15.
352 Many users innovate and many develop commercially valuable innovations
Professor Eric von Hippel MIT Sloan School of Management
Essential Definitions
The functional source of innovation depends upon the functional relationship between innovator and innovation:
An INNOVATION is anything new that is actually used (enters the marketplace) whether major or minor. An innovation is a USER innovation when the developer expects to benefit by USING it; An innovation is a MANUFACTURER innovation when the developer expects to benefit by SELLING it.
Major finding: many users innovate
Industrial products
Printed Circuit CAD Pipe Hanger Hardware Library IT Systems Software security features Surgical Equipment
n
136 74 102 131
% innovating 24.3% 36% 26% 19.1% 22% % innovating 9.8% 37.8% 19.2%
262
Consumer products
Outdoor Products Extreme sports equipment Mountain biking equipment
n
153 197 291
WHY do so many users want custom products? Because many have custom needs.
z
Two analyses of published market segmentation studies (done by cluster analysis) show that about markets are typically divided into about 5 segments, and 50% of total variation in need is within-segment variation. This means that when manufacturers divide a market into a few segments, many are dissatisfied by the products on offer some seriously so. Luxury focus
Sporty auto Driving focus
Car buyers with a reliabilty and safety focus
WHY do so many users want custom products? Because many have custom needs.
z
Lets test this statement against your personal experience. Discuss 3 items in turn:
1. What product type do you care most passionately about? 2. What shortcomings does the specific product of that type you bought (built?) have in your view? 3. Do you think a lot of other people have the same unmet need as you do? Or are your needs pretty custom? Why are your needs so special?
Innovating users tend to develop commercially valuable products - because they tend to be lead users
Lead Users are users that: 1. Have needs that foreshadow general demand in the marketplace; 2. Expect to obtain high benefit from a solution to their needs. (Such users are more likely to innovate Necessity is the mother of invention!)
Lead User innovations offer the basis for new products and services of value to manufacturers. Lead Users are today facing target market emerging needs
Only lead user prototypes available Commercial versions of product available
# of users perceiving need
Target Market Time Time
In PC-CAD Lead Users were innovating Routine Users were not
Expected Lead Type of Questions We User Attribute Asked At Front of High Density Trend? High Need For Improved System? Active In Solving Own Problem? Number in Sample What are your: z Avg. Number of layers? z Avg. Line width (mils)? (1988 data) Are you satisfied with your present PCB CAD system? Did you build own PCB CAD System LEAD Users 6.8 11 No Routine Users 4.1 15 Its OK
82% Yes 33
1% Yes 99
User innovation has been shown to be the source of prototypes for many manufacturer product successes
Innovations Affecting Gas Chromatography Nuclear Magnetic Resonance Spectrometry Ultraviolet Spectrophotometry Transmission Electron Microscopy Total First Device 1 1 Major Improvement 11 14 Minor Improvement -
1 1 4
5 14 44
63 63
First device used in field developed and built by:
Innovations Affecting Gas Chromatography Nuclear Magnetic Resonance Spectrometry Ultraviolet Spectrophotometry Transmission Electron Microscopy Total
% User 83% 80%
User 10 12
Mfg. 2 3
100% 72% 77%
6 44 72
0 17 22
The World Wide Web A Lead User Innovation
Tim Berners-Lee did not set out to invent a contemporary cultural phenomenon; rather, he says, it was something I needed in my work. He wanted to simply to solve a problem that was hindering his efforts as a consulting software engineer at CERN. Berners-Lees innovation was to apply hypertext to the growing reality of networked computers. He expanded the idea he had developed at CERN and made it available on the Internet in the summer of 1991. Technology Review, July 1996, p.34
Many commercially important consumer products also have roots in user innovation.
Familiar product examples:
Category Health Products Personal Care Example Gatorade Protein-base Shampoo Feminine Hygiene Mountain Bike Skateboard Scuba gear Sports Bra Chocolate Milk Graham Cracker Crust White-out Liquid Electronic Mail, Desk Top Publishing
Sports Equipment
Apparel Food
Office Software
User-innovators in consumer fields are lead users too sports equipment example
Sports equipment user Characteristics Lead User Characteristic (1): Being Ahead of the Trend * Innovators NONinnovators Difference
I improved or developed new techniques in my sport.
Lead User Characteristic (2): High Benefit from Innovation *
4.29
5.84
p<0.001
I have new needs which are not satisfied by existing products. I am not satisfied with existing equipment.
3.27
4.38
p<0.001
3.90
5.13
p<0.001
Data source: Sports equipment study: Franke and Shah (2003) *7-point rating scale: 1 = very accurate; 7 = not accurate at all
Users tend to innovate at the leading edge of markets where demand is small and uncertain. SO - lead user innovations can become the basis of commercially valuable products for manufacturers
Users can innovate more cheaply here (finding with Carliss Baldwin)
Manufacturers can innovate more cheaply here
# of users perceiving need
Time
In sum: Many users innovate because they have custom needs the products they develop are valuable to manufacturers because innovators also tend to be lead users:
z
Innovations developed by lead users have high commercial value Morrison and several other authors Commercial value of innovations users develop goes up as lead user characteristics of innovators intensify Franke & vH