How virtual customer environments help companies to innovate

By Satish Nambisan and Priya Nambisan - MIT Sloan Management Review

In recent years, companies such as Microsoft, Cisco, Nokia, Volvo and Nike have established online customer forums, known as virtual customer environments (VCEs). The forums range from simple online discussion groups to more sophisticated prototyping centers. And companies use the information they glean from these environments to help them develop new products and processes.

By interacting with customers, for example, Nokia Corp. has tapped into innovative design concepts. Similarly, AB Volvo has accelerated its product development by involving customers in virtual product concept tests. Microsoft Corp. has realized considerable savings by having “expert” customers provide product support services to other customers.

Benefits beyond innovation

Virtual customer environments can offer important and often hidden benefits beyond innovation. Participating in them helps customers form relationships with companies, as well with their products and brands. Customers can, in fact, play various roles in VCEs. They can interact among themselves to generate ideas about improving products or creating new ones. Ducati Motor Holding S.p.A., the Italian motorcycle company, has created a virtual space called Tech Café in which customers share design ideas for customizing and improving motorcycles. Ducati has incorporated some of their suggestions into its next generation of products.

Or customers can design their own ideal products using virtual prototyping tools. Bayerische Motoren Werke AG (BMW) has a Customer Innovation Lab in which it gives customers online design tools to develop their own ideas related to telematics and driver-assistance systems. Customers can also help test out products using these technologies. Both Volvo and Audi AG use virtual reality tools that let customers test product concepts. Customers can also learn about new products in VCEs. Both Korea’s Samsung Group and Japan’s Suzuki Motor Corp. have experimented with virtual product launch centers that use interactive product simulation technologies.

Most often, customers use these virtual environments to offer to other customers their knowledge and expertise about products. They act as product support specialists, supporting their peers. HP, Novell, Cisco and Microsoft have been at the forefront of this area.

Customers who enjoy these virtual environments are likely to remain involved and continue to contribute their ideas. And, crucially, customers equate their experiences in these forums with the companies themselves. That means for good or bad, customers are forming their views about the company and product when they spend time in these online environments. It shapes their decisions about future purchases, for instance -- whether to buy one product over another.

How to make VCEs a positive customer experience 

How can companies create positive experiences for customers in these virtual environments? One way is to create customer recognition programs. Organizations such as IBM, HP and Microsoft confer titles and awards upon customers who take part in these environments. Every year Microsoft selects “Most Valuable Professionals” from customers who contribute to its product support activities. Those who win these awards say that they find being recognized satisfying, and that they feel closer to the virtual community, as well as more responsible to it.

Companies can also create elite customer forums within their overall virtual customer environments. Doing so gives members a sense of exclusivity. Hallmark divides customer contributors on the basis of their demographic profiles, and then assigns them to different forums. Microsoft has created forums specifically for customers who have won the MVP title. These forums are involved in a wider range of collaborative innovation activities. Finally, it helps to have clean technical designs -- simple, easy-to-use customer interfaces combined with fast and intuitive navigation features.

With all these features in place in virtual customer environments, companies will find that more customers will offer better suggestions -- some of which could very well find their way into product development pipelines. And they may find customers more loyal to their brands and products.

This article is adapted from “How to Profit From a Better ‘Virtual Customer Environment,’” by Satish Nambisan and Priya Nambisan, which appeared in the Spring 2008 issue of MIT Sloan Management Review. The complete article is available at http://sloanreview.mit.edu/smr/issue/2008/spring/13/.

Published on 5/23/2008

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