|Book Review: Democratizing Innovation|
Written by: Eric von Hippel. Cambridge, MA: MIT Press, 2005. 204+x pages.
Reinertsen (1983) originated the phrase fuzzy front end to describe the early stages of the new product development cycle when the product concept is fuzzy. Von Hippel (1986) invented the lead-user market research tool for creating clearly focused new product concepts.
Product innovation managers employ the lead-user tool to identify emerging customer needs and to build a sharp product concept for a targeted market. Lead users experience new product needs that lie in the future for most prospective customers in the market. These users have put together a well-defined product concept that satisfies their unmet needs and is often a prototype for other users to come.
Disciplined homework characterizes effective use of the lead-user tool. It shares this characteristic with other powerful tools for fuzzy-front-end market research such as voice-of-the-customer interviews. These tools start with an ambiguous product concept and unearth must-have features future customers want and for which they will pay. However, benchmarking studies of the front end find “pitifully small amounts of time and money are devoted to these critical (homework) steps” (Cooper, 2005, p. 9).
The first six of the twelve chapters of Democratizing Innovation deal mainly with post-1986 extensions and applications of the lead-user tool. This updating covers practitioner applications in consumer and industrial products and services, both high and low tech. For practitioners who are relative novices in dealing with fuzzy-front-end issues, the chapters serve as a reliable guide for effective use of the tool. For seasoned practitioners, these six chapters provide insight from von Hippel and his colleagues on how to improve their use of the tool.
The final six chapters outline an emerging product innovation philosophy von Hippel labels democratized innovation, which moves beyond an older view of technological innovation as an insider's game needing massive investment in resources. It moves to a view of a lowered cost of admission, through advances in information technology, bringing more people into the game. These chapters will be discussed after reviewing the first six.
After von Hippel (1986) invented his approach to understanding customer needs, new product professionals, and the business press quickly added the term lead user to their rhetoric on product innovation management. It is easy to grasp the idea that concepts created by lead users could be more innovative than the incremental improvements created by other end user groups. By definition, lead users are out in front, working at the leading edge of a significant trend in their industry. They have superior knowledge of the problem they wish to solve with the concept they create. Finally, and most importantly, they expect to gain significantly if the product developed from the concept solves their problem.
However, going beyond rhetoric and employing the lead-user tool in product innovation management has followed a much slower path of adoption. Product innovation managers soon realize that use of this tool needs a major commitment of people, time, and money for effective results. All too often managers balk at earmarking more resources for market research in the fuzzy front end than they or their business unit normally commit.
Democratizing Innovation begins with a chapter providing brief outlines of the chapters to follow. Chapter 2, “Development of Products by Lead Users” reviews the evidence that users often develop and adapt products for their own use. Included are the results of a study by von Hippel (2003) of 30 user–innovators in emerging markets showing that the stronger the lead-user characteristics possessed by a user–innovator, the greater the commercial attractiveness of innovations are developed.
Chapter 3 discusses “Why Many Users Want Custom Products.” Chapter 4, “User's Innovate-or-Buy Decisions,” introduces the transition costs that influence why users who want a custom product sometimes innovate for themselves rather than buy from a manufacturer of custom products.
Chapter 5, “Users' Low-Cost Innovation Niches,” highlights the costs to transfer sticky information between user and developer. Stickiness is a measure of the incremental expenses needed to transfer a unit of information in a coherent form. Often the ability of a user or a developer to absorb new, outside technical information depends on related knowledge they already have. Sometimes users know relevant information and could easily provide it to the developers; however, the developers lack the skill for eliciting the information in a way that encourages users to volunteer it.
“Why Users Often Freely Reveal Their Innovations” is the topic of chapter 6. The evidence that free revealing often occurs was a major surprise to von Hippel and his colleagues. By freely revealing information about a product, the innovator gives up all intellectual property rights to the information. Von Hippel argues that some innovating users freely reveal because it is the best practical route for them to increase profit from their innovations by increasing the rate of diffusion of the innovation.
Novice practitioners who want to use the lead-user tool would do well to supplement Democratizing Innovation by buying Breakthrough Products and Services with Lead User Research (von Hippel, Churchill, and Sonnack, 1998). Written by von Hippel and members of his LUCI lead-user consulting practice, this handbook walks the reader through typical lead-user studies, pointing out useful levers and potential pitfalls.
In Chapter 7, “Innovation Communities,” von Hippel moves into the heart of democratized innovation, which is the organized cooperation among user–innovators in development of innovations and other matters. Open-source software development communities are prime examples of innovation communities. Such communities use the Internet to exchange software code and other information widely, easily, and cheaply. Von Hippel cites figures for Sourceforge.net, an open-source software innovation community. In 2004 Sourceforge.net hosted 83,000 projects and had more than 870,000 users.
Innovation community behavior is also emerging for physical products such as sports equipment. For example, chapter 7 describes how kite surfing enthusiasts have used the site www.zeroprestige.com since 2001 to exchange computer-aided design files and design tips to spread innovations in their sports equipment quickly around the world.
In “Adapting Policy to User Innovation,” chapter 8, the author explores how innovation by users affects social welfare. In a recent paper he and Henkel (Henkel and von Hippel, 2005) found that, compared with a world in which only manufacturers innovate, social welfare is increased by the presence of innovations freely revealed by users.
He weakens his argument by a common error, stating “that most new products developed and introduced to the market by manufacturers are commercial failures” (p. 127) and citing studies showing success rates of only 27%. However, a rigorous examination by Crawford (1987) of 34 failure studies from 1945 to 1979 and seven failure studies from 1979 to 1986 showed the commercial success rate over the 1945–1986 period was 62 to 72%. Later studies by the Product Development Management Association (PDMA) in 1990, 1995, and 2004 of more than 1,000 business units show the commercial success rate over this period remains between 56 and 57% (Adams-Bigelow, 2005).
Chapter 9 crystallizes von Hippel's mental picture of democratizing innovation. “[T]he traditional pattern of concentrating innovation-support resources on a few pre-selected potential innovators is hugely inefficient. High-cost resources for innovation support cannot efficiently be allocated to ‘the right people’ because one does not know who they are until they develop an important innovation” (p. 123). He states that the cost of high-quality resources for design and prototyping are plummeting and that the result will be democratization of the opportunity to create.
Chapter 10, “Application: Searching for Lead User Innovations,” continues the thrust of the previous chapter. The author declares that most manufacturers still think product development's job is always to find a need and fill it. One outcome of democratizing innovation, in his view, is for manufacturers to change the way they currently do product innovation by systematically searching for and further developing innovations created by lead users. A way to do this is for the manufacturer to sell kits to ease users' innovation-related tasks. This is the subject of chapter 11, “Application: Toolkits for User Innovation and Custom Design.” However, some lead-user advocates find that business units are reluctant to ship toolkits to prospective lead users. These units believe that giving users a way to customize products is tantamount to shipping an incomplete product (Osofsky, 2005).
The final chapter, “Linking User Innovation to Other Phenomena and Fields,” first points out that user innovation communities are a subset of information communities. User-centric innovation is linked with economics of knowledge literature and with the competitive advantage of nations. In closing the chapter von Hippel considers the question of how the topic of this book could complement the way product development is currently taught to product developers.
In keeping with the principles of democratizing innovation, a free copy of the book can be downloaded from http://web.mit.edu/evhippel/www/democ.htm. Von Hippel is head of the technological innovation and entrepreneurship group at the MIT Sloan School of Management. In this short book he says much that is thought provoking and valuable for new product professionals.