In this book Eric von Hippel explains how and why users of products and services (either in the form of firms or individuals) develop and freely reveal innovations resulting in what he names “Democratization of Innovation”.

Traditionally innovation of products and services is developed by manufacturers in a closed ways, using patents and copyrights to protect intellectual property and user’s role consist only in have needs. In this fashion the author define “Users” as firms or individual consumers that expect to benefit from using a product or service. “Manufacturers” expect to benefit from selling a product or service as a result of their innovations. So, Mass manufacturer’s strategy is to meet needs of heterogeneous users and capture profits form a large number of them, what is called “a few sizes fit all”

On the non-traditional side “user centered innovation”, users are the first to develop innovation in products. This occurs because manufacturers produce standard products that do not fulfill at all everybody’s needs. Hence, users using a standard product can make adjustments or add-ons to develop exactly what they require.

As follows a company or individual can play the role either of manufacturer innovator or user innovator. For example if we look at Boeing innovations for the airplanes it sells, then it is a manufacturer innovator. On the other hand Boeing has developed machinery in to build airplanes, and then it is also a user innovator.

According to research on this field 10 to 40% of users develop or modify products. In order for this to happen two conditions must take place: 1) They want something that is not available on the market and 2) they are able and willing to pay for its development.

Once these conditions are taking place there are two options: 1) Hire a custom manufacturer that is more likely to do it faster, better and cheaper or 2) Self-Development. Surprisingly, users prefer Self-Development mainly because a) Agency Cost- the cost to monitor, commit and audit outcome to assure that the agent is following the interest of the principal- and b) Enjoyment of the innovation process.

In short, customer wants the right product at their own budget and manufacturer want to lower cost reusing elements they already have and predict what other will want in the future. The author proves mathematically that is better to go for self-development when they have unique needs and that manufactures is the most economical options when “n” users want the same thing.

An example is when a user requires a unique climbing boot that fit his particular technique and he has a desired price for it. The manufacturer would use his current tech and will not want to learn a new way to bond the components that fit the user requirements. Any deviation on this would impact the user technique and cost for him. As a result when a user wants something special they will often get the best result by innovating themselves. Moreover they feel stimulated with the enjoyment of innovation.

Innovators can combine and leverage their efforts to increase their success chances. This result in innovation communities where users and manufacturers develop, test and diffuse their innovations. One example of is Wikipedia, which is an open information community.

Freely reveal is explicable because gives benefit for enhancement of reputation, positive network, diffusion on innovation. Without revealing innovations multiple users would have to innovate themselves, on the other hand a revealed innovation comes to a public good that impacts the social efficiency. Manufacturers contribute partially because they offer innovator products but never the information to replicate the product.

Unluckily the actual intellectual property law favour manufacturers over user innovators since in US made an illegal practice to modify products on the market, much of them prototypes of innovation, making this policy not neutral respect to the source of innovation.

Along revealing innovation “Democratizing of innovations” is causing a shift on manufactures form design their own innovations to better commercialize an innovation that lead user have. This latter approach can provide a better interface to the innovation process and so better performance. In 3M sales of lead users resulted in $146 million vs. $18 million of forecasted sales per year

In the same shift, other firms are partitioning product-development into need intensive subtasks that area assigned to users along with a kit of tools that enable them to execute. In 2003 more than $15 mill of semiconductors had been designed with this approach.

A great example to summarize the entire book is when von Hippel cites Larry Stanley, a windsurfer that developed a small board with foodstraps to keep the board attached while in air. This innovation allowed him to jump higher and go faster on waves in the late 1970´s. Today the footstrap is considered a standard feature on windsurf boards.

This example illustrates key components of innovation development by users. First, the act of use itself creates new needs and desires among users that lead to the creation of new equipment and techniques. Second, user cooperation in communities is critical to prototyping, improving, and diffusing solutions to those needs. Working jointly allows rapid development and simultaneous experimentation, however working jointly also requires that users openly reveal their ideas and prototypes to others. Third, user innovations – even after they have been freely revealed – are sometimes commercialized.

In conclusion the shift caused by the democratization of innovation has created welfare through innovation communities, lead innovators and individual innovation and its forcing changes not only in manufacturer innovation practices, but also the need of neutral regulations. This new scenario is taking out the manufacturers as “Standard Innovators” and creates new possibilities for customized users.

References:

von Hippel, E. (2005) “Democratizing Innovation”. Boston,MA: MIT Press. Home page at MIT: http://web.mit.edu/evhippel/www/index.html