Harnessing Digital Customer Platforms for Enhanced Product Innovation: The Mediating Role of Competence Ambidexterity

In today's business landscape, heightened customer expectations coupled with an increasing demand for personalization presents a formidable challenge for manufacturers. The American Customer Satisfaction Index (ACSI) report highlights this tension, indicating a stagnation in customer satisfaction over the past decade, despite a surge in global product availability (ACSI, 2022). This dichotomy is further exacerbated by the rise in consumer sophistication, where they not only demand more customized products and services but also expect firms to respond agilely to their evolving needs (Schmitz & Ganesan, 2014).
Understanding these shifts, many firms are turning to Digital Customer Platforms (DCPs) as a strategic tool to actively engage with and tap into the latent creativity of their customers. Such platforms are not merely interfaces; they have evolved into essential conduits for identifying market opportunities, streamlining product offerings, and achieving broader innovation objectives (McIntyre & Srinivasan, 2017). While the concept of digital platform is appealing, the empirical research in this area remains limited. One of the major challenges conducting empirical research on digital platforms is the absence of a clear conceptual definition, as highlighted by Bonina et al. (2021). This study aims to provide a comprehensive understanding of DCPs, thereby offering a two-fold benefit of DCPs: a creativity function that allows for the free flow and enhancement of innovative ideas, and a connectivity function that ensures clear communication and direct customer support across various digital channels. An example to this is the strategy adopted by LEGO, wherein its DCP not only enables user-designed toys but also ensures these designs are in sync with the company's broader business strategies, moving beyond the traditional confines of in-house product development. Through the adept use of DCPs, manufacturers can harness the collective creativity and insights of their customer base, enhancing their innovation outcomes and staying agile in the face of evolving market demands.
In light of the above, our research question is: How can manufacturers leverage customer platforms for enhanced product innovation? Drawing insights from dynamic capability, organizational ambidexterity and contingency theory, we argue that companies must strike a balance between competence exploitation and exploration (i.e., competence ambidexterity) to translate the benefits of digital customer platforms into firm’s innovative performance. In this study, digital customer platform can be established by the company or rely on third party platform. Digital customer platform is defined as a digital platform that facilitates interactions between the firm and its consumers for a better value co-creation. The function of a digital customer platform for connectivity can offer firm valuable insights to enhance its existing decision-making process. However, a firm that becomes excessively focused on exploitation may face challenges because the existing knowledge and capacity may limit its ability to fully realize novel idea. Likewise, a firm that is overly oriented towards digital customer platform for creativity to explore new ideas may suffers the costs of experimentation without gaining many of its benefits. This is because many of these ideas may be unfeasible and exhibit little refinement of the existing competencies. Therefore, firms need to better leverage digital customer platform to balance the view of exploitation and exploration competences to achieve innovative performance.
Our study offers three distinct contributions to current literature. First, while the emerging body of research on DCPs is expanding, there remains a significant gap in its conceptual clarity. One of the primary challenges is the ambiguous definition surrounding DCPs (Bonina et al., 2021). To address this, we introduce and empirically validate two foundational functions of these platforms: Creativity – where platforms enable customers to freely share novel ideas, build upon each other's concepts, and access tools that augment their creative expression; and Connectivity – characterized by transparent communication, fostering interactive dialogues between and among customers, and seamless integration with the firm’s core business processes and decision-making routines.
Second, our research bridges the previously fragmented connection between DCPs and innovative performance by spotlighting the pivotal role of competence ambidexterity. While the existing literature offers insights into the impacts of DCPs on business outcomes (Wei, Wang, and Chang, 2021; Tse et al., 2023), the intricate interplay between these platforms and their potential to foster both exploration (via creative customer inputs) and exploitation (through improved connectivity and real-time feedback) remains underexplored. Our study delves deep into this synergy, elucidating the mechanisms through which DCPs nurture competence ambidexterity, thus acting as a potent catalyst for new product innovation. In doing so, we provide firms with a nuanced framework, guiding them in the optimal utilization of DCPs to supercharge their innovative capacities in an increasingly competitive landscape.
Third, our study employs a multifaceted approach, examining both internal and external factors that determine the effectiveness of DCPs. On the internal front, we find that competence ambidexterity benefits from the presence of technical knowledge explicitness and interfunctional coordination; these factors foster efficient knowledge transfer and integration, enabling firms to make better use of customer platforms. Externally, while market uncertainty, characterized by swift changes in technology and customer preferences, dampens the impact of customer platforms on competence ambidexterity, the presence of competitor imitation bolsters it. This is because imitation acts as a market signal, decreasing information asymmetries and underscoring product trends. These diverse contingencies, spanning from internal knowledge strategies to external market shifts, influence the extent to which firms can capitalize on DCPs to boost competence ambidexterity. Through this analysis, our research provides a strategic roadmap for manufacturers navigating the intricate domain of DCPs, ultimately aiming to amplify product innovation in an ever-changing and evolving marketplace.
Through a multi-informant survey of 312 manufacturing firms in China, we examine the mediating effect of competence ambidexterity and investigate the boundary conditions that influence the efficacy of digital customer platforms. Our findings reveal that these platforms exert a more pronounced influence on a firm's competence ambidexterity when the firm excels in tacit knowledge transfer and interfunctional coordination. In contrast, the influence diminishes in environments characterized by high market uncertainty and when competitor imitation is less pronounced.