Democratizing Innovation

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Book: Democratizing Innovation. Author::Erik von Hippel. MIT Press, published::2005

URL = http://web.mit.edu/evhippel/www/papers.htm


A landmark book on User-centered Innovation.


Description

Jeff Howe:

"In 2005 Eric von Hippel, the head of the Innovation Group at MIT’s Sloan School of Management, published Democratizing Innovation, that demonstrated how customers were collaborating with firms in the design of new products. “Users that innovate can develop exactly what they want, rather than relying on manufacturers to act as their (often very imperfect) agents,” von Hippel writes. Who thought to add foot straps to windsurfing boards? Not the companies. Back in 1975 the sport’s elite athletes had begun using their windsurfers to jump waves. But as windsurfer Larry Stanley recalled, “The problem was that the riders flew off in mid-air because there was no way to keep the board with you.” Soon the riders were experimenting with foot-straps, and not long after the manufactures began installing them on the factory-issued product.

Von Hippel demonstrated that in fields as wide-ranging as scientific instruments to mountain bikes to computer chips, the task of innovation was passing from the manufacturer to the user, who had both a greater need and a greater ability to improve a product’s performance. Companies that embraced this change entered into a creative relationship with their customers, even going so far as to provide them with tools to help design the end products. The writer and technology professor Clay Shirky has termed this phenomenon “downsourcing,” in which a manufacturer simply shifts the burden of certain functions—innovation, in this case—down the supply chain to the customer. The company then institutes the innovation, and sells it back to the customer, who is, in this case, is also a supplier.

Von Hippel offers another useful observation that we see echoed in crowdsourcing: Customers don’t innovate in a vacuum. “Individual users do not have to develop everything they need on their own: they can benefit from innovations developed and freely shared by others.” They form, in von Hippel’s terminology, “user innovation communities.” They do this not so much out of a need to socialize with like minds—though that surely plays a role as well—but because the community structure offers considerable advantages to the individual innovators. “Chat rooms and email lists with public postings can be provided so that contributors can exchange ideas and provide mutual assistance. Tools to help users develop, evaluate and integrate their work can also be provided to community members—and such tools are often developed by community members themselves.” Such user communities, then, are like mutual aid societies, or cooperatives. And for such communities to operate efficiently, the individual members generally agree to abide by an accepted social norm: they “freely reveal,” which is to say, relinquish any proprietary interest in, their own innovations. The community exists to improve on each other’s creations.

Such communities offer the companies for which they “work” considerable benefits—they are more efficient at organizing and performing such labor than a firm. And not only does the firm generally not have to pay for the innovations, but the transaction costs associated with the innovations are kept to a minimum. The companies don’t have to locate the innovators, manage their productivity or evaluate their output. The community does all this for them. This strikes to the heart of many of our assumptions about how markets and capitalist economies function. What motivates people to act in such a seemingly selfless fashion?" (http://crowdsourcing.typepad.com/cs/2008/05/chapter-5-the-r.html)

Excerpts

User-centered Innovation practices vs. manufacturer-centric innovation

"When I say that innovation is being democratized, I mean that users of products and services—both firms and individual consumers—are increasingly able to innovate for themselves. User-centered innovation processes offer great advantages over the manufacturer-centric innovation development systems that have been the mainstay of commerce for hundreds of years. Users that innovate can develop exactly what they want, rather than relying on manufacturers to act as their (often very imperfect) agents. Moreover, individual users do not have to develop everything they need on their own: they can benefit from innovations developed and freely shared by others. The trend toward democratization of innovation applies to information products such as software and also to physical products.

The user-centered innovation process just illustrated is in sharp contrast to the traditional model, in which products and services are developed by manufacturers in a closed way, the manufacturers using patents, copyrights, and other protections to prevent imitators from free riding on their innovation investments. In this traditional model, a user’s only role is to have needs, which manufacturers then identify and fill by designing and producing new products. The manufacturer-centric model does fit some fields and conditions. However, a growing body of empirical work shows that users are the first to develop many and perhaps most new industrial and consumer products. Further, the contribution of users is growing steadily larger as a result of continuing advances in computer and communications capabilities. In this book I explain in detail how the emerging process of user-centric, democratized innovation works. I also explain how innovation by users provides a very necessary complement to and feedstock for manufacturer innovation. The ongoing shift of innovation to users has some very attractive qualities. It is becoming progressively easier for many users to get precisely what they want by designing it for themselves. And innovation by users appears to increase social welfare. At the same time, the ongoing shift of product-development activities from manufacturers to users is painful and difficult for many manufacturers. Open, distributed innovation is “attacking‿ a major structure of the social division of labor. Many firms and industries must make fundamental changes to long-held business models in order to adapt. Further, governmental policy and legislation sometimes preferentially supports innovation by manufacturers. Considerations of social welfare suggest that this must change. The workings of the intellectual property system are of special concern. But despite the difficulties, a democratized and user-centric system of innovation appears well worth striving for. (http://web.mit.edu/evhippel/www/books/DI/Chapter1.pdf )


