Lead Users and user communities L10 - created from Mind Map

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1. Innovation along the Value Chain

Innovation along the Value Chain  Classical view:  product innovations come from the product manufacturer  the manufacturer generates ideas and develops prototypes  New perspective:  many innovations do not come from manufacturers but from users of the product  users often supply not only the idea, but also prototypes  Note:  the distribution of innovative activity along the value chain varies strongly between industries  results are based on research by Eric von Hippel, MIT (since mid 70s) and many others since then

High-Performance Windsurfing: Innovation in User Communities  experiments by professional windsurfers in Hawaii in1978: foot straps for jumps  further developed by user community; today: standard High-Performance Kite-Surfing: Innovation in User Communities  Innovation in the field of Kite-Surfing requires a lot of skills  Problem: Manufacturer R&D Departments are small  Surfers use CAD applications to design kites and publish the results in user communities  Many manufacturers of sails are located close to beaches and are able to work with CAD files

benefits by manufacturing and selling the product Supplier: benefits by creating or increasing demand for input that it supplies User: benefits by using the innovation:new functionality and higher productivity Complementor: benefits by creating or increasing demand for its own good, which complements the innovation

2. Lead Users

 Classical market research is based on a static concept of a representative customer  In contrast, the lead user method focuses on users that are ahead of the trend  Lead users have needs that foreshadow general demand  They expect to obtain high benefit from a solution to their needs  They are more likely to innovate – “Necessity is the mother of invention!”

 Classical market research:  aims at representative findings (“average customer”)  large-number studies  quantitative methods preferred for comparability  Problems: Average user...  is mentally focused on existing reality  has typically difficulties in articulating new needs  mostly has no pressing need for new products  The lead users method avoids these problems

1.) Determine lead user indicators: a) trends; b) benefits from innovation 2.) Identify lead user group 4.) Check general acceptance of concept 3.) Develop product concept with lead users

Step 1: Indicators Example: CAD for printed circuit boards Urban and von Hippel (1988, Management Science)  Survey type: phone survey of experts  Choice of experts: contact firms using CAD: “Who in your firm is the best expert on CAD?”  Survey questions: important future technical trends and developments?  Result: increased density of components is dominant technical trend  Investment in own developments  “Have you developed your own CAD systems instead of buying systems available on the market?“  Dissatisfaction with existing market offers  “How satisfied are you with existing CAD systems?“  Speed of adoption of new technology  “When in the diffusion process do you adopt new CAD systems?“

Step 2: Identification  Structured phone survey  Random choice of 178 customer firms  Survey questions: see step 1  Participants were grouped using cluster analysis  Results:  two clusters  28% can be identified as lead users  own developments strongest indicator for lead user

Step 3: Development  Product concept developed in creativity workshop  Participants: 5 firms from lead user cluster that had developed their own CAD systems  Topic: development of CAD system with improved presentation of high-density circuit boards; solution had to fit existing production technology  Result: improved solution with broader simulation functionality, flexible interfaces, presentation of thin interconnects

Step 4: Testing  Important step to avoid niche solutions  Method: written survey  Participants: 173 of the firms already contacted before  Subject of survey:  comparison of 4 different PC-CAD systems  evaluation of systems w.r.t. product attributes  determination of purchase probabilities  Lead User solution clearly preferred!

Critique  Risks / downsides:  development of niche solutions  problems with intellectual property  secrecy might be compromised  costly and time-consuming  internal acceptance: “not invented here”  Operational difficulties:  identifying the right trends  identifying the true lead users  problems in lead user workshop  problems in test of acceptance

Beyond Customers  Lead Users are often not customers of your and they may not have an incentive to “lead” you to their innovations  Sir 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 solve a problem that was hindering his efforts as a consulting software engineer at CERN  Berners-Lee’s 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

3. Toolkits for User Innovation

 Users often have information on needs and solution approaches, but lack technical means to design a solution  Manufacturers offer a “toolkit“ for innovation that extends choices and allow development at the user‘s site (learning by using)  Custom ICs: integrated circuits specifically developed for customers  Early 80s: LSI Logic (small firm) supplies customers with software to design ICs themselves.  Development process is accelerated considerably and SI became a major player

Nestlé Foodservices  Customized food for restaurant chains (e.g., Mexico dressing for Taco Bell)  The standard approach was for the customer to develop a recipe as a specification for Nestlé  However, the ingredients and process are different in industrial production, requiring many iterations  Nestlé now offers toolkit with ingredients used in industrial production, allowing error-free translation of the customer’s recipe  Development time reduced from 26 to 3 weeks!

 statistics package with ready-to-use routines for multivariate analysis of data  early 90s – late entrant in the market for statistics software, limited set of routines  interface with simple programming language for development of user’s own routines  publication of selected new routines  incorporation of user extensions in the kernel  late 90s: vastly extended functionality, leading market position despite of huge price increases  STATA Helpline: users support users, moderated by STATA personnel

 Only need-related aspects of design should be done by the user  Toolkits should be designed to enable user to go through trial and error cycles  Toolkits should enable to design alternative solutions  Toolkits should be user-friendly  User design elements should be included in the product  Toolkit-based products should be manufactured without much change

4.Conclusions and Outlook

Conclusions and Outlook Users and lead users are an important source of innovation  The lead user method – includes identification of lead user indicators, identification of lead users, development of a product concepts with the lead users and testing if this product is accepted by general users The lead user method is not always suitable, and bears risks and practical difficulties Toolkits for user innovation enable users to innovate themselves.

Lead Users and user communities L10