innovation is democratizing: what can governments do? · 3m products based on lead user ideas...
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Innovation is Democratizing:Innovation is Democratizing:What can governments do?What can governments do?
Eric von HippelMIT Sloan School of Management
Phone: (617) 253-7155, Email: Evhippel@mit.edu,http://mit.edu/evhippel/www
Essential DefinitionEssential Definition
‘‘Democratization of InnovationDemocratization of Innovation’’ means that means that usersusers of of products and servicesproducts and services——both firms and individual both firms and individual consumersconsumers——are increasingly able to develop what they are increasingly able to develop what they need for themselves. need for themselves.
–– AnAn innovation is a innovation is a USER innovationUSER innovation when the developer when the developer expects to benefit by USING it;expects to benefit by USING it;
–– An innovation is a An innovation is a MANUFACTURER innovationMANUFACTURER innovation when the when the developer expects to benefit by SELLING it.developer expects to benefit by SELLING it.
# of usersperceiving need
TimeTime
Traditional, Manufacturer-Centered Innovation ParadigmManufacturers identify user needs, develop products at private expense,And profit by protecting and selling what they have developed.
User-Centered (Democratized) Innovation ParadigmLead Users innovate to solve their own needs at private expense - and then freely reveal their innovations
Lead Users innovate here
First manufacturer product appears here
Target Market
A fastA fast--growing international academic growing international academic community specializes in community specializes in research on research on useruser--centeredcentered innovationinnovation
Yun Mi Antorini (Aarhus)Yun Mi Antorini (Aarhus)
Sung Joo Bae (MIT) Sung Joo Bae (MIT)
Carliss Baldwin (HBS)Carliss Baldwin (HBS)
Marcel Bogers (Lausanne)Marcel Bogers (Lausanne)
Harry Demonaco (MGH)Harry Demonaco (MGH)
Emm Fauchart (CNAM)Emm Fauchart (CNAM)
Dominique Foray (Lausanne)Dominique Foray (Lausanne)
Nikolaus Franke (Wien)Nikolaus Franke (Wien)
Johann FJohann Füüller (Innsbruck)ller (Innsbruck)
Stefan Haefliger (ETH Zurich)Stefan Haefliger (ETH Zurich)
Pia Hannukainen (Helsinki)Pia Hannukainen (Helsinki)
Dietmar Harhoff (LMU)Dietmar Harhoff (LMU)
Joachim Henkel (TUM)Joachim Henkel (TUM)
Cornelius Herstatt (TUH)Cornelius Herstatt (TUH)
Christoph Hienerth (CBS)
Lars Bo Jeppesen (CBS)
Per Kristensson (Karlstad)
Karim Lakhani (HBS)
Christopher Lettl (Aarhus)
Christian Luethje (Bern)
Peter Magnusson (Karlstad)
Pavan Mamidi (IIMB)
Philip Mayrhofer (LMU)
Ethan Mollick (MIT)
Pam Morrision (UNSW)
Frank Piller (Aachen)
Marion Pötz (Vienna)
Emanuela Prandelli (Milan)
Reinhard Prügl (Vienna)
Patricia Sandmeier (Sta. Gallen
Celine Schulz (LMU)
Sonali Shah (Illinois)
Martin Schreier (Vienna)
Sheryl Winston-Smith (Minn)
Christoph Steger (Vienna)
Robert Tietz (TUH)
Stefan Thomke (HBS)
Gianmario Verona (Milan)
Georg v. Krogh (ETH Zurich)
Eric v. Hippel (MIT)
Marcus Wagner (TUM)
How we discovered that users develop How we discovered that users develop many major new productsmany major new products
6363444444TotalTotal
6363141411Transmission Electron Transmission Electron MicroscopyMicroscopy
--5511Ultraviolet Ultraviolet SpectrophotometrySpectrophotometry
--141411Nuclear Magnetic Nuclear Magnetic Resonance Resonance SpectrometrySpectrometry
--111111Gas ChromatographyGas Chromatography
Minor Minor ImprovementImprovement
Major Major ImprovementImprovement
First First DeviceDevice
Innovations AffectingInnovations Affecting
First device used in field First device used in field developed and built by:developed and built by:
2222727277%77%TotalTotal
