3. An organization and its competitors use high-qualitycomputer-based simulation and rapid-prototyping toolsinternally to develop new products.PRODUCT INNOVATION MODELFOR CUSTOMER RETENTIONIn the course of studying product innovation across manyindustries, we have discovered that a number of compa-nies have adopted an intriguing approach, which at firstseems counterintuitive. Essentially, these companies haveabandoned their efforts to understand exactly what prod-ucts their customers want and have instead equippedthem with tools to design and develop their own prod-ucts, ranging from minor modifications to major newIn order to retain customers over the long term in today'shyper competitive global environment, organizations mustinnovate. If the key to customer loyalty is consistently pro-viding superior value-superior quality, superior cost, andsuperior service-the key to providing superior value isinnovation. Innovation is how organizations continuallyimprove the quality and cost of their products as well asthe quality of their services. It is also how they continuallyreduce the cost of doing business while increasing the vol-ume of business they do. A well-known example of a busi-ness that lost customers by failing to innovate is Motorola'sinitial failure to upgrade its heretofore successful line ofanalog cellular telephones to digital. This failure allowedNokia and several others to tap into Motorola's customerbase.Implementing the InnovationPartnership ApproachA variety of industries use this approach. Bush BoakeAllen (BBA), a global supplier of specialty flavors tocompanies like Nestlé, has built a tool kit that enables itscustomers to develop their own flavors, which BBA thenmanufactures. In the materials field, GE provides custom-ers with web-based tools for designing better plastic prod-ucts. In software, a number of companies let people addcustom-designed modules to their standard products andthen commercialize the best of those components. Indeedthe trend toward customers as innovators has the powerto completely transform industries. In the semiconduc-tor business, it has led to a custom-chip market that hasgrown to more than $15 billion.17Thomke and von Hippel recommend five steps for imple-menting the innovation partnership approach to productdevelopment:1. Develop a tool kit for customers that is easy touse. The tool kit should (1) enable customers torun repeated trial-and-error experiments and testsquickly, easily, and efficiently; (2) use technology thatallows customers to work in a familiar design lan-guage; (3) include a library of standard design mod-ules to make it easier for customers to create complexdesigns quickly; and (4) use technologies that tie intomanufacturing processes so that customer designs canbe sent directly to manufacturing with little or no tai-loring required.2. Increase the flexibility of your production pro-Praveen Gupta has developed an innovation model thatorganizations can use to keep products up-to-date, attrac-tive, and relevant for the customers. It contains the followingfive process steps:19Traditional Product Development Versus theInnovation Partnership Approach- Target the opportunity. Focus on identifying customerneeds and use them to guide innovations.. Explore the idea. Conduct a thorough research to en-sure that the proposed innovation will be successful inthe marketplace.- Develop alternatives. Develop a variety of alternativesfor the innovation-prototypes-and test them thor-oughly to determine which is the best.Retool your manufacturing processes forThe body of quality literature is replete with the concept ofthinking outside the box and the need to adopt new para-digms, but few quality-related concepts emphasize theseconcepts more than making customers innovation partners.The relationship between customer and supplier is radicallydifferent when the customer is responsible for new productdevelopment.With the traditional approach, the supplier was re-sponsible for research and development, product design,and prototyping. Smart companies would involve custom-ers at the testing phase to make sure the prototype devel-oped actually satisfied their needs. Changes would then bemade to the prototype design based on customer feedback.Once the design was revised, the product would go intoproduction. With the innovation partnership approach, thesupplier is still responsible for the research and develop-ment phase of product development. But the design, proto-typing, and testing phases are turned over to the customer.This new approach tends to increase the pace of productchange, which, in turn, requires manufacturers to be evenmore flexible, adaptable, and agile.cesses.flexible, lean, low-cost production of specializedproducts.3. Carefully select the first customers to use your toolkit. The best prospects are customers that have a criti-cal need for custom products that are developed quickly,have a skilled engineering and product developmentstaff, and have limited experience with traditional cus-tomization services. This combination of experienceand capabilities will cause these customers to stay thecourse as you work with them to identify and correctbugs in the innovation partnership processes.. Optimize the solution. Take the chosen alternative andoptimize it for production and delivery.