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1POTENTIAL OF SOCIAL MEDIA IN THE CUSTOMER INTERFACE OF INNOVATION PROCESS EBRF 201010th Annual EBRF “Research Forum to Understand Business in Knowledge Society” Conference – Co-creation as the way forward Nokia, Finland Jari Jussila, Tampere University of Technology Hannu Kärkkäinen, Tampere University of Technology Hanna Nordlund, Technology Centre Innopark Ltd

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2Background• According to a number of so called “success factor studies” of innovation, one of the most frequently recognized very central drivers (maybe the most commonly recognized essential individual driver) contributing to the success in innovation and new product development is the good, in-depth understanding of customer and market needs (e.g. Barcley, 1992; Rothwell, 1974; Cooper, 1993; Hart et al., 1999)• It has been suggested that customers, especially users, are becoming “the developers” or “the innovators” who can dominate even whole innovation processes in search for products that fit their needs exactly• The notion of co-creation is based on idea of working closely with customers. It is assumed that when a customer is involved as a co-producer, the interaction between the parties should generate more value in terms of new knowledge and ideas gained than a traditional transaction process. Co-creation is also expected to lead to better identification of customer needs.• Social media can provide novel and useful ways of interacting and collaborating in innovation, as well as for creating new information and knowledge for innovations (Barker, 2008; Bernoff & Li, 2008; Cachia et al. 2007), which have not yet been much investigated because of the novelty of social media concepts and approaches, and simultaneously, the possibilities of social media are not yet fully understood in the context of innovation

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3 Perspective on Innovation Product concept Launch•Identifying lead users •Making use of lead users and •Feedback from new products•On-line communities, online communities (e.g. business intelligence andnetworking employees, users •Testing concepts (for example data mining techniques)and customers on-line communities and virtual •User toolkits•Identifying market trends communities, such as Second •Customization of products •prediction markets Life) •lead users •Voting •”trend communities”•User toolkits• Problem and solutionmarketplaces•Competitions and voting

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4Definition of Social Media and Web 2.0• Web 2.0 means technologies that enable users to communicate, create content and share it with each other via communities, social networks and virtual worlds, making it easier than before, as well as to have real life experiences in virtual worlds and to organize content on the internet with content aggregators (Lehtimäki et al., 2009)• Social media can be defined as “A group of Internet-based applications that build on the ideological and technological foundations of Web 2.0, and that allow the creation and exchange of user-generated content” (Kaplan & Haenlein, 2009)• Furthering this, social media is referred to as applications that are either fully based on user-created content, or in which user- created content or user activity have a significant role in increasing the value of the application or the service (Kangas et al., 2007)

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5Research aimsto study the potential of social media in facilitating the customer interaction and the creation of customer understanding in the innovation processto understand, more specifically,• how (Finnish) companies perceive the applicability and the benefits of using social media in the customer interface of innovation• how significant opportunities social media is perceived to give to involving customers in innovation• how large potential social media is perceived to offer in the different forms of customer interaction, and• in which ways social media can support the acquisition of customer needs related knowledge

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6Research design• A systematic literature review on social media in innovation and customer interface contexts was performed• A questionnaire was designed to study social media potential and use in the above mentioned context utilizing found social media related literature, survey- type empirical social media studies, as well as several social media expert interviews• A sample of 1984 Finnish decision makers from companies with more than 50 employees were surveyed• Persons working in companies employing more than 50 employees in either research and development or product design.• 74 responses were received to the email invitation letter in two weeks time period, the effective response rate thus being 3.7 % (74/1984)

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International studies, e.g.• McKinsey Global Survey ”Building the Web2.0 Enterprise” 2008, 2009• Forrester ”The Social Technographics of Business Buyers” 2009• Social Media Today “The Coming Change in Social Media Business Applications” 2009• Social Media marketing industry report “How Marketers Are Using Social Media to Grow Their Businesses” 2009• Carabiner Communications “Social Media: How B2B Companies can connect” 2009• Emarketer “B2B Marketing on Social Networks: Engaging the Business Audience”• … Completely or mostly lacking innovation perspective, customer knowledge creation perspective or B2B-perspective

