Tapping Into the Collective Wisdom of Community to Make Great Products

Barry Libert and Jon Spector

For businesses large and small, it’s no inconsequential decision to let customers dictate what is sold. New product development is among the most important activities any enterprise undertakes. A business lives or dies on the strength of what it offers, and it’s understandable that leaders often resist losing control over the basic nature of the goods they sell.

But there’s much to be said for tapping the collective wisdom of a community—customer or otherwise—for product ideas and improvements. In the case of customers, it gives them a vested interest in the results and all but guarantees they will like—and buy—what they’ve created. You might even be able to skip the whole test-marketing process (but, of course, that’s up to you).

Imagine the computers that Acer or Gateway or Hewlett-Packard could create with input from customers—computers made not for geeks who love to install memory cards and new software, but for the rest of us, who like to drive cars without having to know how to repair the fuel injector.

Many companies have pioneered product development by people not on their payroll. These businesses range from food giants to the inventors of a popular virtual world that has confounded skeptics who believed only nerds would sign on. These organizations’ commitment to the collaborative process ranges from cautious to total immersion.

Nikoli

Maki Kaji likes to bet on the ponies, which explains why, when he started a puzzle magazine in 1980, he named it Nikoli in honor of a winning racehorse. The quarterly magazine, based in Tokyo, turned out to be a good bet, too. It offers some 30 different types of puzzles with each issue, and a third of them are brand new. They are the handiwork not of the company’s employees, but of its readers.

Kaji is the world’s most prolific pencil-and-paper puzzle creator, and he publishes them by the hundreds in Nikoli and in all sorts of books and other puzzle magazines. But he relies on others to do the creating. In the case of Sudoku, for example, which Kaji promoted around the globe, the inventor was an American. For the rest, he looks to his tens of thousands of subscribers.

They submit their ideas for new kinds of puzzles; a staff of 20 goes through them; and the most promising appear in the next issue of Nikoli. Readers then send in their reactions and critiques. Out of that process, Kaji has winnowed some 250 new kinds of puzzles, which get printed in his books.

In the case of Sudoku, he trademarked the game in Japan but nowhere else, so he receives no royalties from the huge sales of the game around the world. He claims to be unfazed, and he has no intention of trademarking other new games. “This openness is more in keeping with Nikoli’s open culture,” he told The New York Times. “We’re prolific because we do it for the love of the games, not the money.” He prides himself on never having advertised Nikoli, letting the Japanese love of mathematics and games do the selling.

Working a puzzle is like being at the track, he explains: “Not just the fun of solving it, but the excitement before, even if you don’t solve it. It’s that excitement before the finish line when the horses are roaring down the stretch, and you’re cheering them on.”

Nikoli first published a complicated version of Sudoku in 1984. Its readers offered their modifications and corrections until Kaji had a puzzle he thought was a winner, and it caught on in Japan. But it wasn’t until the London Times picked it up 20 years later that Sudoku took off. And that put Kaji and his company in the spotlight as puzzle promoters. Lately, another community-provided numbers puzzle from Nikoli, called Kakuro, has been taking the world by storm.

Procter & Gamble

For generations, the research and development (R&D) team at Procter & Gamble (P&G), 9,000-strong, had been the stuff of business legend, cranking out dozens of high-profile, high-profit new products year after year. But in 2000, A. G. Lafley, the company’s newly arrived chairman and chief executive officer, stunned his prideful researchers. They were not, he announced, producing winners big enough or fast enough to significantly boost corporate revenues. His solution was drastic: By the end of the decade, fully half of all new P&G products and technologies would have to come from outside the company.

The object, Lafley insisted, was not to supplant the mighty in-house R&D effort, but to supplement it. That turned out to be a vastly difficult venture, though, and no wonder, given the company’s size and complexity. For one thing, the internal communication systems had to be reinvented to make it possible for all parts of the company to exchange data and brainstorm. Then that information had to be made available to non-company entities, including suppliers and distributors.

Another stumbling block was the resistance of many of P&G’s key researchers. Some complained that the proposed changes in their way of doing things would stifle creativity. Others feared a loss of power and prestige if their information and work had to be shared.

Lafley persevered. His most drastic move was a giant step into crowdsourcing. P&G put together a global community made up of high-tech entrepreneurs and open networks such as NineSigma, including the retired scientists and engineers of YourEncore, and the marketplace for intellectual property exchange called Yet2.com. P&G has also gone to Innocentive, a network of 120,000 self-selected technical people from more than 175 countries who receive cash awards if their ideas prove out.

In seeking help from its extended community, P&G submits so-called “science problems” for solutions. Sometimes the problems come from in-house R&D, representing blind alleys those researchers have come up against. Sometimes the company asks its online partners for help in adapting a feature of a competitor’s product to one of its own. The right answers have greatly benefited P&G. In the case of Innocentive, for example, a third of the dozens of problems posed have been solved. One crisp example of an early crowdsourcing triumph: When the company was stymied for a way to print messages on its Pringles potato chips, the development community found a bakery in Italy with a little-publicized process that could do the job.

P&G is closing in on Lafley’s goal. As of 2006, the company was deriving 35 percent of its ideas from outsiders. Meanwhile, R&D productivity has soared 60 percent. A whopping 80 percent of its product launches are successful, compared to 30 percent for the consumer-products industry as a whole. And it spends 3.1 percent, or about $2.1 billion, of its more than $68 billion in annual worldwide revenue on R&D, much more than others in the industry.

What You Can Do

Tread firmly but carefully. Seeking the help of outsiders, even when they’re part of some amorphous, unseen community, can be threatening to in-house staff. They will resist. Make your intentions clear, as P&G’s Lafley did, and stick to them. Meanwhile, do everything possible to accommodate the concerns of the resisters. For example, P&G

allowed researchers to type up their notes in Microsoft Word or continue to rely on an older system that was modified to make it compatible with the new pilot technology.