Featured Research: The Paradox of Tie Strength in Customer Relationships for Innovation: A Longitudinal Case Study in the Sports Industry

I am happy to announce the publication of a new paper on a topic that is strongly underlying this blog: The relationship between firms and customers for innovation and value creation.This post shall be the start of a series of posts on our own papers and papers from others in the area. In an act of shameless self promotion, I start with one of our own papers.

Piller:fredbergThe Paradox of Tie Strength in Customer Relationship for Innovation: A Longitudinal Case Study in the Sports Industry, by Tobias Fredberg & Frank T. Piller 
 

Published in: R&D Management, Vol. 41, Issue 5 (Dec 2011)
Download working paper version at SSRN.com

Current literature argues that firms should have strong ties to customers to benefit from increased customer retention and loyalty. Strong ties, however, have also been shown to prevent innovation, suggesting that firms should also develop weak ties to other customer groups.

Our paper tries to explain this paradox. We look in situations where strong ties facilitate, rather than prohibit, innovation.Picflow Kopie Our paper is based in a seven-year longitudinal research project with a global sporting goods company.

From the case we find that the paradox of tie strength results from an overly simplified view of the nature of company-customer relationships.

Contrary to the established literature, we find that strong ties in the case supported significant innovation. In fact, the involvement resulted in the development of a new product with a radically different product architecture and led to one of the most successful product launches in the company’s history.

To explain these findings, we introduce the nature of customer participation in a firm’s value creation processes as a new dimension of the constitution of firm-customer ties and discuss how such a kind of relationship can develop (see Figure).

In addition to the known continuum of strong and weak ties, firms have to look on the nature of ties which results from different modes of interacting with customers: Firms can either select rather passive modes, where customers just response to an activity of a firm, or much more interactive relationships, where customers actively contribute and participate. We find that the latter kind of relationships can be created by a firm, and that here radical innovation despite (or better: due to) strong ties can be possible.

Context information:

Benedict Dellaert and colleagues recently had a great paper on a similar topic, see "Corine S. Noordhoff, Kyriakis Kyriakopoulos, Christine Moorman, Piet Pauwels and Benedict G.C. Dellaert (2011), “The Bright-Side and Dark-Side of Embedded Ties in Business-to-Business Innovation,” Journal of Marketing, forthcoming (pdf download here)."

Interested in more recent / upcoming research papers? Then look here for a list:

SSRNRecent Working Papers / Work in Progress by Frank Piller: Download of recent working papers at SSRN

About the Author:

Frank T. Piller is a Co-Director of the MIT Smart Customization Group at the MIT Media Lab, Massachusetts Institute of Technology, USA, and a chair professor of management at the Technology & Innovation Management Group of RWTH Aachen University, Germany, one of Europe’s leading institutes of technology. Before entering his recent position in Aachen, he worked at the MIT Sloan School of Management (2004-2007) and has been an associate professor of management at TUM Business School, Technische Universitaet Muenchen. Frequently quoted in The New York Times, The Economist, and Business Week, amongst others, Frank is regarded as one of the leading experts on strategies for customer-centric value creation, like mass customization, personalization, and innovation co-creation. His recent analysis of the crowdsourcing business model “Threadless” (co-authored with Susumu Ogawa), an innovative crowdsourcing business model in the fashion industry, has been elected as one of the Top-20 articles in MIT Sloan Management Review.