Virtual customer communities enable firms to establish distributed innovation models that involve varied customer roles in new product development. In this article I use a multitheorotic lens to examine the design of such virtual customer environments, focusing on four underlying theoretical themes (interaction pattern, knowledge creation, customer motivation, and virtual customer community-new product development team integration) and deriving their implications for virtual customer environment design. I offer propositions that relate specific virtual customer environment design elements to successful customer value creation, and thereby to new product development success. The emergence of new information and communications technologies has initiated a radical transformation of customer-producer relationships in many industries, with important implications for new product development (NPD). New technologies, such as the internet, allow broad communities of interest (e.g., customers) to coalesce around specific products and services. Such online or virfuaJ customer communities (VCCs) could facilitate the deployment of distributed innovation models that involve varied customer roles in NPD (Holmstrom, 2001; Kambil, Friesen, & Sundaram, 1999; Prahalad & Ramaswamy, 2000) . Customers can be involved not only in generating ideas for new products but also in cocreating them with firms, in testing finished products, and in providing end user product support. In short, new technologies enable "a shift from a perspective of exploiting customer knowledge by the firm to a perspective of knowledge co-creation with the customers" (Sawhney & Prandelli, 2000: 31; emphasis added). Such knowledge creation tends to be deeply rooted in the social relationships that take hold ietween the various entities in the virtual com-I gratefully acknowledge North Carolina State University's Center for Innovation Management Studies (CIMS), which provided funding for this study through a research grant. I also thank the attendees of the AMR Theory Development Workshop in Toronto, associate editor Devereaux Jennings, and the anonymous AMR reviewers for their valuable comments on earlier versions of this article. munity, and, hence, customer interactions and customer roles in a VCC have to be viewed from the emerging sociological perspective on knowledge and value creation (Nahapiet & Ghoshal, 1998; Nonaka & Konno, 1998; Spender, 1996) . Still, success in leveraging knowledge depends on the systems and the processes that enhance the integrative capabilities of the firm (Kogut & Zander, 1992; Nadler & Tushman, 1997; Verona, 1999) . Thus, the design of VCCs for NPD requires the use of the knowledge-based view of the firm, along with some standard organizational perspectives, such as systems theory. In this article I propose a theoretical framework that relies primarily on the knowledge-based view but also on context and principles from systems theory and organizational design in order to inform the design and deployment of VCCs for NPD. The development of new products is a challenging task. With the underlying knowledge base of most products becoming more diverse and dynamic, NPD teams are increasingly seeking out external resources to overcome the learning curves related to new technologies and nev^ markets (Holmes, 1999; Schilling & Hill, 1998) . The promise of cusfomer as an external resource for NPD has been recognized in theory and in practice for a long time (e.g., LeonardBarton, 1995; Rothwell, Freeman, & Townsend, 1974; von Hippel, 1988) . For example, customer involvement in NPD has been shown to enhance product concept effectiveness (i.e., productmarket fit [Brown & Eisenhardt, 1995] (Wayland & Cole, 1997) . Several reasons can be cited for the relatively weak utilization of this valuable resource in NPD, but perhaps the most limiting factor has been the poor connectivity between customers and producers. New technologies have the potential to greatly enhance the connectivity between customers and producers in a costeffective manner and to support new models of NPD that involve customers as partners of innovation. For example. Hallmark Inc., the maker of greeting cards, has established the Hallmark Knowledge Creation Community-an online forum consisting of lead retailers (i.e., its firstlevel customers)-to create new product designs (Kambil et al., 1999) . In this article I take the initial steps to gain an understanding of the design of such technologybased VCCs for NPD by considering the underlying knowledge creation issues, as well as the nature of customer interactions and motivations in a computer-mediated and communityoriented environment. Specifically, I focus on three customer roles in NPD-resource, cocreator, and user-and identify four important themes that frame these customer-NPD roles in virtual environments: (1) customer interactions are computer mediated, (2) customers participate in knowledge creation, (3) customers have various motivations to participate in NPD, and (4) the VCC is an integral part of the NPD team. To understand the implications of these themes for VCC design, I draw from work in various areas, including computer-mediated communication (CMC), organization theory, NPD, innovation management, information technology, and knowledge management. I generate a set of propositions that relate specific VCC design elements to successful customer value creation, and thereby to NPD success. Taken together, these propositions indicate that while the new technologies may represent a potentially powerful tool to engage customers in value cocreation, their effective deployment calls for careful consideration of the complex interplay between the technologies and the customer-NPD contexts. I organize this article as follows. First, I examine the varied roles customers can play in product innovation and value creation. I then present, in the main body of the article, a theoretical model of customer-NPD roles in virtual environments. I conclude by identifying the salient theoretical and practical implications of the research model. CUSTOMER ROLES IN NPD The creation of economic value by organizations is a process that involves the innovative combination and exchange of multiple resources. In an insightful discussion about