Systems Research and Behavioral Science Syst. Res.18, 29^40 (2001) & Research Paper Systems Approach to Knowledge Development for Creating New Products and Services John Pourdehnad 1* and Patrick J. Robinson 2 1 Ackoff Center for Advanced Systems Approaches, Philadelphia, USA 2 Robinson Consulting, King of Prussia, Pennsylvania, USA Innovative products and services were created using a combination of consumer- idealized design (CID) and market research. CID played a signi®cant role by providing out-of-box thinking, with new design concepts and ideas. Stakeholder participation and input from the ®rst CID session and the application of ®eld research helped with developing knowledge and understanding regarding stakeholder needs and desires. This in turn provided guidelines to perfect concepts and more advantageously to position and promote new product and service offerings. In addition, an effective validation and feedback system for the product and service designs were created using CID participants for the second time in tandem with focus groups, individual in-depth interviews and test marketing. Copyright # 2001 John Wiley & Sons, Ltd. Keywords consumer idealized design; knowledge development; market research; systems thinking; organizational learning; product and service development INTRODUCTION It is increasingly evident that the improvement of ®nancial returns and the acquisition of compe- titive advantages are primarily dependent on increasing customer satisfaction. Greater custo- mer satisfaction, in turn, can only be obtained by increasing one's knowledge and understanding of customer needs and desires. As Kardon reported: We examined several U.S. industry sectors to see whether ®rms that have superior under- standing of their customers report superior ®nancial performance. Through a search of available literature and interviews with indus- try participants and Wall Street industry analysts, we identi®ed a single company in each industry that is conspicuously savvy at understanding and responding to their custo- mers. Using the measures of cash-on-cash ROI and 5-year return to shareholders, each of the companies outperformed their industry peers. (Kardon, 1992, p. 1) To serve customers better is obviously desirable, but doing so has become increasingly com- plicated. A monolithic mass market with Received 27 April 1999 Copyright # 2001 John Wiley & Sons, Ltd. Accepted 29 March 2000 * Correspondence to: John Pourdehnad, Ackoff Center for Advanced Systems Approaches, University of Pennsylvania, Department of Systems Engineering, 220 South 33 rd Street, Philadelphia, PA 19104- 6315, USA, E-mail: jpourdeh@seas.upenn.edu