1717444472%72%Transmission Electron Transmission Electron MicroscopyMicroscopy
0066100%100%Ultraviolet Ultraviolet SpectrophotometrySpectrophotometry
33121280%80%Nuclear Magnetic Nuclear Magnetic Resonance Resonance SpectrometrySpectrometry
22101083%83%Gas ChromatographyGas Chromatography
Mfg.Mfg.UserUser% User% UserInnovations AffectingInnovations Affecting
Gammaflow:Gammaflow:A Completely Automated Radioimmunoassay SystemA Completely Automated Radioimmunoassay System
Source: Science Vol 194 October 1976
Examples of Important Examples of Important Consumer Product InnovationsConsumer Product Innovations
Electronic MailElectronic MailDesk Top PublishingDesk Top Publishing
Computer Application Computer Application SoftwareSoftware
WhiteWhite--out Liquidout LiquidOfficeOffice
Chocolate MilkChocolate MilkGraham Cracker CrustGraham Cracker Crust
FoodFood
Sports BraSports BraApparelApparel
Mountain BikeMountain BikeMountain ClimbingMountain Climbing--PitonPiton
Sports EquipmentSports Equipment
ProteinProtein--base Shampoobase ShampooFeminine HygieneFeminine Hygiene
Personal CarePersonal Care
GatoradeGatoradeHealth ProductsHealth Products
ExampleExampleCategoryCategory
# of usersperceiving need
Time
Users can innovate more cheaply here
Manufacturers can innovate more cheaply here
Time
User innovations are usually developed by User innovations are usually developed by ““LeadLeadUsers. Lead user innovationsUsers. Lead user innovations offer:offer:(1) benefits to the innovator (they build what they need)(1) benefits to the innovator (they build what they need)(2)(2) a product feedstock for existing manufacturers a product feedstock for existing manufacturers (3)(3) a a rich sourcerich source of new of new company startcompany start--ups (U/Ms)ups (U/Ms)
TargetMarket
““Lead UsersLead Users”” are users that:are users that:(1) (1) Have needs that Have needs that foreshadow general demandforeshadow general demand in the in the marketplace;marketplace;(2) Expect to (2) Expect to obtain high benefitobtain high benefit from a solution to from a solution to their needs. their needs.
Innovations developed by Innovations developed by lead users have high lead users have high commercial value commercial value –– Morrison Morrison and several other authorsand several other authors
Commercial value of Commercial value of innovations users develop innovations users develop goes up as goes up as ““lead userlead user””characteristics of innovators characteristics of innovators intensify intensify ––Source Franke & vHSource Franke & vH
User’s expectedbenefit
(LU component 1)
highlow
low
User position on
trend
(LU component 2)
high
Legend: Innovating users (with size indicating attractiveness of innovation)Non-innovating users
∅
effect 1:more innovators
∅
effect 2:more attractiveinnovations
Higher innovation benefit expectations drive up innovation likelihood• “Ahead of the trend,” increases innovation attractiveness• When both components are high, a high fraction of users develop
attractive innovations Source: Franke, Schrier and v.H. 2006
3M products based on Lead3M products based on Lead User User ideas produce ideas produce 8X higher sales than center8X higher sales than center--ofof--market marketing market marketing researchresearch
0.800.800.920.920.610.61
6.76.76.76.78.08.0
7.17.17.87.88.88.8
Fit with Business Fit with Business Intellectual property protectionIntellectual property protectionFit with mfr. CapabilitiesFit with mfr. CapabilitiesFit with distribution channelsFit with distribution channels
0.080.089.249.24
7.37.38.48.4
9.69.69.89.8
Strategic ValueStrategic ValueStrategic importanceStrategic importanceFit with Strategic planFit with Strategic plan
0.010.010.000.00
33%33%18m18m
68%68%$146m$146m
