Customer co-development is a much less radical innovation process change than user innovation.
Customer co-development means that producers try to gain the benefits of direct user design advice while still retaining full intellectual property rights and control over new product and service development. Producers carry out co-development by inviting a few users to come to their development laboratories to participate in design activities along with their in-house team of professional developers.
The advantage of customer co-development is that firms get to work more closely with a few customers. The disadvantage is that these few customers become directly involved in the culture of the innovating company, and what often comes out is a compromise between what the customer really wants and what the internal product developers think he or she wants.
When Starbucks or Nike or Nokia asks customers to come and talk with their product developers, that is a kind of customer co-development.