Leveraging user innovation for national benefit: Changing the innovation paradigm

Christopher Lettl, lettl@asb.dk

Christoph Hienerth, ch.ivs@cbs.dk

Individual Lead Users Innovating User Firms

§ The paradigm of user-centered innovation

§ How firms can profit from user-centered innovation

§ Lead User method

§ Community based innovation

§ Using user-centered innovation to gain national competitive advantage

The Danish Lab Model

Agenda

# of usersperceiving need

TimeTime

User-Centered (Democratized) Innovation ParadigmLead Users innovate to solve their own needs at private expense -and then freely reveal their innovations

Traditional, Manufacturer-Centered Innovation ParadigmManufacturers identify user needs, develop products at private expense,And profit by protecting and selling what they have developed.

Users innovate here

First manufacturer product appears here

Target Market

How we discovered that users develop many major new products: Example of scientific instruments

63444Total

63141Transmission Electron Microscopy

-51Ultraviolet Spectrophotometry

-141Nuclear Magnetic Resonance Spectrometry

-111Gas Chromatography

Minor Improvement

Major Improvement

First Device

Innovations Affecting

First device used in field developed and built by:

227277%Total

174472%Transmission Electron Microscopy

06100%Ultraviolet Spectrophotometry

31280%Nuclear Magnetic Resonance Spectrometry

21083%Gas Chromatography

Mfg.User% UserInnovations developed for:

Users develop MOST commercially important instruments

Robotic system for neurosurgery Biocompatible implant for hernia repair

Examples of user-developed innovations(medical market)

The economics of userThe economics of user--centered innovation is centered innovation is now on firm ground now on firm ground

Users innovate because they often have a higher benefitfrom an innovation than manufacturers

Users innovation costs are often lower than manufacturers‘

(von Hippel 1988, Urban and von Hippel 1989, Herstatt and von Hippel 1992, Riggs and von Hippel 1994, Morrison et al. 2000, Luethje, 2003; Luethje et al. 2005, von Hippel, 2005; Franke and Shah 2003, Luethje 2003, Franke et al. 2006)

(Slaughter, 1993; Luethje et al, 2005; von Hippel, 2005)

Firms can profit from innovations developed by users–because innovating users tend to be ahead of the market -they tend to be LEAD USERS

“Lead Users” are users that:

1. Have needs that foreshadow general demand in the marketplace;

2. Expect to obtain high benefit from a solution to their needs. (Such users are more likely to innovate – “Necessity is the mother of invention!”)

The stronger an innovator’s lead user characteristics, the more commercially desirable is its innovation

§ Innovations developed by lead users have high commercial value

(e.g. Herstatt and von Hippel,1992;Morrison et al., 2000; Lilien et al., 2002)

§ Commercial value of innovations users develop goes up as “lead user”characteristics of innovators intensify –

(Franke and von Hippel, 2003;Franke et al., 2006)

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A study conducted at 3M shows clear advantages of lead user generated ideas compared to ideas generated by traditional marketing research methods, e.g. lead user ideas have a more than 8times higher sales potential

Source: Lilien et al. (2002)

Novelty relative to competition 1

Originality / newness of customer needs addressed 1

Idea types

Strategic Importance 1

Estimated Sales in year 5 (deflated)

9,6

8,3

0 incremental5 major product lines

9,6

146 Mio. $

Lead user Ideas(n = 5)

Non - Lead user Ideas(n = 42)

6,8

5,3

41 incremental1 major product line

7,3

18 Mio. $

p

0,01

0,09

0,01

0,08

0,001 Scale: 1 = very low, 10 = very high

Empirical test of the quality of lead user ideas

Lead Users can develop Inventions with StrongTechnological Merit

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Titelmasterformat durch Klicken bearbeitenLead user methodThe lead user method is a tool to identify and integrate lead users into concrete innovation projects of a company. Basically there are four main steps:

Start des Lead User Projekts

Phase 1:

Start of the lead user project

Phase 2:

Identification ofimportant needs

and trends

Phase 3:

Identification of lead users and ideas

Phase 4:

Lead user workshop

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Titelmasterformat durch Klicken bearbeitenLead user method / phase 1The lead user method has four steps:

Phase 1:

Start of the lead user project

• Formation of interdisciplinary team• Specification of the search field (target market) – problem definition• Definition of project goals (deadlines, budget, specification and requirements for

innovative concepts)

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Titelmasterformat durch Klicken bearbeitenLead user method / phase 1

Search field: Pre-assembly, transport and insertion of escalators

Example: lead user project with a manufacturer of escalators

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Titelmasterformat durch Klicken bearbeitenLead user method / phase 2The lead user method has four steps:

Start des Lead User Projekts

Phase 1:

Start of the lead user

project

Phase 2:

Identification ofimportant needs

and trends

• Scanning of literature, internet, data bases• Interviews with market and technology experts and users• Evaluation of trends• Selection of trends that are important for the search field

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High degree of pre-fabrication

Space optimizationHardware/Software

Modular designPlug`n´Play

Example: project with manufacturer of escalatorsSelection of 3 out of 8 trends, basis for lead user identification

Lead user method / phase 2

Sources: 72 Interviews, 81 secondary data sources

Pre-assembly, transport and

insertion of escalators

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Titelmasterformat durch Klicken bearbeitenLead user method / phase 3