Projected ProfitabilityProjected Profitability% market share in year 5% market share in year 5Estimated sales in year 5Estimated sales in year 5
0.010.010.090.09
6.86.85.35.3
9.69.68.38.3
““NewnessNewness”” of Ideaof IdeaNovelty compared to Novelty compared to competitioncompetitionNewness of needs addressedNewness of needs addressed
Sig.Sig.NONNON--LU Ideas LU Ideas (n=42)(n=42)
LU Ideas (n=5)LU Ideas (n=5)
Note: Items measured on 10 pt. Scale, 10=high, 1=low
Users arenUsers aren’’t always the innovatorst always the innovators
4848--15%15%--27%27%58%58%Sports EquipmentSports Equipment161644----92%92%8%8%Plastics AdditivesPlastics Additives55------90%90%10%10%Engineering PlasticsEngineering Plastics
1111------94%94%6%6%Tractor Shovel Tractor Shovel RelatedRelated
1010------10%10%90%90%Pultrusion ProcessPultrusion Process
49496612%12%--21%21%67%67%Semicon & PC Crd Semicon & PC Crd ProcessProcess
1111111717----23%23%77%77%Scientific InstrumentsScientific Instruments
Total Total (N)(N)
NANAOtherOtherSuplrSuplrMfrMfrUserUserInnovations Innovations Samples:Samples:
Information on needs and solutions is often Information on needs and solutions is often ““stickysticky””–– so users and manufacturers tend to draw on so users and manufacturers tend to draw on different different local information when they innovatelocal information when they innovate
Richest NeedRichest Need information is usually found at user sites.information is usually found at user sites.Richest SolutionRichest Solution information is often found at information is often found at manufacturer sites.manufacturer sites.
Solution Information
Need Information
Manufacturer User
User and manufacturer innovations User and manufacturer innovations differdifferUsers tend to develop Users tend to develop Novel Functional CapabilityNovel Functional Capability innovations:innovations:
The first sportsThe first sports--nutrition barnutrition barThe first scientific instrument of a new typeThe first scientific instrument of a new type
Manufacturers tend to develop Manufacturers tend to develop Dimension of Merit Dimension of Merit Improvements:Improvements:A betterA better--tasting sportstasting sports--nutrition barnutrition barImprovements to an existing type of scientific instrumentImprovements to an existing type of scientific instrument
Example – Study of scientific Instrument Innovations
New functional capability 82% user-developed
DOM improvements 87% mfr-developed
Total innovation sample size: n = 64Source Riggs & von Hippel (1994)
Because of information is sticky,each user responds to local needs using local solution information
Few users developed more than one major commercialized innovationNumber of users developing this Number of major innovations
Innovation Type 1 2 3 6 na (n)Scientific Instruments* 28 0 1 0 1 32Scientific Instruments** 20 1 0 1 0 28Process equipment*** 19 1 0 0 8 29Sports equipment**** 7 0 0 0 0 7
* Source, von Hippel 1988, Appendix: GC, TEM, NMR Innovations** Source, Riggs and von Hippel, Esca and AES*** Source, von Hippel 1988, Appendix: Semiconductor and pultrusion process
equipment innovations.**** Source, Shah 2000,
Heterogeneity of user needs and sticky information means that user innovation is widely distributed among users
Industrial products n % innovating
Printed Circuit CAD Urban and vH
136 24.3%Pipe Hanger HardwareHerstatt and vH
74 36%Library IT Systems Morrison, Roberts, vH
102 26%Software security featuresFranke and vH
131 19.1%
Surgical EquipmentLuthje
262 22%Consumer products n % innovating
Outdoor Products Luthje
153 9.8%“Extreme” sports equipment Franke & Shah
197 37.8%Mountain biking equipment Luthje, Herstatt, vH
291 19.2%
Studies show that Many users innovate
