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IMPLEMENTING CUSTOMER RELATIONSHIP ATTITUDES MAPPING TO IMPROVE NEW PRODUCT DEVELOPMENT

Pierre KRAWTCHENKO, PhD - Student

Equipe de Recherche sur les Processus Innovatifs

INPL-ENSGSI 8, rue Bastien Lepage 54000, Nancy, France

Laure MOREL-GUIMARAES, Associate Professor

Equipe de Recherche sur les Processus Innovatifs INPL-ENSGSI

8, rue Bastien Lepage 54000, Nancy, France

Vincent BOLY, Professor

Equipe de Recherche sur les Processus Innovatifs INPL-ENSGSI

8, rue Bastien Lepage 54000, Nancy, France

ABSTRACT : In a turbulent and constantly changing environment, the customer has become the company�s most important asset. Today, to outperform the market, a company must offer its customers better value than its rivals. Furthermore, customers have become less easy to satisfy and more unpredictable. They also want to play an active role in the product design process. These two points constitute the basis of our research work. We propose to answer the following question : �What can a firm do to integrate the customer in the product design process to improve it ?�. For this purpose, we used guidelines to identify and define ways to integrate customers in the product design process within 47 companies. These companies operate in 4 different technology fields, and are of various sizes ranging from SMEs to major groups. This led to a statistical study of the best practices that improve the chances of a project reaching a successful outcome. KEYWORDS : Innovation, product design process, customer relationship attitude,

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INTRODUCTION : Trade liberalization, competitor intensification, and technology proliferation have increased the importance of profitability and sustained competitive advantage to ensure a company�s economic development. They therefore have to propose an offer (product or services) that meets customers� needs and is different from that of their rivals. On that basis, we propose to answer the following question : �What can a firm do to integrate its customers in the new product design process (NPD process), in order to improve it ?� If the question is simple, the answer is less so. Indeed, even if innovation seems necessary, it also appears stamped with uncertainty : it is not possible to guarantee success in advance. Furthermore, customers have become more unpredictable and more difficult to retain considering the amount of offers proposed to them by the market. This inversion in the customer / supplier ratio is not the only consequence of change in mentalities occurring from the pre-industrial period to the present day, distinguished by new communication and information technologies (NCITs) : the customers formerly relegated to the role of end-buyers, have become companies� most important asset by playing an active role in the design of the offers they want companies to propose to them. In this constantly changing context, companies face a double risk : Not to innovate, and file for bankruptcy, or, on the contrary, to innovate, to take the risk of not meeting the market needs and finally to disappear. To avoid this, it is necessary to diminish the zones of uncertainty, by implementing practices that will improve the chances of a project reaching a successful outcome. This leads to the question of customer integration in the NPD process, that we can summarize in the following way : �The customer1 is becoming more and more an actor in the offer she wants to have and, furthermore, is highly knowledgeable. So, would integrating the customer in the company�s NPD process improve the acceptability of the offer by the market ?

1. REQUIREMENTS FOR AN EFFECTIVE ASSESSMENT OF CUSTOMER RELATIONSHIP ATTITUDE IN NEW PRODUCT DEVELOPMENT PROCESS

Our study focuses on the fields of Technological innovation, Knowledge management and Customerization (Customer implication in the NPD process). An innovation project can be defined as a combination of organizational resources to create something that did not exist before. It is a ground of information exchange between the actors of the project. Traditionally, new knowledge is created from interactions occurring between the project actors, following which innovation emerges (GURGUL, RUMYANTSEVA and ENKEL, 2002). From this point of view, technological innovation applied to innovation projects can be related to the integration of a new actor (such as a customer) and his knowledge in the innovation project. Today, customers have become more important than simply the buyer of the company�s offer. PRAHALAD and RAMASWAMY (PRAHALAD and RAMASWAMY, 2000) compare their

1 The word �customer� must be understood as meaning the �customer system�. Indeed, the concept of

�customer� is multiple, as the end customer or an intermediary distributor, a purchaser or a technical user, etc.

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role, until today, to the spectator in traditional theatre : on stage, the actors had clearly defined roles, and the customers paid for their tickets, sat back and watched the show passively. The company�s changing environment has modified relationships between companies and their customers. The latter, perceived as being knowledgeable, and therefore sources of value, are invited to engage in an active dialogue with companies. Indeed, these companies have realized that the proximity with their customers is necessary in order to know them better and thus to propose them better offers. It is from this point of view that we consider the customer in our study. The literature mentions the term �customerization� to mean customer implication in the NPD process. It consists in holding a dialogue between companies and their customers by using tools, concepts, and methods, that allow the transfer of knowledge and "collectivization" between the actors of the project. According to LEONARD-BARTON (LEONARD-BARTON, 1995), the co-design of a product, extended to the customers, allows for example the development of modes and protocols sometimes far removed from exclusively internal designs. It is also what AMALBERTI, MAUGEY, BEGUIN, REUZEAU and COLAS underline (AMALBERTI, MAUGEY, BEGUIN, REUZEAU and COLAS, 1999) by declaring that co-operation contributes to the effectiveness of the NPD process if it concerns, in addition to the company�s team, all the actors concerned with the design object. Thus, seeking to understand the way companies can integrate their customers in the NPD process raises two important dimensions :

