Edited by Laura Anna Costanzo and Robert Bradley MacKay
* C. Annique Un and Alvaro Cuervo-Cazurra Introduction In this chapter we analyze how managers can interact with customers to identify their needs and preferences and create innovations that meet these needs and preferences. The creation of innovations that satisfy customer needs is crucial for the ﬁrm’s success (Teece, 1986). Despite several decades of research on this topic, it remains challenging for many ﬁrms (Hoopes and Postrel, 1999). In some instances, a ﬁrm launches a new product that it considers highly innovative but is disappointed by unexpectedly low sales as it missed the market. Despite being a new product with no rival, customers do not appreciate it and avoid it. In other instances, a ﬁrm may be surprised when an innovation performs above expectation in the market, but the ﬁrm is then unable to meet the unanticipated demand. In both cases, the ﬁrm faces a problem. In the ﬁrst scenario, the innovative eﬀorts of the ﬁrm are not rewarded by the market. In the second, the ﬁrm is unable to meet demand and may pave the way for competitors. To avoid both problems, the ﬁrm can beneﬁt from interacting with customers. This helps it obtain knowledge needed to innovate the product in a way that improves its success in the marketplace (Flores, 1993; Griﬃn and Hauser, 1993). This interaction with customers helps the ﬁrm better manage the unexpected performance of the innovation by helping to better foresight the needs and preferences of customers. Such foresight goes beyond forecasting...
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