the gap between productive (or value creation) possibilities and productive opportunities, Moran and Ghoshal note that "it is not resources per se, but the ability to access, deploy, exchange, and combine them that lies at the heart of value creation" (1999: 409; emphasis added). New information technologies and innovative organizational practices enable firms to significantly enhance their social capital, and thereby their knowledge exchange and combinatorial capacity (Kogut & Zander, 1992; Nahapiet & Ghoshal, 1998) , and to establish new opportunities for value creation and value appropriation. Here I focus on technology-based virtual environments that offer new avenues for firms to enhance their social capital vis-a-vis their relationships with customers and to facilitate value creation. The focus on customers is not meant to undermine the utility of such virtual environments to foster value creation by other external entities, such as suppliers and complementors; rather, it only serves to demonstrate the power and the potential of the new technologies to facilitate distributed innovation involving resources that are the farthest away from the firm. Firms across industries (e.g., Cisco, Bang & Olufsen, Compaq, Fiat, Microsoft, 3Com) have started establishing VCCs where their customers can share knowledge or otherwise participate in various value creation activities, including NPD. The implementation of such online forums involves the deployment of a variety of technologies, including the internet, groupware, multimedia, streaming video, intelligent agents, virtual reality tools, and interactive sensory peripherals. Specific services provided can range from discussion and message boards, e-mail and mailing lists, and product/technology knowledge centers to web-based games, customer design forums, and virtual prototyping 394  July centers (Dahan & Hauser, 2000) . For example, groupware collaborative and messaging tools can empower customers to help one another (Kambil et al., 1999) , virtual reality tools enable firms to implement internet-based product concept testing using visual depiction and animation for both industrial and consumer products (Dahan & Srinivasan, 2000) , and new security tools enable firms to create "gated" communities with restricted access to those customers who are perceived as potential innovators and contributors (Kay, 1999; Sawhney & Prandelli, 2000) . In short, by combining various new technologies, firms can provide a range of online services to their customers that facilitate different types of partnering in product innovation and value creation. In the strategic management literature and quality management literature, researchers have identified five roles for customers in value creation: resource, coproducer, buyer, user, and product (Finch, 1999; Gersuny & Rosengren, 1973; Kaulio, 1998; Lengnick-Hall, 1996) . The first two customer roles are at the upstream or input side of organizational activity, whereas the other three roles cluster at the downstream or output side of the system. Here I focus on the following three roles: customer as resource, customer as cocreator, and customer as user. The first relates to the customer as a source of innovation, the second relates to customer participation in product design and development, and the third relates to customer involvement in product testing and in product support.^ The two other rolesnamely, the customer as buyer and as productare less relevant to the NPD context, since the emphasis is on customers as objects rather than as agents of value transformation (LengnickHall, 1996); hence, I do not focus on them here. I use the term customer to include both current (established) as well as future (potential) customers, although their characteristics and the nature of their contributions to NPD may differ. In Table 1 I briefly examine the above roles and identify the key challenges in implementing them. ' I use the term user for the third customer role both to signify that the contributions (in product testing and product support) are directly related to product usage and to be consistent with usage in prior literature (e.g., Lengnick-Hall, 1996) , although all customer roles do originate from customers' experience as product users. In the management literature the most thoroughly documented role of customer as resource has been that of supplying information and wealth to firms (Lengnick-Hall, 1996) . Here I limit the focus to customers as a source of new product ideas. Customers' role in idea generation or product conceptualization has been relatively well explored in the marketing literature and NPD literature (e.g., Christensen, 1997; LeonardBarton, 1995; Rothwell et al., 1974; von Hippel, 1988) . While some researchers have argued that customers need to play a pivotal role in the generation of new product ideas, others have argued equally fervently that involving customers in idea generation will simply lead to imitative, unimaginative products. It is now relatively well established that the utility of customers as^ a resource varies with the maturity of the technology and the alignment of the product line with the current customer base (Christensen, 1997; Leonard-Barton, 1995) . When both the dimensions are high (continuous innovation), customers are an excellent source of innovation, whereas when both the dimensions are low (i.e., evolving technologies and emerging markets), the value of current customers as a resource is limited. However, even in those contexts where they are a promising resource, customers have played a largely passive role, with firms employing a range of structured inquiry mechanisms (market surveys, focus groups) to import customer knowledge. Customers rarely offer new product ideas without being prompted by firms; further, the use of structured inquiry mechanisms severely limits the richness and frequency of customer contributions. Also, logistical and economic considerations force firms to involve only a minority of customers, often unrepresentative of the diverse customer population (Wayland & Cole, 1997) . In certain industries (especially in technology sectors), lead customers (or lead users) have been portrayed as assuming more active roles as they, in the process of finding "solutions" to