WhyWhy do so many users develop products for do so many users develop products for themselves? Because many have themselves? Because many have ““customcustom”” needsneeds
2 meta analyses of market segmentation studies show 2 meta analyses of market segmentation studies show heterogeneity of need is generally high:heterogeneity of need is generally high:
–– 5.5 segments specified on average: 46% within5.5 segments specified on average: 46% within--segment variation remainingsegment variation remaining (Franke and Reisinger, 2003)(Franke and Reisinger, 2003)
–– 3.7 segments specified on average: 54% within3.7 segments specified on average: 54% within--segment variation remaining segment variation remaining (Franke and von Hippel, 2003)(Franke and von Hippel, 2003)
# of usersperceiving need
Time
Users can innovate more cheaply here
Manufacturers can innovate more cheaply here
Time
Users tend to innovate Users tend to innovate collaborativelycollaboratively in in communities and communities and freely revealfreely reveal their innovationstheir innovations
TargetMarket
Free revealing makes economic senseFree revealing makes economic sense
It is typically It is typically not practicalnot practical for for distributed userdistributed user innovators innovators to protect their innovations as intellectual property and to protect their innovations as intellectual property and license them. license them.
GenerallyGenerally useruser--innovatorsinnovators reveal gladly because reveal gladly because freefreerevealing offers private revealing offers private returns:returns:
–– Innovators benefit from Innovators benefit from usingusing their innovationstheir innovations–– Enhanced Enhanced reputation for innovatorsreputation for innovators–– Your innovation Your innovation in the information commons isin the information commons is improved improved
by others (for free)by others (for free)–– Network Network effectseffects benefitsbenefits……
M. Weilguni (Germany)Outlines vacuum problem with
very large databasesProposes “simple” solution
(Bit field in tables)
9/3/2002
S. Daithankar (India)Proposes alternative solution
(Usage,Triggers,Threads)
9/3/2002
M. WeilguniS.D. proposal not practical
for his situation
9/3/2002
R.Taylor (Canada)M.W is mistaken
Provides sample scriptfor S.D proposal
9/3/2002
T. Lane (USA)Acknowledges problemCalls it: “auto vaccum”
Proposes serverimplementation
9/3/2002
S. DaithankarAnnounces intention to cerate solution
Provides details onhis approach - asks for feedback
(Usage,Triggers,Threads)
9/3/2002
T. LaneS.D’s approach will never work(Use Free Space Map(FSM)
in server instead)
9/3/2002
R.TaylorProposes an additional
component to T.L’s ideas(Use DB Analyze)
9/3/2002
T. LaneGood idea! - Interesting
implications for performance
9/3/2002
B.Lind (USA)Proposes new design
(Partial vacuum only - createDirty Space Map?)
9/3/2002
M. WeilguniProposes using “Stats Collector”(already in PG) instead of FSM
Provides URL to showsample output
(Use Stats Collector)
9/3/2002
T. LaneStats Collector approach
is also good(Has questions on details)
9/3/2002
M. O’Connor (USA)Announces intention to
create solutionAnswers T.L’s quesitons
(Stats Collector)
9/3/2002
S. DaithankarAnnounces solution is ready
Based on:Stats Collector and Table Activity
DB AnalyzeClient daemon - not server based(Abandoned previous approach)
9/23/2002
S. DaithankarPosts questions from M.O
on his approach+ his answers
9/24/2002
M. WeilguniFinds issues with S.D’s
implementation
9/24/2002
M. O’ConnorAnnounces new solutionbased on SD submission
Similar to S.D.’s clientdaemon design
Written in C instead of C++(Abandoned previous approach)
11/26/2002
M. O’ConnorSubmits V3 based on
feedback from developers
3/11/2003
M. Neusland (Germany)“I have been using S.D’s code in
Production for months!”
