Value Creation by Toolkits for User Innovation and Design: The Case of the Watch Market

Franke, Nikolaus and Piller, Frank (2004) Value Creation by Toolkits for User Innovation and Design: The Case of the Watch Market. Journal of Product Innovation Management, 21 (6). pp. 401-415. ISSN 1540-5885

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This study analyzes the value created by so-called "toolkits for user innovation and design," a new method of integrating customers into new product development and design. Toolkits allow customers to create their own product, which in turn is produced by the manufacturer. In the present study, questions asked were (1) if customers actually make use of the solution space offered by toolkits, and, if so, (2) how much value the self-design actually creates. In this study, a relatively simple, design-focused toolkit was used for a set of four experiments with a total of 717 participants, 267 of whom actually created their own watches. The heterogeneity of the resulting design solutions was calculated using the entropy concept, and willingness to pay (WTP) was measured by the contingent valuation method and Vickrey auctions. Entropy coefficients showed that self-designed watches vary quite widely. On the other hand, significant patterns still are visible despite this high level of entropy, meaning that customer preferences are highly heterogeneous and diverse in style but not completely random. It also was found that consumers are willing to pay a considerable price premium. Their WTP for a self-designed watch exceeds the WTP for standard watches by far, even for the best-selling standard watches of the same technical quality. On average, a 100% value increment was found for watches designed by users with the help of the toolkit. Taken together, these findings suggest that the toolkit's ability to allow customers to customize products to suit their individual preferences creates value for them in a business-to-consumer (B2C) setting even when only a simple toolkit is employed. Alternative explanations, implications, and necessary future research are discussed. (authors' abstract)

Item Type: Article
Additional Information: The authors would like to thank Steffen Wiedemann, Martin Schreier, Marion Pötz, and the students of the E&I Research course (2002-2003) for their valuable assistance. We also are indebted to Helmut Strasser (chair of experimental mathematics and statistics, Vienna University of Economics and Business Administration) for his contributions regarding the concept of entropy. Also, we would like to express our gratitude to Abbie Griffin and the two anonymous reviewers, whose comments helped us to improve the article significantly. Finally, the authors would like to thank the Jubilaeumsfonds der Oesterreichischen Nationalbank for funding this research project. Published with Wiley OnlineOpen option.
Divisions: Departments > Strategy and Innovation > Entrepreneurship und Innovation > Franke
Version of the Document: Published
Variance from Published Version: None
Depositing User: Elena Simukovic
Date Deposited: 11 Feb 2016 11:05
Last Modified: 06 May 2018 16:00
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