Democratizing Innovation

Democratizing Innovation Democratizing Innovation Eric von Hippel The MIT Press Cambridge, Massachusetts London, England © 2005 Eric von Hippel Exclusive rights to publish and sell this book in print form in English are licensed to The MIT Press. All other rights are reserved by the author. An electronic version of this book is available under a Creative Commons license. MIT Press books may be purchased at special quantity discounts for business or sales promotional use. For information, please email [email protected] or write to Special Sales Department, The MIT Press, 5 Cambridge Center, Cambridge, MA 02142. Set in Stone sans and Stone serif by The MIT Press. Printed and bound in the United States of America. Library of Congress Cataloging-in-Publication Data Hippel, Eric von. Democratizing innovation / Eric von Hippel. p. cm. Includes bibliographical references and index. ISBN 0-262-00274-4 1. Technological innovations—Economic aspects. 2. Diffusion of innovations. 3. Democracy. I. Title. HC79.T4H558 2005 338'.064—dc22 2004061060 1098765432 Dedicated to all who are building the information commons. Contents Acknowledgements ix 1 Introduction and Overview 1 2 Development of Products by Lead Users 19 3 Why Many Users Want Custom Products 33 4 Users’ Innovate-or-Buy Decisions 45 5 Users’ Low-Cost Innovation Niches 63 6 Why Users Often Freely Reveal Their Innovations 77 7 Innovation Communities 93 8 Adapting Policy to User Innovation 107 9 Democratizing Innovation 121 10 Application: Searching for Lead User Innovations 133 11 Application: Toolkits for User Innovation and Custom Design 147 12 Linking User Innovation to Other Phenomena and Fields 165 Notes 179 Bibliography 183 Index 197 Acknowledgements Early in my research on the democratization of innovation I was very for- tunate to gain five major academic mentors and friends. Nathan Rosenberg, Richard Nelson, Zvi Griliches, Edwin Mansfield, and Ann Carter all provided crucial support as I adopted economics as the organizing framework and toolset for my work. Later, I collaborated with a number of wonderful co-authors, all of whom are friends as well: Stan Finkelstein, Nikolaus Franke, Dietmar Harhoff, Joachim Henkel, Cornelius Herstatt, Ralph Katz, Georg von Krogh, Karim Lakhani, Gary Lilien, Christian Luthje, Pamela Morrison, William Riggs, John Roberts, Stephan Schrader, Mary Sonnack, Stefan Thomke, Marcie Tyre, and Glen Urban. Other excellent research col- laborators and friends of long standing include Carliss Baldwin, Sonali Shah, Sarah Slaughter, and Lars Jeppesen. At some point as interest in a topic grows, there is a transition from dyadic academic relationships to a real research community. In my case, the essential person in enabling that transition was my close friend and col- league Dietmar Harhoff. He began to send wonderful Assistant Professors (Habilitanden) over from his university, Ludwig Maximilians Universität in Munich, to do collaborative research with me as MIT Visiting Scholars. They worked on issues related to the democratization of innovation while at MIT and then carried on when they returned to Europe. Now they are training others in their turn. I have also greatly benefited from close contacts with colleagues in industry. As Director of the MIT Innovation Lab, I work together with senior innovation managers in just a few companies to develop and try out innovation tools in actual company settings. Close intellectual colleagues and friends of many years standing in this sphere include Jim Euchner from Pitney-Bowes, Mary Sonnack and Roger Lacey from 3M, John Wright x Acknowledgements from IFF, Dave Richards from Nortel Networks, John Martin from Verizon, Ben Hyde from the Apache Foundation, Brian Behlendorf from the Apache Foundation and CollabNet, and Joan Churchill and Susan Hiestand from Lead User Concepts. Thank you so much for the huge (and often humbling) insights that your and our field experimentation has provided! I am also eager to acknowledge and thank my family for the joy and learning they experience and share with me. My wife Jessie is a professional editor and edited my first book in a wonderful way. For this book, however, time devoted to bringing up the children made a renewed editorial collab- oration impossible. I hope the reader will not suffer unduly as a conse- quence! My children Christiana Dagmar and Eric James have watched me work on the book—indeed they could not avoid it as I often write at home. I hope they have been drawing the lesson that academic research can be really fun. Certainly, that is the lesson I drew from my father, Arthur von Hippel. He wrote his books in his study upstairs when I was a child and would often come down to the kitchen for a cup of coffee. In transit, he would throw up his hands and say, to no one in particular, “Why do I choose to work on such difficult problems?” And then he would look deeply happy. Dad, I noticed the smile! Finally my warmest thanks to my MIT colleagues and students and also to MIT as an institution. MIT is a really inspiring place to work and learn from others. We all understand the requirements for good research and learning, and we all strive to contribute to a very supportive academic envi- ronment. And, of course, new people are always showing up with new and interesting ideas, so fun and learning are always being renewed! Democratizing Innovation 1 Introduction and Overview When I say that innovation is being democratized, I mean that users of products and services—both firms and individual consumers—are increas- ingly 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. As a quick illustra- tion of the latter, consider the development of high-performance windsurfing techniques and equipment in Hawaii by an informal user group. High-performance windsurfing involves acrobatics such as jumps and flips and turns in mid-air. Larry Stanley, a pioneer in high-performance windsurfing, described the development of a major innovation in technique and equipment to Sonali Shah: In 1978 Jürgen Honscheid came over from West Germany for the first Hawaiian World Cup and discovered jumping, which was new to him, although Mike Horgan and I were jumping in 1974 and 1975. There was a new enthusiasm for jumping and we were all trying to outdo each other by jumping higher and higher. The problem was that . the riders flew off in mid-air because there was no way to keep the board with you—and as a result you hurt your feet, your legs, and the board. Then I remembered the “Chip,” a small experimental board we had built with footstraps, and thought “it’s dumb not to use this for jumping.” That’s when I first started jumping with footstraps and discovering controlled flight. I could go so much faster than I ever thought and when you hit a wave it was like a motorcycle rider 2 Chapter 1 hitting a ramp; you just flew into the air. All of a sudden not only could you fly into the air, but you could land the thing, and not only that, but you could change direc- tion in the air! The whole sport of high-performance windsurfing really started from that. As soon as I did it, there were about ten of us who sailed all the time together and within one or two days there were various boards out there that had footstraps of various kinds on them, and we were all going fast and jumping waves and stuff. It just kind of snowballed from there. (Shah 2000) By 1998, more than a million people were engaged in windsurfing, and a large fraction of the boards sold incorporated the user-developed innovations for the high-performance sport. 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 pro- ducing 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 qual- ities. 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 “attack- ing” a major structure of the social division of labor.

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