Working closely with your customers to tweak offerings and even business models is a standard business practice. But some companies gain ideas and insights from their customers’ customers as well.
Innovative companies fund internal research and development to help them gain a future edge in the marketplace. They also work closely with their suppliers in an effort to offer greater functionality and performance for their customers.1 However, some critical new product insights come not from suppliers and customers working together but from the customer’s customers. Although the supplier may have demonstrated the basic commercial viability of its offering, uncertainty can remain about what the best applications are and how to realize potential value. When suppliers and customers cooperate, they can “tweak” the technology. Relatively small changes can lead to big gains in value for the customer’s customers. Recent research on customer-oriented supplier innovation has focused on how suppliers and customers can cooperate to create innovative products and services, with cost savings as the principal goal.2 Other research has taken an outcomes-driven perspective on supply chains, treating innovation as one of many outcomes.3 By contrast, our research focuses on the innovation process involving three participants in the value chain — the supplier, its customer and the customer’s customer — to understand how to achieve outcomes that otherwise would not occur, in a process we call tweaking the supplier’s offering. (See “About the Research.”)