Co-creation–companies and customers creating experiences, new products and services together–is a way of life with among the most innovative companies, and few would argue that co-creation is beneficial. And there’s plenty of research showing that under the right circumstances and conditions customers and users can develop innovations which are both novel and have greater value for the users that what the company’s own developers come up with. Still, there hasn’t been overwhelming agreement on the how and why of it all.

recent study by Anders Gustafsson at BI Norwegian Business School and Karlstad University in Sweden demonstrates that profitable co-creation with customers centers on the nature of the communication and interaction between the company and its customers.

The researchers were after answers to two questions: How should companies communicate with their customers? When is it profitable to listen to what they say?

They tested four hypotheses. First, that customer co-creation characterized by high frequency communication will lead to increased product and market success.

Second, that because companies often take an overly dominating role, a more evenly distributed dialogue will lead to more beneficial outcomes of an innovation process.

Third, that collaborative process of face-to-face communication and openness in critical aspects of a project, will facilitate successful development of future services and products:

Finally, that new offerings will be more successful if they account for needs that have been identified from use experiences.

The researchers conducted a survey among 334 managers who all had experience with innovation to create new products and services. They selected 284 real development projects that they divided into two main groups:

207 of the projects dealt with minor improvements of products or services, while the remaining 77 projects dealt with development of radically new products or services not previously known to the market.

The study confirms that companies can achieve better results in new product development if customers are given the right pre-requisites for participating actively in the company’s development processes. Better results were defined as enhanced creativity, improved user value, and a more successful launch.

Listening…No Big Surprise

For minor improvements to products and services it is advantageous to talk frequently with the customers and have two-way communication between the company and customers. The researchers also saw that it’s wise to listen carefully to what the customers actually said. Users will often know better what is needed to make them even more satisfied with products and services. Customers will also be able to tell you what types of improvements they are willing to pay for.

Listening…Don’t Bother

When a company aims to develop a product or service entirely new to the market, on the other hand, you should not listen too much to the customers’ specific proposals. The researchers saw that companies that listened too much to what customers said were less successful with radical innovations than those which placed less emphasis on the contents of conversations.

“The customers base themselves to a great extent on previous experiences. The really radical solutions are difficult to imagine in advance based on experiences with current products,” Gustafsson points out.

Sounds a bit like Henry Ford’s famous century-old quote: “If I had asked people what they wanted, they would have said a faster horse.” And he didn’t even have to conduct a survey of over 300 managers.

And as Toyota chief designer Kevin Hunter once told me: “People can’t tell you what they want in the future, but they know what they want now. You have to balance creativity with market acceptability. You have to push the envelope and be progressive, but you can’t get too far out there, because customers won’t understand. Your design has to evoke something familiar or emotional while at the same time offering something new and unfamiliar. You have to avoid a strict design bias and remember who you’re designing for. You can’t be selfish, you must focus outward, and on the problem you’re trying to solve for customers.”