Democratization of Innovation is a Competitive Imperative
Companies innovate by making incremental product improvements inspired largely by market research that looks to fill needs. New product development of the future, it can be argued, will actually be accomplished by communities of user groups feeding cool stuff they want to use into manufacturers who make it happen. And now, Denmark has become the first to say it will pay incentives to companies who align with their open innovators rather than in-house R&D to create new products. Expect EU partners to follow.
Over the last 30 years, market-changing, mega-income producing new products have largely been created with a single market research method: find a need and fill it.
Simple.
Yes, but increasingly ineffective, says MIT/Sloan School of Management Professor of Innovation Management Eric von Hippel. His exhaustive study of multiple industries and innovations shows that in most cases, the truly ground-shaking product innovations come from the the most ignored part of the market curve: the user’s own invention.
“All markets are small and uncertain at the beginning; users experience need well ahead of manufacturers and are usually ignored by companies because they are few in number,” Dr. von Hippel just told hundreds of global business strategists attending the World Innovation Forum in New York.
Why? Because, Dr. von Hippel says, users innovate to develop something they can use the way they want to use it as opposed to companies who innovate largely when they see the potential to sell something. Products created this way include the heart and lung machine, the jogger baby stroller, the mountain bike, the Dyson vacuum cleaners, and endless software and IT systems.
Dr. von Hippel explains that user community advantage comes largely from its volume. “Many users can produce more design work than can any individual producer,” he said this morning. “All users are free to adopt the best solution discovered by any user. Users share this stuff freely. The result is that the user community can pick up the best design – the best design plus ability to grab the best, becomes the economics that make this so powerful.”
What can manufacturers do? If they recognize what is going on they can reorient market research to find lead user innovations. Often, the voice you want to find is not the voice of your “typical customer group”; in fact they are not your customers at all, but are people who have adapted your product to do something you haven’t thought of.
Can you incentivize these users? Yes. Dr. von Hippel says royalties and payments are always welcome but the thing these early adopters – often hackers – is that they get to use the experience. “If a hacker cobbles together parts and makes a bike that will withstand mountain riding, he gets a great mountain bike to use.” Dr von Hippel reports two-thirds of all hackers say their motivation is use.
To put these user innovators to work, Dr. von Hippel recommends finding user communities and sharing your IP (intellectual property) to allow user communities to innovate without needing to defend themselves against future litigation. Your role will then be to harness the innovation and use your production and business skill to bring it to the rest of the market.
In fact, Denmark is now putting tax dollars forward to support with funding user-driven innovation. For a government with limited resources, the Danes are testing just how much innovation can be supported with presumably less outlay by rewarding companies who tap the collective innovation of their customers. And why not?