- the �customer integration� dimension - the �NPD process� dimension

We chose to clarify these two dimensions as follows :

- the �customer integration� means the various degrees according to which it is possible to implicate the customer

- the �NPD process� is formalized by the phases which constitute the process

On this basis, we elaborated guidelines for customer integration practices in the NPD process. These guidelines were integrated into a questionnaire sent to 47 companies. We will present a synthesis of the statistical analysis carried out on completed questionnaires. It will allow us to identify the practices implemented by companies to integrate their customers in the NPD process.

1.1. �Customer integration� dimension : 5 degrees of implication Authors such as AMALBERTI, MAUGEY, BEGUIN, REUZEAU and COLAS argue that co-operation with the user can have various levels of intensity. From LEONARD-BARTON�s proposal (LEONARD-BARTON, 1995) and from an extrapolation of CALVI, LE DAIN and HARBI�s studies (CALVI, LE DAIN and HARBI, 2002) about the scales of supplier autonomy in design activities, we propose to make a similar analogy concerning the degree of customer implication in the NPD process. Indeed, we argue that customers can be integrated in the NPD process through several degrees. This leads us to propose a taxonomy of customer integration, corresponding to customer autonomy in the NPD process, according to a scale which goes from 0 to 4 :

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Figure 1 : 5 degrees of customer implication (Source : our research)

1.2 "NPD process" dimension : 7 phases of the process We made the choice of the �by phases� formalism for several reasons :

- it is sufficiently general to include the whole of the process. - it is easily understandable by all the company�s executives because it leaves no room

for interpretation. - it does not impose a chronological linearity, because these phases can be realized in

different orders, some phases can also be avoided and others can be realized in several steps or in an iterative way.

Figure 2 : 7 phases of the NPD process (Source : Our research)

Level 0 : Delivery. The customer is never directly solicited by the company in the NPD process. He only plays a role at the end of the company�s value chain, as a product buyer. Level 1 : Observation. The customer is taken into account but considered distant by thecompany, i.e. without direct exchanges between the company and the customer (neither communication, nor request). He doesn�t actually play a role in the NPD process. Level 2 : Consultation. This level refers to an NPD which supposes specific but repeatedcontacts with the customer, in order to obtain feedback, opinions about use or product utility �). Here, the customer is directly solicited, but doesn�t play a direct role in the NPD. Level 3 : Co-development. The company directly solicits the customer who takes part in aneffective way in the NPD process. Project teams are created, integrating the customer whois considered as full member of the team. He shares suggestions, proposes solutions andcontributes fully to the development of new products. Level 4 : Training. The customer is completely in charge of the offer that he wants the company to propose to him. The latter is considered as a technology supplier, withresponsibility for carrying out what the customer wishes.

Phase 1 : Knowing the Customer and identifying her needs Phase 2 : Turning needs into specifications Phase 3 : Formalizing the concept Phase 4 : Development / Problem solving Phase 5 : Testing / checking Phase 6 : Launching production Phase 7 : Evaluating Customer�s satisfaction / dissatisfaction

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1.3 Principle of guidelines for customer implication practices These two dimensions allow us to propose guidelines, which correspond to the following definition : �Various degrees of customer implication are possible in each phase of the NPD process�. In other words, it is possible to implicate the customer with varying degrees, in each phase of the NPD process. Thus, according to the aim of each phase (knowing customers and identifying their needs, turning their needs into specifications, etc...) and for each level of customer implication, it is possible to define practices.

2. METHODOLOGY OF CUSTOMER INTEGRATION

2.1. Protocol of data acquisition Data was acquired thanks to a questionnaire, previously validated by a panel of experts, which was sent to 47 French companies of various sizes ranging from SMEs to major groups, of various business types (BtoB or BtoC) and operating in 4 different technology fields :

- food industry - chemical industry - plastics industry - electrical industry

The questionnaire was divided into six parts :

- the first part lays the foundations. It allows us to know if the company has modified its offer over the two last years, if that modification was realized with the customer and, if so, for which step(s) of the NPD process.

- the second part aims to understand the customer implication practices which were

implemented by the company during the modification of the offer. This part is based on the concept of guidelines with the two dimensions previously described.

