The digital revolution that has taken place in recent decades has changed the way we work and play. It has also changed the way that businesses operate–and how customers interact with them. So what separates companies that are wildly successful in the digital sphere from those that are not? Kalle Lyytinen, PhD, has a theory.

Lyytinen is Iris S. Wolstein Professor of Management Design, associate dean for research, faculty director of the Doctor of Management (DM) program, and a professor of design and innovation. He recently coauthored a book with two graduates of the DM program, Mike Fisher and Marty Abbott. The book, which is aimed at a general business audience, is called The Power of Customer Misbehavior: Drive Growth and Innovation by Learning from Your Customers.

W: Your new book is called The Power of Customer Misbehavior. What do you mean by “customer misbehavior”?

KL: The main point we wanted to argue is that, especially in this new digital space–in social media and similar services–much of the market growth for companies happens when their customers basically misuse their service. And those companies that cannot build a mechanism to learn from customer misuse are the ones that can’t succeed.

W: What is your favorite example of a company that did this well?

KL: Around 2006, Facebook found out that users were creating accounts for cats and dogs. And while pets don’t really qualify as what they typically thought of as a user, they basically allowed that to happen. Then they created separate overall applications called Catbook and Dogbook.

Friendster was the first social media site, before MySpace or Facebook, and it had all the elements to become a very successful company. One of the reasons it didn’t is because the company didn’t really learn from misuse. For example, they actually forbade their users to create accounts for their cats and dogs. They called them Fakesters, and they were very rude about it. So that shows how these two companies had very different attitudes toward clear misuse.

The classical view of innovation and marketing studies says there are three aspects to the value proposition of a product. The first, of course, is that it has to be somehow useful. There has to be some value for the customer. The second one is that it has to be easy to use. It has to be easy to access, or the cost of using it shouldn’t be too great. For example, that is why Apple is so popular–because Apple products are incredibly easy to use. You don’t even get a manual with them. The third aspect is, how does the product relate to myself? The idea is, you try to create a brand that appeals to certain market segments so that my identity, my view of myself can be somehow aligned with it.

When you look at these cases of Catbook and Dogbook, it’s something different. It’s not about branding. It’s not, “Here’s a cool thing by which pet owners can relate to our brand of Facebook.” It was rather that the users themselves saw an opportunity to use the service in a way that helped them to express their identity. And that idea of identity projection or identity consumption is another key idea in the book: Much consumption and market behavior, especially in the digital space, is about identity construction.

Two motivations for the use of such products came out clearly in our field studies. One of them is exhibitionism, and the other is voyeurism. These are mutually enhancing behaviors, so exhibitionists need voyeurs, and voyeurs need exhibitionists. Each of us has both of these traits to some extent.

Social media sites enable these behaviors to become more pronounced and strengthened. And what is really unique about our study is the idea of misuse as it’s related to identity. It’s not about classical branding, but is largely driven by these quite archetypal and fundamental human traits: the need to be seen and recognized, and the idea that “I belong to a group, and I want to see what the others are doing.”

W: So it’s these fundamental human qualities that allow people to take something and misuse it to get at those basic needs?

KL: We used the word misbehavior, because it’s broader. There is some work by Eric Von Hippel and others at MIT about lead users and how users have become innovators. We go further than he does, because his main argument is, “Well, you have to learn from users.” But the learning is merely associated with the primary functions of the original product–you can expand it or add new buttons, things like that. There’s a good example of that. Over the Thanksgiving holiday, there were a lot of advertisements for LG phones saying, “We listened to our customers.” Now the volume button is at the back so you can use your index finger. This is an example of learning from lead users, but it’s not misuse. It’s just making it easier. Whereas our idea would be using the phone as a hammer.

W: So this is taking a capability that the creators of a product had not thought about and going with it. Facebook responded to customers with Catbook and Dogbook, but Friendster did not know how to do this.

KL: Facebook was really relentless in trying to learn how people used it differently and to integrate that type of learning into their product development, whereas at Friendster, this was not the case. They had a very strict view of their product: “This is what it’s for.” They tried to improve it over time and follow very strict engineering principles. But they were not successful.

First of all, they didn’t even necessarily listen to lead users. Second, they denied and cancelled all possibilities for misuse. This idea of misuse has significant implications for how you think about, first of all, your R and D, and also, what is the role of the designer, who is the designer, and how you think about design.

W: So they may have a designer-driven idea, but it kind of sucks the life out of it if you don’t then allow users to modify it and crowdsource and contribute to it.

KL: We also had this idea that social media platforms are examples par excellence of co-creation. There’s no value unless you get users to co-create the value: They generate the content, and there has to be content which is of interest to other users.

We have found that there is a secondary process which you could call co-production. Classically, only the company itself develops the products, and that’s fine and dandy. You have to do that, because you have to make something which is useful and easy to use, and you have to understand customer needs throughout the cycle.

Now, the idea of co-production goes further, because you have to actually understand that in many cases the users are better designers than you are. And the experience of Facebook and Twitter and any of these successful companies is exactly that. The best ideas emerge while people actually use the product.

W: What if you had a couple of hours to yourself without any research- or teaching-related activities to attend to? What would you do with your spare time?

KL: I’d go to a good classical concert or opera. I like Bach, Beethoven. But I’m a Finn, so I also like Sibelius. He expresses the Finnish soul. It’s a little bit dark, but there are some shades of clarity. My wife and I have season tickets to the Cleveland Orchestra. It’s one of the joys of living in Cleveland.

(Source :http://weatherhead.case.edu/news/2013/12/20/kalle-lyytinen-explains-why-facebook-succeeded-where-friendster-failed)