Von Hippel on Lead Users

"Eric von Hippel's new book, Democratizing Innovation, documents how breakthrough innovations are developed by "lead users," -- users with a high incentive to solve problem, and that often develop solutions that the market will want in the future. Von Hippel argues that a user-centered innovation process -- one that harnesses lead users -- offers great advantages over the manufacturer-centric innovation model that has been the mainstay of commerce for hundreds of years. To this end, he has developed a systematic model for companies to tap into the innovation potential of their lead user communities." (quote from the Smart Mobs weblog)

An interview with the author where he explains the concept of "lead users", at http://www.thefeature.com/article?articleid=101525&ref=6647666

Interview

Excerpts from an interview with Open Business, at http://www.openbusiness.cc/2006/01/20/democratizing-innovation-a-conversation-between-openbusiness-and-eric-von-hippel-2/


"Eric von Hippel, a professor at the Massachusetts Institute of Technology (MIT), focuses his research on developing strategies to identify new ideas and innovations systematically and quickly. His book Democratizing Innovation has documented how the internet and improvements in computing have changed the innovation process. Now users have much more power. To understand the effects of his ideas OpenBusiness has spoken to von Hippel.

OB: What do you mean by Democratizing Innovation?

Eric von Hippel: I mean that users of products and services—both firms and individual consumers—are increasingly able to innovate for themselves. It gives more power to users and these user-centered innovation processes offer great advantages over the manufacturer-centric innovation development systems. Those have been the norm for hundreds of years. Now innovation can happen in a much more decentralized way from the bottom up.

OB: This sounds great for consumers and small time entrepreneurs, but what makes it possible?

Eric von Hippel: Sophisticated design tools are far more widespread, less costly and easier to use. By and large the vast improvements in computation has been the driving force. And most importantly the increasing communication between users, because of the internet, has made it much easier to share knowledge and drive innovation.

OB: Do you think Intellectual Property laws as they are block innovation?

Eric von Hippel: Certainly. Property owners will try to control the process and block everything that threatens their business models. But free materials will increasingly become an effective competitor for non-free materials and content.

OB: How does this change businesses and business models?

Eric von Hippel: Well, users have a natural advantage in the innovation process. They know what they need and can distribute their ideas much more effectively than large corporations. You know there is a general rule – markets start small – therefore corporations tend not innovate at the cutting edge of social and commercial demands. Manufacturers tend to concentrate on markets they like and understand. And they had no real access to users and their demands. Innovations therefore were quite often not need-oriented. Now users can connect, debate their needs and create solutions in a much more seamless way. Businesses in this environment need to be far more connected to their users and integrate them directly in the innovation process.

OB: In your book you highlight that the modus operandi of businesses is changing and give as an example Open Source development. And even though it seems a great example of democratized innovation the question remains how business models work, if the core product – software – is distributed for free. What will drive innovation in this space?

Eric von Hippel: I think in the first place motivations are non-commercial. Users who innovate do so basically because they have a need that they cannot fill with available commercial products. Their major reward is the in-house use of what they have developed and recognition by their peers. Innovators in the open-source field gain reputation by publicly reporting their innovations. Its true the core product is free, but its wrong to assume that this means there is no economic activity. Just look at the case of the Apache server, which is used by major corporations. They pay developers to participate in the process, because they benefit from the product. To put it differently: economic activity moves from the Microsoft layer – controlling every step in the development and distribution process in a closed way – to the Open Source or Linux layer. It is still economic activity, just the business models are different."

(http://www.openbusiness.cc/2006/01/20/democratizing-innovation-a-conversation-between-openbusiness-and-eric-von-hippel-2/)


More Information

More essays by the author at http://web.mit.edu/evhippel/www/papers.htm

Another interview with Eric von Hippel on the Democratization of Innovation