product development articles

Are the best product ideas internally or externally developed?


Client question: Do we get better product ideas from internal professionals, such as engineers, designers, marketers and product management, or from external sources?

(Poetz and Schreier 2012) (1) , reviewed past academic literature and conducted a study to answer this very question. Arguments range from “A truly creative product idea is outside the scope of the normal experience of the consumer,” (Bennet and Cooper, 1981) (2) , to “users often innovate for themselves, and many of these innovations are characterized by high commercial attractiveness, (von Hippel, 2005) (3) .” Not surprisingly, internal professionals tend to focus on “how the product should work” as opposed to external recruits that focus on “what a potential new product can do.”

Poetz and Schreier concluded that idea generation is still an area where scholars have limited insight on the idea process, and the existing literature remains inconclusive. These authors went beyond the literature review and conducted a study to gather further insight on who generates the best ideas. The study presented a comparison of baby product ideas generated by internal professionals and external crowdsourcing users. The authors define crowdsourcing as “outsourcing the phase of idea generation to a potentially large and unknown population, referred to as the ’crowd’ in the form of an open call.”

The Findings

Executives who were blind to the source rated the product ideas on 1. novelty, 2. customer benefit, and 3. feasibility. The crowdsourcing process generated higher scores in terms of novelty and customer benefit, and somewhat lower in terms of feasibility.

Does that mean that you should rely solely on external crowdsourcing for your product ideas? No.

Your internal professionals still have the best knowledge on commercial and technical feasibility. It also depends on the type of industry. Outsourcing idea generation to an unknown population does not make sense for products that are technically advanced. This is a forum for lead users. However, for products such as the baby food study, crowdsourcing makes sense.

We find that it is not an either-or situation, but rather a blend of internal professional and external resources that produce the highest quality ideas.

We recommend you ask yourself, what is our strategic intent? Are we a market leader or a follower in this category? Are we serving lead users who are willing to pay for innovative products or do we serve mainstream customers who wait for products to mature and come down in price? Do we provide premium products or value products? Your techniques for gathering the best ideas will most likely differ.

If you wish to be a market leader, techniques for break-through ideas are best obtained by a combination of internal professionals with input from lead users. New product concepts with collaboration from both internal professionals and lead users led to a sales potential that was on average eight times higher than traditionally internally generated 3M concepts (Lilien et al. 2002)(4) .

If you are a market follower, your new product ideas may focus on improving convenience, reducing cost of purchase and maintenance, or reducing the level of expertise required to use the product. Collaborating with customers” is always encouraged regardless of your strategic intent.

Keep it focused

Be explicit about the kinds of ideas you are looking for; what strategies and markets you need to support, and what technologies you want to leverage. Without boundaries or guidance, people can have a tough time coming up with useful ideas. There are just too many things to consider, or they provide ideas that do not fit the strategic framework. In fact, running challenges from time to time and soliciting ideas for a particular problem or need can be a great way to focus an organization’s creative efforts.  Read this posting on outsourcing your idea generation.

We have a client who is quite successful in holding ideation contests based on clearly stated problems that need to be solved. Four to six teams of 3 to 4 cross-functional employees with diverse experience worked separately trying to solve the stated problem. The teams reconvened three weeks later for a final read-out to the judges. The best solution is recognized with a cash award and an announcement of the winners in the company newsletter. The solutions are of high quality, and the accolades and recognition to the teams are quite significant. It is a win-win solution for all.

Do you have any thoughts on this topic? If so, we would love to hear them.

(1)Poetz, M. K., and M. Schreier, 2012. The value of crowdsourcing: Can users really compete with professionals in generating new product ideas? Prod Innovation Management, PDMA. 2012:29(2): 245-256.

(2)Bennet, R.C., and R. G. Cooper. 1981. The misuse of marketing. McKinsey Quarterly 3: 52-69.

(3)Von Hippel, E. 2005. Democratizing innovation. Cambridge, MA: MIT Press.

(4)Lilien et al. 2002. Performance assessment of the lead user idea-generation process for new product development. Management Science 48 (8): 1042-59.