Search for lead users in the target marketSearch for lead users in analogous marketsEvaluation of lead users Tracking and evaluating first ideas

Phase 3:

Identification of lead users and lead user ideas

The lead user method has four steps:

Start des Lead User Projekts

Phase 1:

Start of the lead user

project

Phase 2:

Identification ofimportant needs

and trends

Analogous market:A market in which the same trend

that was identified as being relevant for the target field problem

plays an important role

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Titelmasterformat durch Klicken bearbeitenAnalogous marketsExample project

Study 5

Target market trends E.g. modular design / plug & play

Search field: innovative solutions for pre-assembly, transport and insertion

Problem: preassembly, transportation and insertion of current solution

Analogous Markets

Model makingPower plant engineering

Crane engineering

leading edge model maker

leading edge power plant logistic engineer

leading edge crane engineer

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Conducting the workshop with lead users and company membersDevelopment of innovative conceptsEvaluation of innovative concepts

Phase 4:

Development of innovative

concepts (lead user workshop)

Phase 3:

Identification of lead users and lead user ideas

Start des Lead User Projekts

Phase 1:

Start of the lead user

project

Phase 2:

Identification ofimportant needs

and trends

The lead user method has four steps:

Lead user method / phase 4

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3 Teams consisting of:

Thursday Friday Saturday

Project IntroductionGroup formation

Get together Evening program

Working session 1

Working session 2

Working session 3

Plenum Session

Plenum Session

Plenum Session and Evaluation

LU LU

LU

DOC MODCOMP

In a three days workshop lead users, together with company employees, develop innovative solutions

Lead user method / phase 4

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Titelmasterformat durch Klicken bearbeitenPositive outcomes in all lead user projects

Crush protection for passenger cars$101.25 M90Motor vehicle parts and accessories

Step chain systems$255.20 M782Escalators and elevators

Stability monitoring for truck-cranes$665.90 M3,087Construction machinery, cranes

Online entertainment for broadband networks$76,322.90 M244,000Telecommunications

B2B stock logistics$2.8 M45Logistic systems

Pre-assembly, transport and insertion of escalators$255.20 M782Escalators and elevators

B2B communication systems for office workplaces$5,933.30 M7,852Electrical and electronic equipment

Decision support for air traffic controllers$97.70 M553Communication systems (air traffic control)

Functional beverages/packaging$22.20 M38Alcoholic and other beverages

Value added services at petrol stations$19,949.80 M49,919Drilling oil and gas wells

Search fieldSalesEmpl.Industry

Study 1 Study 2 Study 3 Study 4 Study 5

Study 6 Study 7 Study 8 Study 9 Study 10

In 10 lead user projects we identified 81 lead users and worked with different companies successfully

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A first analysis shows that the concepts developed by the lead users score significantly higher on novelty, value and realizability, compared to company internal concepts

Positive outcomes in all lead user projects

Novelty Value Realizability

1

5

2.5Ref.Value

3.8 3.7 3.5

n=40; ***p<0.001, two-tailed testsa…mean values, five point rating scale: 1=very low, 5=very high

T = 14.53***df = 80mean diff. = 0.99

T = 22.00***df = 80mean diff. = 1.20

T = 19.18***df = 80mean diff. = 1.29

t-test for single sample, test value=2.50b

358 members from 11 countries

400 cases and 1500 reviews

Involvement with medical device manufacturers andpatent attorneys

International community of leading spinesurgeons (lead users in their field)

The brain• Computer “brain” within Lego brick

Movement• 3 stepper motors

Sensors• Light• Touch• Temperature

Teaching• Kid-friendly, graphical

programming environment• Programs downloaded from

PC via infrared

Price ~ $200

Mindstorms robot kit

The Case of Lego Mindstorms

Lego mindstorms user communities grew rapidly- without company involvement

Robots become widely available

August 1998

800

700

600

500

400

300

200

900

Nov1997

Jun1998

Feb1999

Oct1999

Jun2000

Jan2001

Aug2001

Apr2002

100

Lego robots announced

January 1998

Members

Today, LEGO is creating links to innovating fans

“Lego Factory”Website links youngfans who wantto share their designs

Top innovators from “Adult Fans of Lego”participate in LEGO factory product development teams

For NXT Mindstorms Robot product line:• Lego adopts key existing AFOL

innovations• Lego asks a few AFOL members to join

R&D team

National competitive advantage with user-centeredinnovation: the DANISH USER INNOVATION LAB

Leadingacademics

in user-centered innovation

Eric von Hippel, Yun Mi Antorini,Lars Bo Jeppesen, Christoph Hienerth

Christopher Lettl

Work with

Leading Danish Firms

Lego, Novo Nordisk, DaniscoBang & Olufson, Coloplast, IO Interactive

Advancedpractices

Danishfirms

How to start your own national user-centered innovation program

§ Staff some professorships in top institutions with leading specialists in user-centered innovation

§ Set up a program to fund research and diffusion efforts in user-centered innovation

§ Professors and firms will set up a collaborative academic / industry Lab to develop and test and diffuse best practices in user-centered innovation.

§ Adapt government innovation policies to support user-centered innovation− Support development of collaborative

innovation tools − Support users’ rights to modify standard

products