Creative consumers (defined as customers who adapt, modify, or transform a proprietary offering) represent an intriguing paradox for business. On one hand, they can signify a black hole for future revenue, with breach of copyright and intellectual property. On the other hand, they represent a gold mine of ideas and business opportunities. Central to business is the need to create and capture value, and creative consumers demand a shift in the mindsets and business models of how firms accomplish both. Based upon their attitude and action toward customer innovation, we develop a typology of firms’ stances toward creative consumers. We then consider the implications of the stances model for corporate strategy and examine a three-step approach to dealing with creative consumers: awareness, analysis, and response.

1. WHEN CUSTOMERS GET CLEVER:MANAGERIAL APPROACHES TO DEALING WITH CREATIVE CONSUMERS Based on the following paper: Berthon, P.R., Pitt, L.F., McCarthy, I.P., and Kates, S.M. 2007. When Customers Get Clever: Managerial Approaches to Dealing with Creative Consumers. Business Horizons, 50(1): 39-47. Download a PDF of the paper)

2. SOME STORIES……. Jim Hill Jose Avila Ron Gremban The BBC

3. JIM HILL barred from the Magic Kingdom devoted Disney fan writes a blog on Disney Offers guided but unauthorized tours of Disneyland, charging $25 per person March 2005 security at Disneyland in Anaheim, California informed him barred from the park and all other Disney venues

4. JOSE AVILA Made furniture for his apartment exclusively from Federal Express boxes FedEx promptly overnighted a cease and desist letter consumer comments on weblogs persist: “This really brightened my day! The letters are classic lawyer exchange. My husband and I laughed and laughed. Lawyers jousting at windmills...”, “FedEx needs to lighten up. Jose is a bright and innovative young man, and instead of making his life miserable, they should give him a great job.

5. RON GREMBAN’S CAR looks like a typical Toyota Prius hybrid an additional stack of 18 brick-sized batteries boosts the car's already high mileage with an extra electrical charge so it can burn even less fuel. spent several months and $3,000 tinkering with his car Toyota initially frowned on people altering their cars now say they may be able to learn from them

6. THE BBC giving web developers and designers outside of the organization access to its content so that they can "create cool new things". Called backstage.bbc.co.uk, it gives people who create computer programs, applications or graphics the chance to put their stamp on BBC digital content. Build what you want using BBC content backstage.bbc.co.uk is the BBC's developer network to encourage innovation and support new talent. Content feeds are available for people to build with on a non-commercial basis.

7. CREATIVE CUSTOMERS ARE……. We define the creative consumer as an individual or group, who adapts, modifies or transforms a proprietary product, service or idea Early Model T Ford regularly adapted by farmers as a power source for driving generators, mills and lathes The related concept of ‘lead user’ has been the primary focus of management and researcher attention.

8. CREATIVE CONSUMERS INCLUDE: Lead users Pirates Ad-generator consumers Hackers Steam punks In fact any “individual or group, who adapts, modifies or transforms a proprietary product, service or idea” (Berthon et al., 2007, page 40)

9. CREATIVE CONSUMERS Creative consumers work with all types of products – NOT just novel or enhanced products that are the focus of the lead user Creative consumers don’t necessarily face needs that will become general, often work on personal issues that remain personal, or expand in use to a subset of users. Creative consumers need not benefit directly from their innovations, may obviously benefit indirectly thorough thanks, peer recognition etc. Firms use formal and disciplined process to find, screen and select lead users. Creative consumers rarely ask permission to experiment - they select the product, the firm, the innovation.

10. CREATIVE CONSUMERS - WHY TREAT THEM STRATEGICALLY: They exist, are here to stay - as technology becomes more digitized, atomized, and interconnected: the potential for consumers to reprogram, adapt, modify and transform becomes greater. Creative consumers are a rich source of innovation. Recognizing and utilizing creative consumers is a form of outsourcing, whereby the process of new product development is informally contracted out to the market

11. WHAT STANCE SHOULD FIRMS HAVE TOWARDS CREATIVE CONSUMERS

12. THE DISCOURAGE STANCE Firm’s attitude towards consumer innovation is negative, but the firm’s actions are de facto passive Sony and the PSP Apple and Podcasting

13. THE RESIST STANCE Attitude towards consumer innovation is negative, but the firm’s responses are active Ford refused to honor warranties on vehicles that had been adapted for alternative farming applications Sony sued consumers who hacked the AiboPet operating system to make their cyberpet dance, jive and perform a wide host of ‘unauthorized’ actions

14. THE ENCOURAGE STANCE Firm’s attitude towards consumer innovation is primarily positive, but the firm’s actions are again de facto passive Skype and Skypecasting

15. THE ENABLE STANCE Firm’s attitude towards consumer innovation is positive, but the firm’s posture is overtly active Ford seems to have changed its stance and is working with individuals such as Chip Foose and his own business, Foose Design.

16. AWARENESS, ANALYSIS AND RESPONSE Be Aware of what’s happening Analyze the phenomenon - this is where the matrix is essential. What are the implications for the firm? Should our attitude be positive or negative? Should we pursue a hands-off approach, or actively engage with the phenomenon? Two key questions that need to be asked during the analysis phase are: what is the path of the value What is the polarity of the value - produced by creative consumers?

17. DEFINITIONS The path of the value relates to whether the impact on the firm is direct or indirect. The polarity of the value relates to the whether the value to the firm is positive or negative.

18. CONCLUSION Traditionally firms have paid little attention to the phenomenon of creative consumers - we suggest that this can no longer be the case Creative consumers are likely to be an increasingly important force for change and innovation in many markets. Firms need to enhance awareness of their creative consumers, analyze their impact and formulate an appropriate response.

19. CONCLUSION Responding to the threats and opportunities of creative consumers will require firms to manage a three way fit between: a specific stance towards creative consumers the relative ability and desire of consumers to adapt, modify and transform their products and, the firm’s ability to scan, track and control consumer produced innovations

20. THANK YOU