- the third part raises the question of the knowledge which was exchanged between the

company and the customer and more precisely its impact on the company.

- the fourth part aims to detect if customer implication in the NPD process is positively translated through the acceptability of the company�s product by its market.

- the fifth part deals with the position of the company�s innovation compared to that of

its rivals

- Finally, the sixth part is about the professional identity of the executive who completed the questionnaire. This part poses important questions for further data analysis, such as the type of business, the technology field and the company�s size.

2.2. Methodology of processing data The processing of the returned questionnaires consisted in statistical analysis by categorizing, cross-classifying and MCA (Multiple Correspondence Analysis), carried out thanks to the statistical processing software SPAD 4.50. The next figure shows for example the screen copy of an AFCM chart :

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2.3. Results Analysis by technology fields : The analysis revealed that companies in the food industry mainly implement, in a very important way, level 1 practices, i.e. practices suggesting limited customer consideration (only a presence in minds). Practices supposing a more effective customer implication (specific and targeted requests or frequent and free requests) are not implemented. These remarks must be moderated concerning level 4 practices supposing greater customer autonomy, for which the companies answers are mixed. Indeed, even if it does not concern the majority, some practices at this level are implemented in an important way within the majority of the companies in the food industry. The companies in the chemical industry principally implement, in an important way, practices relating to levels 1 and 3. Thus, they implement practices supposing limited customer implication (only a presence in minds), and practices supposing a more effective customer implication (with more interactions). These qualitative remarks can be moderated with a more quantitative point of view. Indeed, if the practices implemented in an important way by a majority of companies in the chemical industry are of levels 1 and 3, their number is however less than those implemented for example within the companies in the food industry : three practices of level 1 are implemented in an important way within the companies in the chemical industry, whereas eight are implemented in the companies in the food industry. Furthermore, level 0, 2 and 4 practices are not often, or never, implemented by the companies in the chemical industry. It is possible to make several assumptions to explain these observations. On the one hand, secrecy might be very important in the companies in the chemical industry, for which know-how might mainly be at the formulation level. On the other hand, although the importance of the customer is relevant to certain product aspects (such as softness, texture...), it might not be relevant to more technical aspects. Another possible explanation would be that companies traditionally implement level 1 practices and that they are just starting to integrate the customer more than before (implementation of level 3 practices). Concerning the companies in the plastics industry, the range of practices implemented in an important way is particularly broad : levels 1, 2 and 3 are concerned. They implement practices supposing customer implication ranging from a limited consideration (only a presence in minds) to an effective implication with free interactions and mutual trust between the company and its customers. These remarks can be moderated concerning the implementation of level 2 practices which are based on new technologies such as Customer Relationship Management applications that are not widely implemented in all the companies. In addition, level 0 practices are not often, or never implemented by these companies. The implementation of level 4 practices, supposing total customer autonomy in the NPD process, is mixed. If the practices at this level are implemented in an important way in some phases of the NPD process, the practices are on the contrary not often, or never, implemented in other phases. The range of the practices implemented by the companies in the plastics industry may be explained in several ways. The customers for whom the products are designed belong to a more significant number of different fields than those of the companies in the chemical industry, for example. The practices implemented by the companies of the plastics industry are often influenced by conditions imposed by large customers. This can explain the broader pallet of practices implemented. Concerning level 4 practices, it is debatable whether the

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mixed answers observed mean a tendency to more implementation of these practices, or if they remain secondary. Concerning the companies in the electrical industry, no particular level of customer implication can be determined. Whereas companies implement not often, or never, the majority of level 0 practices, the implementation of practices corresponding to levels 1 to 4 are mixed. Although all of the practices implemented in an important way are from levels 1, 2, 3 and 4, all the possible practices of these levels are not implemented. Let us underline the exception of practices based on tools such as CRM, implemented by a minority of companies in all the categories observed. Contrary to the companies of the plastics industry, the companies of the electrical industry have an important potential for progress, considering the number of level 1 to 4 practices which can still be implemented. This can perhaps mean that customer importance is weaker than in the plastics business, or else the normative pressures may be less important, and so interactions with customers may be less justified. Analysis by company size Analysis reveals that companies employing less than 10 people implement, in an important way, level 3 practices. These practices suppose exchanges and interactions between the company and its customers as part of the NPD process. The practices relating to levels 1 and 2 are implemented in a more mixed way. Although some are implemented in an important way, all the practices of these levels are not. For companies of this size, we still don�t consider the practices based on tools such as CRM, implemented by a minority of companies whatever the business category. For the majority of companies of this size, level 0 and 4 practices are not often, or never, implemented. Concerning the companies which employ between 10 and 49 people, the ways to approach the realization of the NPD phases are similar to the companies employing less than 10 people, in terms of levels requested (Indeed, they are different in terms of the nature of practices implemented). The practices often implemented suppose an effective customer implication, through free and mutual exchanges. Practices relating to levels 1 and 2 are also often implemented, whereas others practices are not often, or never, implemented. The practices relating to levels 0 and 4 are not often, or never, implemented by companies of this size. Companies employing between 50 and 499 people implement level 2 and 3 practices, which suppose an effective implication of customers, in terms of targeted consultations or communal work with the customer. These companies also implement some practices relating to level 1, in which the customer is considered distant (only a presence in minds), but a majority of them say they rarely or never implement practices of this level. Moreover, they do not implement practices of levels 0 and 4 in an important way. There is a certain similarity concerning the companies employing between 500 and 1999 people and the companies in the plastics industry. Their position concerning customer implication in the NPD process is unequivocal. Indeed, these companies implement practices relating to levels 1, 2 and 3 (except practices based on CRM tools). In addition, they implement not often, or never, level 0 and 4 practices. It can thus be concluded that the companies of 500 to 1999 people implement, in an important way, practices which suppose customer implication, whatever the level concerned.