- Commercialize the innovation. Develop and deploy aneffective marketing program for the innovation. Never letan innovation fail for lack of effective marketing.4. Continually improve your tool kit and do so quicklyto satisfy your best customers. Customers that areon the leading edge of technology will keep the pres-sure on you to continually improve your tool kit. Doit. Investments made in continualy and quickly im-proving your tool kit will pay off with leading-edgeGupta encourages creative thinking in applying hismodel, but makes the point that creativity by itself is not aninnovation. According to Gupta, creativity is the idea and in-vention is the prototype of the new or improved product. Butinnovation has not occurred until the product is producedand marketed. 20customers. • Reaching out to customers. Customer-driven compa-nies reach out to their customers. In a total quality set-ting, it is never enough to sit back and wait for customersto give evaluative feedback. A competitive global market-place demands a more assertive approach. Reaching outto customers means doing the following:Making it easy for customers to do businessEncouraging employees to go beyond the normal call of dearly focused plan of improvement.duty to please customersAttempting to resolve all customer complaintsMaking it convenient and easy for customers to maketheir complaints knownCompetence, capability, and empowerment of people. Companies work hard to build customer loyalty. Think ofEmployees are treated as competent, capable profession-als and are empowered to use their judgment in doingwhat is necessary to satisfy customer needs. This meansthat all employees have a thorough understanding of theproducts they provide and the customer's needs relatingto those products. It also means that employees are given keep them for the long term to recoup their investments.the resources and support required to meet the custom-er's needs.with customers and their personnel concerning customerneeds, (2) use of customer-specific metrics, (3) systematicuse of customer feedback, and (4) customer-focused orga-nizational structure."By applying the characteristics and management factorsset forth in this section, quality professionals can recognizecustomer-driven organizations. They can also quickly sur-mise where problems and shortcomings exist and develop aService quality (e.g., sales, after-purchase service, billing) CUSTOMER LOYALTY VERSUSButterfliesESTABLISHING ACUSTOMER FOCUSRelationship quality (eg., communication, availability, CUSTOMER PROFITABILITYButterflies are highly profitable customers, but they don'tCompanies that have successfully established a customerfocus share a number of common characteristics that can bedivided into the following clusters:6responsiveness)- Image strength (e.g., when other performance indicatorsare equal, the organization's image can be an important and prosper in an intensely competitive global environment. transactional satisfaction rather than long-term loyalty;: (2)The common wisdom among quality professionals is that cus- stay around long. Consequently, the following strategies aretomer loyalty is a must for organizations that hope to survive recommended for dealing with butterflies: (1) aim to achieveconsideration)• Price perceptions (eg., initial purchase price, cost of the concept has become so ingrained in contemporary business waste time chasing a rainbow; and (3) make wise decisionsmaintenance and repairs, cost of upgrades)Customer loyalty is, as a general rule, a desirable goal. However, work the accounts only as long as they are active-don't. Vision, commitment, and climate. A company withthese characteristics is totally committed to satisfyingcustomer needs. This commitment shows up in every-thing the company does. Management demonstrates bydeeds and words that the customer is important, thatthe organization is committed to customer satisfaction,and that customer needs take precedence over internalneeds. One way such organizations show their com-mitment to customers and establish a climate in whichthinking that some organizations are leaving out another criti- about the optimum time to break off the relationship.cal factor in the success formula. That factor is profitability."The goal of organizations should be more than just True Friendsearning the loyalty of customers; it should be earning theloyalty of customers who contribute to the organization's True friends are highly profitable, and they are loyal.profitability. Loyal but unprofitable customers are still un- Consequently, the following strategies are recommended forprofitable. Organizations should never assume an automatic dealing with true friends: (1) communicate consistently, butpositive correlation between loyalty and profitability. Nor don't overdo it; (2) build both attitudinal loyalty and bchav-should they assume that because a customer is profitable ini- ioral loyalty; and (3) nurture, defend, and partner with themtially he or she will remain profitable. "Just because a group to create customer delight.of customers was profitable in the past, doesn't mean it willcontinue to be so in the future. Many