Japanese businesses too slow to capitalise on the prosumer potential

On their website, Kusou Seikatsu (http://www.cuusoo.com) celebrates the debut of another innovation. This time they have invented a contractible heater that fits into the window rail to prevent the flow of cold air into a room. Not long after the new product was announced, it became the top seller at Rakuten.co.jp, one of the biggest on-line shopping portals in Japan.

Kusou Seikatsu is a pioneer Internet-based open community that attempts to commercialise product ideas from consumers. Ideas and concept designs for new products are collected from their members. The best designs are put to the vote and the winning design is sold to potential producers for mass production. In theory, the potential marketability of the winning design seems ensured because it is consumer driven and supported.

This so-called “consumer driven innovation” (CDI) is part of an increasingly popular concept called “prosumerism”. Popularised by futurologist, Alvin Toffler, in his book published in 1981, The Third Wave, he describes “prosumers” as a mix between producers and consumers. Toffler suggests that the distinction between producers and consumers is becoming blurred as production shifts away from “mass production” to “mass customisation”. Increasingly, consumers are participating directly in the conception, design, innovation and promotion of products and services.

Eric von Hippel, the author of Democratizing Innovation (MIT Press, 2005), illustrated the enormous potential of prosumerism. An experiment at 3M shows that annual sales of a product developed through CDI can be high as $146 million, eight-times larger than those average products developed in the traditional manner ($18 million). It also suggests that CDI often leads to an entirely new product line, while traditional product development tends to focus on incremental improvement of existing products.

Multinational giants are now cashing in on the prosumer potential. Through CDI, Procter & Gamble (P&G) have already successfully delivered a wide range of products, including a fabric softener with odour-eliminating technology. Nike has an interactive website, “Nike ID”, in which consumers can customise designs. Recently, some companies like General Electronics (GE) and BMW have even provided special designing software (toolkit), so that consumers can create more comprehensive designs.

Japanese producers have been following a similar trend. RICOH Elemex (a member of RICOH group, which is a major manufacturer of photocopiers and printers), a manufacturer of precision equipments, has been running CDI projects to develop designs interactively on an internet forum. Triumph Japan (a major brand of ladies’ underwear) undertook a similar project in 2001, and proved very successful.

Yet, prosumerism in Japan seems to be far from flourishing. Research conducted by InternetCom and InfoPlant have shown that Japanese consumers still have little opportunity to participate in CDI. Although nearly 80% of people expressed their wish to participate in CDI, only 2% of them were actually involved in CDI programs.

Lack of know-how seems to be a major reason why CDI is not widespread in Japan. Kazuko Katase, a senior researcher from Institute of Future Technology, suggests that many CDI projects fail to take advantage of the interactive nature of the internet (Nikkei Digital Core, on-line edition, July 13, 2005). Ms Katase complained that many companies lack the skills to organise and navigate participants’ feedback effectively.

Japanese companies understand the power of consumer feedback. According to the JMA Research Institute (JMAR), 57% of companies collect customer feedback via e-mail and websites, and 25% of them actively search the internet for their company and product’s reputations. The problem is that Japanese businesses do not know what to do with consumer feedback. The survey reveals that 83% of the companies have difficulties in comprehending the feedback, and 90% say that they cannot sufficiently address the solutions.

The problem seems to lie in how Japanese companies communicate with consumers. They are eager to listen, but fail to speak with their customers. Nomura Research Institute suggests that intensive communication and collaboration with consumers is vital for taking the full advantage of consumer feedback, but many companies fail to develop two-way communication. For CDI to succeed, Japanese producers must ensure that they actively communicate with customers and facilitate constructive discussion.

The interactive nature of the internet is, therefore, almost a prerequisite for successful CDI. However, digital divide may have been one of the barriers against prosumerism. A large proportion of consumers might not be participating in CDI simply because of the digital divide. Older people especially are likely to be left out, with the older age group (50 years old or more) accounting only for 15% of total net users.

The good news is that older people are increasingly becoming an important part of on-line communities. Results from InfoCom Research in July 2004 show that older age groups (50 years old or more) have now become the highest on-line spenders (approximately 150,000 Yen a year) among all age groups.

Fortunately, it seems that young and old alike, are all willing to participate in CDI once they are on-line. Surveys by Web Advertising Bureau (WAB) and the National Statistics Office show that usage patterns of the internet are similar across all age groups. Regardless of their age, net-users are equally eager to share opinions, information on sites such as message boards, chats, blogs etc. Japanese producers now can expect participants from a broader population.

The digital divide is now disappearing and potential participants to CDI are much more broad-based. Japanese businesses will need is communicate with these potential prosumers to capitalise on their enormous potential.

Author: Kozo Otsuka
© Research Institute for Asia and the Pacific, University of Sydney

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firstly, what the hell is a window rail?
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Great article although I don't fully understand the product (window rail). I do think though that Japan are definately innovators when it comes to technology and inventions. They are definately leading contenders on a worldwide scale.

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