This is an MIT Sloan Management Review article. It has long been assumed that companies develop new products for consumers, while consumers are passive recipients -buying and consuming what producers create. However, this paradigm is fundamentally flawed, because consumers themselves are a major source of product innovations. The authors have framed a new innovation paradigm, in which consumers and users play a central and active role in developing products on their own. In this article, they summarize key findings from studies on consumer product innovation conducted in the United States, the United Kingdom and Japan. The authors describe three phases in the new innovation paradigm. Initially, markets for products and services with novel functionality are both small and uncertain, with consumers pioneering really new products (for example, the skateboard) for themselves. In the second phase, other consumers become interested in the new products. In the third phase, producer companies decide if the information on the design and function of the new product, and the projected market, are consistent with their risk profiles. The implications are significant for both consumers and producers, the authors note. Consumer innovators should realize that they play important roles in developing novel products and services. Businesses, for their part, need to think about how they can reorganize their product development systems to take advantage of prototypes developed by users. By focusing on product concepts that consumers have already prototyped and tested, companies can save money and improve their success ratios.

This is an MIT Sloan Management Review article. New products suffer from notoriously high failure rates. Many fail, not because of technical shortcomings, but because they simply have no market. Not surprisingly, studies have found that timely and reliable knowledge about customer preferences and requirements is the single most important area of information necessary for product development. To obtain such data, many organizations have made heavy--but often unsuccessful--investments in traditional market research. The authors provide an alternative. Companies including Threadless, Yamaha, and Ryohin Keikaku have integrated customers into the innovation process by soliciting new product concepts directly from them. These firms also ask customers to commit to purchasing a new product before the companies commence final development and manufacturing. This process--called "collective customer commitment"--can help companies avoid costly product failures. In essence, collective customer commitment enables firms to serve a market segment efficiently without first having to identify that segment and helps convert expenditures in market research directly into sales.