nonloyal customers Strangerscan be very profitable initially, causing companies to chase Strangers provide only low profitability and are short-termafter them in vain for future profits."12Werner Reinartz and V. Kumar make the critical point customers. Consequently, the following strategies are recom-that "When customers are sorted according to their prof- mended for dealing with strangers: (1) make the best profititability and longevity, it becomes clear that the relation- possible on every individual transaction and (2) make no in-ship between loyalty and profits is by no means assured." vestment in the relationship.Reinartz and Kumar document this point using a matrix inwhich study subjects of several different types of businesses Barnacleswere sorted into one of four quadrants:Global PerceptionsVALUE PERCEPTION ANDCUSTOMER LOYALTYBased on its evaluation of an organization, a customer willform global perceptions about that organization. There aremany different types of perceptions that might be formed bya customer. For example, customers might form good or badfeelings about overall satisfaction, their willingness to recom-mend the organization to other potential customers, their will-ingness to do business with the organization again, their com-mitment to an ongoing relationship with the organization, theextent to which the organization met their needs, or the valuethey received for their money. If the perceptions formed bycustomers in these and other pertinent areas are positive, theycan lead to loyalty behaviors on the part of those customers.Coke and Pepsi, for example. The goal is to keep the cus-tomer on board for the long term. The theory is that a loyalcustomer is a customer forever. It is easy to see what drivesthe desire to create customer loyalty. Companies spendso much in marketing to attract customers that they mustcustomer satisfaction prevails is by making the goal ofbeing customer focused a major factor in all promotionsand pay increases.The best way to generate customer loyalty is to con-sistently provide customers with superior value. Superiorvalue is a combination of superior quality, superior cost,and superior service. Think of a favorite restaurant.People are loyal customers to a given restaurant becauseit provides high-quality food and atmosphere at competi-- Alignment with customers. Customer-driven compa-nies align themselves with their customers. Customersare included when anyone in the organization says, "we."Alignment with customers manifests itself in severalways, including the following: Customers play a con-sultative role in selling, customers are never promisedmore than can be delivered, employees understand whatproduct attributes the customers value the most, andcustomer feedback and input are incorporated into theproduct development process.- Willingness to find and eliminate customers'lems. Customer-driven companies work hard to con- guide in establishing a customer focus. The first step is a self-tinually identify and eliminate problems for customers. analysis in which it is determined which of these character-This willingness manifests itself in the following ways: istics are present in the organization and which are missing.Customer complaints are monitored and analyzed; cus- zation-wide implementation effort.tomer feedback is sought continually; and internal pro-cesses, procedures, and systems that create no value forcustomers are identified and eliminated.- Continual improvement of products and processes.Customer-driven companies do what is necessary to con-tinually improve their products and the processes thatproduce them. This approach to doing business manifestsitself in the following ways: Internal functional groupscooperate to reach shared goals, best practices in the busi-ness are studied (and implemented wherever they willresult in improvements), research and development cycletime is continually reduced, problems are solved imme-diately, and investments are made in the development ofinnovative ideas.Loyalty BehaviorsCustomer loyalty is a behavioral concept, but it can be mea-sured. For example, an organization can measure the defec-tion rate of its customers-especially those that do businesson a regular basis. Another factor that can be measured isthe business volume of individual customers. Is the volumeof business for the customer going up or dow? A cus-tomer who stays with an organization but significantly de-creases his or her volume of business is not a loyal customer.Consequently, it is important to measure both the defectionrate and the business-volume-by-customer rate. When cus-tomers exhibit loyalty behaviors, the organization benefits inthe critical area of financial outcomes.tive costs and with excellent service. All three of these fac-tors must be given the highest priority by organizationsand continually improved in order to maintain the loyaltyof customers.Barnacles provide only low profitability but are long-termcustomers. Consequently, the following strategies are recom-mended for dealing with barnacles: (1) begin by measuringtheir buying potential and how much of it the organizationgets; (2) if they have buying potential, try to increase theshare of their business the organization gets