Research report: July 2008 The New Inventors How users are changing the rules of innovation The New Inventors How users are changing the rules of innovation Foreword There’s nothing new about user-led innovation. Many of the products and technologies we now take for granted were developed by users – ‘ordinary’ but skilled and imaginative people who knew what they needed to do their jobs more effectively and decided to invent it themselves. What is new in this picture are the powerful tools that users can now employ – the digital technologies and networks that they can exploit to create further innovations and to connect with each other. To investigate this phenomenon, NESTA commissioned research from the Centre for Research in Innovation Management (CENTRIM), University of Brighton, and the Science and Technology Policy Research Unit (SPRU), University of Sussex. This report sets out a way of understanding this ‘new’ phenomenon. Focusing on innovation that emerges from individual users and communities of users, it presents UK and international examples of firms that are harnessing user-led innovation – and firms that have emerged directly from communities of user innovators. Most importantly, it asks the question: are we doing enough to encourage these forms of innovation – or simply to allow them to flourish? Jonathan Kestenbaum CEO, NESTA July, 2008 NESTA is the National Endowment for Science, Technology and the Arts. Our aim is to transform the UK’s capacity for innovation. We invest in early-stage companies, inform innovation policy and encourage a culture that helps innovation to flourish. 3 Executive summary User-led innovation – where users play an active part in the development of new or improved products and services – is exploding: proliferating digital technologies mean that we’re all potential innovators now. New firms based on user-led innovation are being sold for hundreds of millions of dollars only a few years after being founded. Policymakers have remained somewhat sceptical about the importance of user-led innovation. But if the UK is to harness this new wave of invention and creativity, it needs to develop world-leading policy in support of user- led innovation. This means being more aware of the impact of new legislation on user-led innovation, and establishing a forum to ensure that policymakers hear directly from these new inventors. User-led innovation is growing in labour alone in their workshops but belong importance and creating significant to international communities of like-minded commercial value individuals. The internet has become a global workshop where they can share tools, User-led innovation occurs when users play techniques and ideas and work together on an active part in the development of new or projects that change whole industries. improved products and services New ideas do not always first appear from In sectors like software, music and video games formal industrial research and development there is now an expectation that users will (R&D). Users also have innovative ideas that participate in the innovation process. In many lead to new and improved products or services. industries, the closed culture of innovation no These users are often best placed to identify longer applies. The clear divisions that used what they need; they may also be able to to exist between firms and consumers or firms design, build and distribute their own solutions. and suppliers are increasingly blurred: we’re all This is user-led innovation. (potential) innovators now. There is a long and rich tradition of user-led Many UK firms are at the forefront of this innovation in the UK new wave of innovation Writing in 1776, Adam Smith noted that many Firms like Sibelius (in music notation software), of the machines used for manufacturing were NetDoctor (in health information), and the inventions of ‘common workmen’. This Last.fm (in online music) are successfully tradition continued into the modern era: mass harnessing user-led innovation. Bebo, the UK computing owes its birth to a series of user-led social networking site only established in 2005, innovations in the 1970s and 1980s that took has over 42 million users. computers out of large corporations and into homes and small businesses. More recently, Such firms invest huge resources in developing Tim Berners-Lee invented the World Wide a better understanding of the needs of their Web as a means of sharing information at his users. For some firms, user-led innovation workplace at CERN, the European Organization is a key part of their business strategy; they for Nuclear Research. actively encourage users to innovate – and may even give them tools to help. Proliferating digital technologies have accelerated user-led innovation User-led innovation is generating These developments in networked information significant commercial value and communications technology (ICT) have Major firms like IBM and Sun Microsystems in turn enabled a new wave of user-led participate in many user-led open source innovation. The ‘new inventors’ no longer projects. Microsoft has created a free 4 development toolkit to encourage users to different music tracks to create a new piece, build new games for its games console. or indeed new musical genre. American firms in particular have recognised • Modification of existing products the growth potential of user-led innovation- ‘Modding’ (modifying) takes two main forms: based firms, as witnessed in their acquisition making minor adjustments to the operation strategies: of existing products; and re-engineering products to add new functions. • Bebo was recently sold for £417 million to US internet company AOL. • Production of novel products The most extensive user-led innovation • Last.fm was acquired by American occurs when individual users or user broadcaster CBS in 2007 for £140 million. communities create their own novel systems, products or services – for example • Sibelius was acquired by US-based Avid in developing major open source software Technology in 2006 for £12.2 million. systems such as Linux. Users in effect become manufacturers. • NetDoctor was acquired by American media conglomerate Hearst Corporation in 2006 for User innovators tend to be driven by their an undisclosed sum. interests rather than intellectual property rights, and work within highly active communities There are important differences • Innovative users are interest-driven between user-led innovation and Users often have very different motivations ‘traditional’ innovation from those that drive commercial activity. User innovators are often passionate about User-led innovation often challenges the status their particular area of interest and prepared quo and seeks to push the boundaries in ways to devote extraordinary amounts of time and that are often not possible within traditional energy to developing their ideas. R&D. Such activity can challenge existing intellectual property (IP) rights designed to • Online communities play a major role promote innovation, but which can have a User communities facilitate innovative ‘chilling effect’ on innovative activity by users. activity between members, as well as providing education and development for User-led innovation ranges from giving newcomers. feedback and support, to creating entirely new products, services and systems • Intellectual property may be viewed as less important, or set aside entirely • Provision of feedback Being interest-driven, users will often set Existing products are often served by forums aside all issues concerning intellectual where newer users can ask for advice and property (IP). IP may even be viewed as an support from more knowledgeable users. impediment to creativity and innovation. Such knowledgeable users also probe and Users often freely reveal their ideas within report the flaws and weaknesses in new their communities. products. • Some users and communities prevent • Production of content for existing their work from being commercialised products There are now a series of mechanisms, The business model of firms like YouTube, sometimes referred to as copyleft, designed MySpace, Facebook, and Bebo relies on to prevent restrictions on copying, individual users generating and sharing developing and distributing original work or content. Content production in some areas later modifications, so protecting innovations is more advanced, for example, creating new from being directly appropriated by firms. characters and landscapes for a video game. • User communities often create ‘toolkits’ • Novel use of existing products to enable other users to innovate Some highly skilled users recombine Software tools are an important resource existing products and services to create new for users who wish to innovate. Many user products. For example, users can mix two communities – and firms – make a wide range of such tools freely available. 5 Policy needs to embrace user-led to develop a leading position among major innovation and better understand its industrial nations in developing innovation implications for the UK economy policy that recognises, promotes and supports user-led innovation. UK policy still suffers from a linear model ‘hangover’ and has only just begun to Avoid the potential chilling effect of recognise the importance of users in existing and new legislation innovation First, relax copyright rules: in taking forward User-led innovation has emerged under the its responses to the Gowers Review, the radar of government and has largely occurred Government should respond by adopting