2/11/2003
M. O’ConnorSubmits V2 based on
feedback from developers
2/11/2003
B. Momjian (USA)
Commits code to repository -now official part of PG
3/20/2003
S. DaithankarThanks for doing the work!
11/26/2002
Individual innovations are developed in a distributed wayExample: A total of 23 people contributed to the development of Intelligent Auto-Vacuuming for PostgreSQL – 4 core, 19 “ad hoc” users(Auto Vacuum Voted “Best New Feature” in 7.4 PostGres Release)
Source: Karim Lakhani
User innovation communities cansupplant product development by
manufacturers
EXAMPLE: Zeroprestige.org
“We are interested in furthering kite-powered sport by enabling an 'open source' (shared knowledge and documentation) approach to kite-building and things kite-powered in general.”
“You are encouraged to post and add comments and knowledge to any of the postings.”
- Saul Grifith
This is what kitesurfing equipment looks likeThis is what kitesurfing equipment looks like
Tietz, Morrison and Herstatt have found that many innovations in this field come from users
Users developed and posted their kite designs -often better than designs by kite manufacturers
EXAMPLE: Super high AR mountain board kite“From Sebastian in Argentina.. a super high AR inflatable design for mountain boarding…”
Posted by saul at 05:58 PM
Kite modeling tools Patterns for building kites(Can be sent to sail lofts as CAD files.)
Kite design tools posted by users on Zeroprestige.orgare often better than manufacturers’ internal tools
Aerodynamic modeling tools
RESULT: User Innovation Communities may RESULT: User Innovation Communities may drive kite manufacturers right out of product drive kite manufacturers right out of product design design –– innovation is being innovation is being ““democratizeddemocratized””
HAS BEEN HAS BEEN An industry of manufacturers that develop and An industry of manufacturers that develop and sell kites of their own design. sell kites of their own design. $100mm in equipment sales in 2002 $100mm in equipment sales in 2002 –– growing fast.growing fast.
TODAYTODAY –– some firms are moving to a some firms are moving to a ““build onlybuild only””specialization specialization –– leaving product innovation to the user leaving product innovation to the user community (Firms are starting to download and build user community (Firms are starting to download and build user designs instead of creating their own kite designs.)designs instead of creating their own kite designs.)
358 members from 11 countries
400 cases and 1500 reviews
Involvement with medical device manufacturers andpatent attorneys
This is happening in many fields: International community of leading spine surgeons (lead users in their field)
There are ~ 200 internal R&D people at Lego. There are ~ 200 internal R&D people at Lego. There are There are 20,000+20,000+ AFOLAFOL’’s s –– many innovate. many innovate. More LegoMore Lego--related R&D related R&D outsideoutside Lego than inside?Lego than inside?