by up-selling• high profitability/short term. high profitability/long term. low profitability/short term. low profitability/long termUsing the customers of a corporate service provider as and cross-selling; and (3) if they don't have buying potential,a typical example, only 30% of the long-term (loyal) cus- impose strict cost controls on their account.tomers studied were found to be highly profitable for theservice provider. More than 20% of the long-term custom-ers were found to provide only low profitability. On theother hand, 20% of the corporate service provider's short-CUSTOMER LOYALTY MODELOrganizations attempt to consistently exceed customerexpectations for the purpose of creating and maintain-ing customer loyalty." Customers constantly evaluate-both formally and informally-the organizations they dobusiness with. From these evaluations, they form per-ceptions of the performance of the organizations. Theseperceptions, if they are positive, can lead to customer loy-alty. Customer loyalty, in turn, can lead to a higher levelof competitiveness and better financial performance: inother words, success.Steve Hoisington and Earl Nauman have transformedthe process of creating customer loyalty into a four-phasemodel that has the following components: (1) business per-formance, (2) global perceptions, (3) loyalty behaviors, and(4) financial outcomes." These four components are ex-These seven clusters of characteristics can be used as aProb.Characteristics that are missing form the basis for an organi-Financial Outcomesatinually; and internal pro-Financial outcomes are affected by several key factors, in- term (nonloyal) customers were found to be highly profit-cluding the following1. Market share-High customer loyalty leads to a largermarket share, which, in turn, leads to better financial study is that "When profitability and loyalty are consideredable, and only 29% of its short-term customers were foundto provide low profitability.The key point that Reinartz and Kumar make in thisRECOGNIZING THE CUSTOMER-- Use of customer information. Customer-driven com- DRIVEN ORGANIZATIONpanies not only collect customer feedback but also use Is a given organization customer driven? In today's com-it and communicate it to those who need it to make im- petitive business environment, the answer to this questionprovements. The use of customer information manifests must be yes. Since this is the case, it is important for qual-itself in the following ways: All employees know how the organization and to be able to articulate its distinguishing plained in the following paragraphs.customer defines quality, employees at different levels are characteristics.given opportunities to meet with customers, employeesknow who the "real" customer is, customers are given in- by the following characteristics: (1) promptly followsformation that helps them develop realistic expectations, through on all promises, (2) can be trusted, (3) has cred-and employees and managers understand what customers ibility, (4) attends to even the smallest details, and (5)want and expect.outcomesat the same time, it becomes clear that different customersneed to be treated in different ways."" They go on to proposethan new customers, which means that customer loyalty four strategies for dealing with customers based on an accu-rate segmentation of an organization's customers on the basisof their loyalty and profitability. They label customers ac-cording to where they fall in the customer loyalty/profitabil-2. Reduced costs-Repeat customers cost less to deal withdecreases the cost of doing business3. Employee attitudes-Positive employee attitudes pro-mote positive customer relations4. Profit-Increased market share can result in increased ity matrix described earlier. High-profitability/short-termcustomers are called butterflies. High-profitability/long-term customers are called true friends. Low-profitability/short-term customers are called strangers. Low-profitability/long-term customers are called barnades. The strategies rec-A customer-driven organization can be recognized Business PerformanceWhen evaluating the performance of an organization theydo business with, customers consider a variety of factors, allof which fall into one of these categories:profits, provided the cost of doing business is held levelor even decreased by customer loyalty5. Shareholder value-Customer loyalty can result inhigher profits, which, in turn, are a key driver of share-holder valueresponsiveness.' In addition to these characteristics,customer-driven organizations exemplify the followingmanagement characteristics: (1) effective communicationommended for each of these customer types follow.• Product quality (e.g., attributes, features, usability, com-patibility, reliability)

Nowadays, involving customers in the customization of the product is not considered an innovative…

Read the pages and make a brief summary of them with your own words, please. Don't make copy-paste, please. Mention important parts only. Also, you will put your comments and ideas about the topic. Write your comments and opinions briefly on the subject in a separate paragraph at the bottom. Please don't write item by item. Write the summary in paragraph form.