internal problems, generate new product ideas (von Hippel, 1988 ). Organizations face three major challenges in using customers as a source of new product ideas. The first challenge relates to the selection of customer innovators and the establishment of ties with them; in the case of both consumer and industrial products, firms often find it difficult to locate appropriate customer innovators in a cost-effective manner. The second challenge relates to the creation of appropriate incentives to foster customer willingness to contribute new product ideas. The third challenge relates to the capture of customer knowledge. It is much more effective to understand customers and their requirements in their own natural settings than in artificial settings. Similarly, longitudinal and "informal" data have been found to be more beneficial than cross-sectional and "formal" data provided by structured inquiry tools (Leonard-Barton, 1995). However, practical considerations, including the cost and the availability of suitable technologies, have so far limited such proactive and "natural" knowledge capture. Customers also play a valuable role as cocreators of new products, in which their participation ranges from product design activities to product development activities. Schneider and Bowen (1995) identify several potential incentives for customers to be involved as cocreators and coproducers, including enhanced selfesteem because of increased control, more discretion and opportunities to make choices, and greater product customization. As cocreators of products, customers can contribute to a variety of product design and development activities, including the validation of product architectural choices, the design and prioritization of product features, the specification of product interface requirements, and the establishment of development process priorities and metrics. The role of customer as cocreator is perhaps more evident in industrial products than in consumer products (Garvin, 1988) . For example, in the software industry, enterprise software developers like Microsoft and SAP often have representatives from customer organizations as members of their product development teams (Hoch, Roeding, & Lindner, 1999) . Similarly, Chaparral Steel (Chase & Garvin, 1989) and Cisco (Kambil et al., 1999) rely on customers to make design choices as members of product development teams. In the consumer sector also, customers have played the role of product cocreator-for example, by participating in concept testing (Page & Rosenbaum, 1992) , consumer idealized design (Ciccantelli & Magidson, 1993) , and component selection (Kambil et al., 1999) . Despite the potential benefits that can be realized from customer cocreation, this process poses significant management challenges. First, customer involvement in product design and development is likely to increase the level of project uncertainty, and new mechanisms may be needed to monitor and control for development quality and efficiency (Lengnick-Hall, 1996) . Further, customers may abdicate their role as cocreators, thereby severely disrupting the development process. Second, to effectively play the role of cocreator, customers may need to possess higher levels of product/technology 396 Academy of Management Review July knowledge; thus, firms will have to invest in enhancing their technology awareness. Third, given the nature of their involvement, customer cocreators will need to be well integrated with internal NPD teams. Compared to the role of customer as resource, customer-firm interactions tend to be much more intense and frequent during cocreation (Sawhney & Prandelli, 2000) , and mechanisms to support such interactions are costly and technology intensive. Therefore, cocreation activities must be carefully governed so that the benefits of customer contributions outweigh the costs of increased uncertainty in the system, as well as the costs of additional support mechanisms. As primary recipients and users of goods and services, customers can create two valuable outcomes-in product testing and in product support. The role of customers in testing new products is not new. Prior studies have established the highly productive role customers can play in product and prototype testing (e.g., Dolan & Mathews, 1993; Nielsen, 1993) . Customers of both industrial and consumer products have participated in product testing. For example, in the software industry many firms have used their customers in beta product testing, enabling those firms to reduce their investments in internal product testing units (Cusumano & Yoffie, 1998) . Customer involvement in product testing enables firms to detect product flaws early in the development cycle and to minimize costly redesign and rework. Further, by involving a diverse set of customers in product testing, firms can gain a rich understanding of how the product would fare in a variety of user contexts. As product users, customers are also uniquely qualified to provide product support for other users. Customers often acquire significant knowledge of or expertise on various aspects of product usage, which then becomes the basis for providing product support for peer users. The homophily (i.e., the degree to which pairs of individuals are alike in terms of certain attributes) between peer customers contributes to their effectiveness in understanding and appreciating the concerns of product users and their particular usage problems-a critical success factor in product support (Brown & Reingen, 1987; Kay, 1999) . Additionally, over a period of time, expert users may discover new ways of product usage, as well as shortcuts and other methods to enhance the overall value of the product. However, few firms have engaged their customers in this capacity, although such a role is not new to many product users, especially in the technology sector. For example, expert users of popular software products such as MS-PowerPoint are often called upon to troubleshoot or provide support to other users within their own organizations. Similarly, users have played such a role outside their firms too (e.g., in productcentered user groups or communities [McWilliam, 2000] ). Such user groups have been in existence for majiy products (e.g., software, computers, automobiles, videogames) for