Official ILTCO website
News groups
Localusergroups
DK
Israel Chile
US
DearLEGO
FAQ
Off topic
…
Castle clubs/
organizations
ILTCO:International
LEGO Train Club Organization
Space
TrainOrganizations
EJLTC
FGLTC
…
GLUG: The Game-
LEGO Users Group
BrickWars
Starship
Yahoo!Group
Yahoo!Group
Yahoo!Group
EverythingLEGO
Educa-tional
Marketplace
Informa-tional
Robotics
…
……
…
…
…
…
…
…
…
……
500
links
Yahoo!Group
Yahoo!Group
NELUG
Source, Yun Mi Antorini
Companies Companies start outstart out ignoringignoring user communities user communities ––and and then begin to adaptthen begin to adapt –– consider Lego consider Lego MindstormsMindstorms
The brain• Computer “brain” within Lego
brick
Movement• 3 stepper motors
Sensors• Light• Touch• Temperature
Teaching• Kid-friendly, graphical
programming environment• Programs downloaded from
PC via infrared
Price ~ $200Source: Karim Lakhani and BCG team
Mindstorms robot kit
Lego mindstorms user communities grew rapidlyLego mindstorms user communities grew rapidly-- without company involvementwithout company involvement
Robots become widely available
August 1998
800
700
600
500
400
300
200
900
Nov1997
Jun1998
Feb1999
Oct1999
Jun2000
Jan2001
Aug2001
Apr2002
100
Lego robots announced
January 1998
(1) Lego Users Group NETwork. An independent discussion site for Lego enthusiasts Source: Russel Nelson, administrator of lego-robotics (russnelson.com)
Members
Today, LEGO has created links to innovating fans
“Lego Factory”Website links youngFans who wantto share their designs
Top Innovators from “Adult Fans of Lego”participate in LEGO factory Product Development teams
For NXT Mindstorms Robot Product Line:
•Lego adopts key existing AFOL innovations•Lego asks a few AFOL members to join R&D team
Policy Suggestion: Policy Suggestion: SupportSupport for distributedfor distributed user user innovation is meritedinnovation is merited
UserUser--centered innovation centered innovation increases social welfareincreases social welfare
UserUser--centered innovation iscentered innovation is increasingly importantincreasingly important as as computing and communication costs drop.computing and communication costs drop.
DistributedDistributed innovation innovation isis more efficientmore efficient than than concentrated concentrated innovation (the Linusinnovation (the Linus’’ Law effect)Law effect)
How can government policies support How can government policies support distributed userdistributed user--centered innovation?centered innovation?
1.1. Measure it! Measure it! ((71% of Canadian businesses in 1989 modified their 71% of Canadian businesses in 1989 modified their equipment. Probably collectively they spend manyfold more than tequipment. Probably collectively they spend manyfold more than the he equipment manufacturers)equipment manufacturers)
1.1. Support infrastructure development for distributed Support infrastructure development for distributed innovation (Open standards, collaborative tools, etc.)innovation (Open standards, collaborative tools, etc.)
2.2. Support open information communication infrastructure Support open information communication infrastructure ––the roads of the Internet age.the roads of the Internet age. (Spectrum licensing, etc.)(Spectrum licensing, etc.)
3.3. Support users ability to modify what they buy (avoid Support users ability to modify what they buy (avoid DMCADMCA--like laws)like laws)
4.4. Rethink IP: (SupportRethink IP: (Support the rights of the rights of users and others to users and others to build and protect informationbuild and protect information commons.)commons.)
Encourage research on distributed innovationEncourage research on distributed innovationExample: study impact of different IP schemes on Example: study impact of different IP schemes on innovative progressinnovative progress
-- Source: Ned Gulley, MathworksSource: Ned Gulley, Mathworks
Danish Government makes support of Danish Government makes support of ““user user driven innovationdriven innovation”” a national priority (Feb, 2005)a national priority (Feb, 2005)
"Strengthening user"Strengthening user--driven innovation and driven innovation and knowledge diffusion" the Government will develop knowledge diffusion" the Government will develop a particular program for the soa particular program for the so--called usercalled user--driven driven innovation. innovation.
SourceSource: Nye Mal Regerings Grundlag, VK Regeringen II, : Nye Mal Regerings Grundlag, VK Regeringen II, February, February, 20052005
Starting in 2007, the Danish Government will invest Starting in 2007, the Danish Government will invest about 130 Mio Danish Kroner per year into about 130 Mio Danish Kroner per year into supporting usersupporting user--centered innovation research and centered innovation research and projectsprojects
National competitive advantage with user-centered innovation: the DANISH LAB
Leading academics
in user-centered innovation
Eric von Hippel, Yun Mi Antorini,Lars Bo Jeppesen, Christoph Hienerth
Christopher Lettl
Work with
Leading Danish Firms
Lego, Novo Nordisk, DaniscoBang & Olufson, Coloplast
Advanced practices
Danishfirms
BOOK AVAILABLEFREE from my MIT
Website
http://mit.edu/evhippel/www/books.htm
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