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Companies employing more than 2000 people implement, in an important way, level 1 practices, which suppose limited customer consideration (only a presence in minds) in the NPD process and, to a lesser extent, the level 2 practices. Indeed, although some practices relating to level 2 are implemented in an important way, this is the contrary for some other practices of this level. However, these companies implement not often, or never, level 0 practices, level 3 practices which suppose an implication of the customer through free and mutual interactions, and level 4 practices. From a quantitative point of view, it is also particularly interesting to note the significant number of level 1 practices implemented in an important way by a majority of the �higher than 2000 people� companies, which is higher than the whole of the other categories. To conclude, it is interesting to note the tendency according to which the highly the manpower, the lower the levels (of customer implication) solicited. i.e. that the practices implemented in an important way reflect a less effective implication of the customer : one goes from customer implication through free and mutual exchanges between the company and its customers (level 3) to a simple taking the customer into account (level 1). Analysis by business types The situation of the BtoB (Business to Business) companies, i.e. whose customers are other companies, is relatively close to that of the companies in the chemical industry, in terms of customer implication levels requested (they are, however, different in terms of practices implemented). Indeed, these companies implement in an important way the practices relating to levels 1 and 3, i.e. the practices which respectively suppose a limited customer consideration (only a presence in minds) and closer interactions between the company and its customers. The BtoB companies implement neither, or not often, the level 0 practices, which consist in designing an offer without customer implication, nor level 4 practices. Concerning the BtoC (Business to Consumer) companies, one can note that the practices often implemented relate to level 1. These companies implement neither, or not often, level 0 practices, which consist in designing an offer without customer implication, nor level 4 practices. Analysis shows that the companies are divided about the implementation of levels 2 and 3 practices. Some differences can be observed between the BtoB and BtoC companies. For example, the phase of Test/checking with the practice of proceeding together (company and its customers) is implemented in a very important way within the BtoB companies, whereas it is not within the BtoC companies. Also, although the practice which consists in turning customer needs into specifications at the initiative of the customer is strongly implemented within the BtoB companies, this is the contrary for most of the BtoC companies. Collaboration may be easier between two companies, rather than in BtoC, for which interfaces with customers are often managed by the marketing department of the company. CONCLUSION From the sending of a questionnaire to 47 French companies, we studied how they integrate their customers in their NPD process, in terms of practices implemented. Particularly, the statistical analysis allowed us to underline differences between the categories of company

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observed (various technology fields, sizes and business types). We have identified, for each phase of the NPD process, the practices implemented, and those which are not, with a common way by a majority of the companies of each category, that is to say the practices for which the behaviors of each category of company are mainly the same, in terms of importance or non importance. BIBLIOGRAPHICAL REFERENCES AMALBERTI, R., MAUGEY, B., BEGUIN, P., REUZEAU, F. et COLAS, R. (1999). Méthodes et modèles d�implication des utilisateurs dans le processus de conception, Journée cognition et conception, Cogniscience-Prosper, Lyon CALVI, R., LE DAIN, M.A. and HARBI, S. (2002). Le partage de l�activité de conception entre un client et un fournisseur : quels modes de coordination adopter ?, 3ème colloque "La métamorphose des organisations", Nancy. GURGUL, G., RUMYANTSEVA, M. and ENKEL, E. (2002). Customer Integration � Establish a constant bilateral knowledge flow, University of St Gallen. LEONARD-BARTON, D. (1995). Wellspring of knowledge, Harvard business school press, Boston, Massachusetts. PRAHALAD, C.K. and RAMASWAMY, V. (2000). Co-opting customer competence, In Harvard Business School Press, Vol.78.