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Potential of social media in the 8 acquisition of different types of customer need –related information Future- orientation of How significantly can social media support the acquisition ofrelated customer knowledge the following types of customer need –related information? User experiences from launched products Feedback from preliminary product concepts that have not been launched New product attributes Little or very little Customer needs and requirements Moderately Much or very much Visionary and radically new product concepts Trends Weak signals 0% 10% 20% 30% 40% 50% 60% N = 74

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9 Potential of social media in different types of customer interaction Depth ofcustomer interaction Offering products and services to customers for them to develop products themselves The companys and the customer communities mutual interaction Little or very little The companys and its customers mutual interaction Moderately Much or very much Collecting customer information to support product development Passing product or service marketing related information to customers 0% 10% 20% 30% 40% 50% 60% N = 74

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10 Prerequisites for Social Media Use in B2B Companies Prerequisites for Social Media Use in B2B Companies The use of social media is allowed in my company Training has been provided for social media use My company has social media guidelines My company has skilled staff to support social media use 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% agree or completely agree neither agree or disagree disagree or completely disagreein the studied B2B companies almost half, 44.0 % expressed that the use of social media was allowed in their companies

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11 Social Media Use in B2B Companies Social Media Use in B2B Companies completely agree agree neither agree or disagree disagree completely disagree 0,0 % 10,0 % 20,0 % 30,0 % 40,0 % 50,0 %11.0 % of B2B companies agreed (either completely agreed or agreed) that social media was used in their companies

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12 Social Media Use vs. Potential in Innovation Process Phases Social media use in innovation Potential of Social Media in Innovation Process Phases in B2B Companies Social media use in internal innovation The front-end phaseSocial media use in collaboration with customersSocial media use in collaboration The product development phase with product development / innovation partnersSocial media use in collaboration Launch/commercializationwith other outside organizations phase 0% 20% 40% 60% 80% 100% 0% 20% 40% 60% 80% rather much or very much somewhat rather little or very little rather much or very much somewhat rather little or very little

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13 Social Media Use vs. Opportunities in Development Social media use in innovation Social Media Opportunies in Development of B2B Companies Social media use in internal innovation Social media offers significant new opportunities in discovering customer demandsSocial media use in collaboration with customers Social media offers significant new opportunities to develop innovationSocial media use in collaboration activity with product development / innovation partners Social media offers significant new opportunities to develop theSocial media use in collaboration organizations activities in generalwith other outside organizations 0% 20% 40% 60% 80% 100% 0% 20% 40% 60% 80% 100% significant or very significant moderately significant rather much or very much somewhat rather little or very little of little significance or unsignificant

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14 Social Media Use vs. Innovation Results Social Media in Improving Results Social media use in innovation of Innovation Activity in B2B Companies Social media use in internal innovation Social media can help in improving qualitySocial media use in collaboration Social media can be used to increase with customers customer orientationSocial media use in collaboration Product development time can be with product development / shortened with the help of social innovation partners media Social media can save costsSocial media use in collaborationwith other outside organizations 0,0 % 20,0 % 40,0 % 60,0 % 80,0 %100,0 % 0% 20% 40% 60% 80% 100% rather much or very much somewhat rather little or very little rather much or very much somewhat rather little or very little

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Challenges of Adopting Social Media in 15 Innovation ActivityLack of understanding of the possibilities of social media in innovation 1 Difficulties in assessing financial gains 3 Difficulties in adopting new mental models and practices 4 Lack of case evidence Security issues Inadequate personnel resources Difficulties in applying to current innovation process Inadequate time resources Difficulties in integrating to existing information systems Inadequate financial resources Failed experiments or bad experiences 0 10 20 30 40 50 60 70 80