a long time. However, they are mostly disparate groups and are restricted to specific geographical areas. Few firms have created formal forums for expert users to extend such a service to a wide-ranging set of peer users. Two main challenges can be identified regarding the above two roles. First, in both cases, customer contributions can be limited by the high cost of providing facilities or mechanisms to structure and channel those customers' inputs. For example, customers' role as product support specialists calls for forums that can support rich interactions among customers. The second challenge relates to ensuring the involvement of a diverse set of customers. This is particularly true in the case of product testing, where firms are often forced to make tradeoffs between customer diversity and testing duration while devising their product testing strategy (Dolan & Mathews, 1993) . In summary, although customers can carry out a wide range of roles in product development and support activities, implementing or realizing those roles requires new bonds of interdependencies and the establishment of increasingly complex social networks that cross traditional organizational boundaries (Gersuny & Rosengren, 1973; Sawhney & Prandelli, 2000) . As noted previously, these roles and the relations that are born out of playing them fuel the knowledge creation process. New communications and information technologies enable firms to create virtual environments that support the establishment of such social networks and rela- However, despite the promise and the wide availability of these technologies, designing and building a VCC is a challenging task. First, understanding the management and the impact of the new relationships that would be established with customers requires the integration of important organizational and marketing perspectives (Goodman, Fichman, Lerch, & Snyder, 1995) , and such an understanding has to become the cornerstone of VCC design. Second, firms need to not only decide the specific roles they would like their customers to play in value creation but also to acknowledge and incorporate the underlying differences among those roles (in terms of interaction patterns, knowledge creation processes, motivations, and so forth) in VCC design. Third, a critical aspect of VCC design involves the identification of firm-level strategies that would guide not only value creation but also value appropriation and, more important, would reconcile the conditions or the requirements for each (Moran & Ghoshal, 1999) . Thus, the design of a virtual customer environment is a task that has to be viewed from multiple theoretical perspectives, including management and organization, product development, marketing, and innovation. In the remainder of the article, I present a broad theoretical framework, drawn from several of the above domains, that relates specific customer-NPD roles to various design elements of the virtual customer environment. Figure 1 provides an overview of the model. It should be noted that the model described here is not tied to any particular technology and applies to any CMC (computer-mediated communications) system that involves organizations and their customers in a product innovation and value creation context. In prior studies researchers have adopted a knowledge creation perspective to study NPD and have linked different types of knowledge and knowledge creation to different product development contexts (e.g., Madhavan & Grover, 1998; Nonaka & Takeuchi, 1995) , although the specific design elements of the product development environment that ensue from such a perspective have received only limited attention. In the vast and varied literature on organizational design (e.g.. Daft, 2001; Galbraith, 1973; Miller, 1993; Nadler & Tushman, 1997; Sanchez & Mahoney, 1996) , however, researchers have discussed several design elements to support innovation in organizations (e.g., the type of intraorganizational and interorganizational linkages, integrator roles, the nature of incentive systems, organizational culture). Here I identify and expand on a set of design themes that build on this foundation and inform the knowledge creation environment in a VCC. First, two aspects of VCC assume importance: (1) the social processes of customer interactions and (2) the cognitive processes that underlie customer knowledge creation. Thus, the first theme relates to the nature of customer interactions or communications and reflects the fact that all customer interactions in a VCC occur in a computer-mediated and community-oriented setting, and the pattern of customer interactions varies with the customer-NPD role. The second theme underlines the key activity in a VCCthat is, Jmowiedge creation-and relates to how the nature and the process of knowledge creation involved vary with the customer-NPD role and imply the need for different types of knowledge management mechanisms in a VCC. A focus on the structure of the VCC in an NPD context shows the VCC as an integral part of the firm's extended product development team and offers two interesting design themes. Thus, the third theme relates to the composition of the extended product development team and, hence, to the mechanisms and the techniques used to identify and select virtual customers as partners in the value creation process. The fourth theme relates to the nature of integration of the VCC with the internal NPD team. It reflects the fact that different customer-NPD roles imply different types of ties or linkages of the virtual customer with the internal NPD team and, hence, varied types of integration and coordination mechanisms. The fifth theme acknowledges the voluntary nature of customer involvement and highlights the importance of customer mofivafion (or disposition) to participate in product development. Customers have varied motivations to contribute to NPD, depending on the role they play in the process, and this implies the need to incor-
To support this stage, customer involvement concepts, such as customer roles (i.e., resource, cocreator, user) REF , and customer knowledge issues can be applied.
DESIGNING VIRTUAL CUSTOMER ENVIRONMENTS FOR NEW PRODUCT DEVELOPMENT : TOWARD A THEORY
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