Management of innovation Lead users and user integration

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Management of innovation Lead users and user
integration

• Vincent Mangematin

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Introduction unsatisfied users

• Empirical evidences
• Consumers know what they want
• They are able to use it and improve it for
  specific use

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Introduction unsatisfied users

• Empirical evidences
• Classical use and

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Introduction unsatisfied users

• Empirical evidences
• Alternative uses

• In house biking

• City biking

• Cruising

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Introduction unsatisfied users

• Empirical evidences
• Alternative uses

• Speeding and racing

• Rail road caring

• Jumping

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Basic ideas

• Costumers involvement
• - Improvement of existing design/product/process
• Adaptation of existing design to specific
  requirements
• Developing new use and new designs
• Specific adaptations

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Unique phenomenon?

• Kayak, bikes, mountain bikes, BMX
• Car tuning
• Software, Linux, Apache, Fetchmail
• Airplanes, scientific instruments
• Windsurf, Kite surf

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Ideas Car tuning
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Outlines

• Introduction unsatisfied users
• Basic ideas
• Unique phenomenon?
• Development of products by lead users
• Elements of lead user theory
• Why many users want custom products?
• Users innovate or buy decisions
• Users Low cost innovation niches
• Why users often freely reveal their innovations
• Innovation communities
• Conclusions and best practices

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Development of products by lead users

• Many users innovate

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Development of products by lead users (cont.)

• Many users innovate

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Elements of lead user theory

• Urban and von Hippel (1998)
• Def by two characteristics
• They face need that will be general in the
  marketplace but face them months or years before
  the bulk of that marketplace encounters
• AND
• They expect to benefit significantly by obtaining
  a solution to those needs

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Elements of lead user theory

• Specifications of the characteristics of lead
  users
• They have needs that are advanced with respect to
  an important marketplace trend
• They expect benefit by obtaining a solution
• Implications
• Identification of trends
• Targeted market (who is able to describe these
  trends? Which is the relevant expert knowledge?)
• Identification of high benefits expectations
• Innovation related activities by users could be
  an indication (what are the modifications
  introduced by users? Is it a generalised need?)

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Elements of lead user theory

• Identification of Lead Users
• Distinction B2B and B2C
• Characteristics of the markets (number of
  users/consumers, expertise, concentration of
  expertise, etc.)
• selection of the lead users sample
• Managing the interactions with lead users
• Example of Stata
• Game industry
• Testing whether lead users concepts appeal to
  typical users

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Why many users want customized products

• Heterogeneity of user needs
• Specific needs or uses
• Different environments
• Various experiences of users
• Evidences of the variety of needs

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Why many users want customized products
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Why many users want customized products

• Evidences from studies of market segmentation
• Evidences of heterogeneity and willingness to pay
• Heterogeneity of users needs (case of Apache
  security system) needs about 45 new security
  functions
• Willingness to pay (example of improved backpack)

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Users innovate or buy decisions

• Mass market manufacturers -gt standardised
  products -gt reluctant to accommodate special
  requests
• Individual user must be sometimes more inclined
  to innovate
• Reduction of transaction costs
• Reduction of information asymmetries

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Users innovate or buy decisions

• Agency costs between users and manufacturers
• Differences between producer and user regarding
  what is a desirable solution
• Ex Weight for a tennis racket difference
  balance from users and manufacturers
• Differences in innovation quality signalling
  requirements between user and manufacturer
  innovators difference between purchased or made
• Ex Work correctly and reliably right out of the
  box, replacement parts, etc.
• Contributors to transaction costs
• Differing legal and regulatory requirements
• Ex Warranty no warranty

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Users Low cost innovation niches

• Problem solving process

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Users Low cost innovation niches

• Sticky information
• Information is useful only as an input. However,
  costly to transfer as sticky

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Users Low cost innovation niches

• Information asymmetries
• Qualitatively different innovations in scientific
  instruments

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Users Low cost innovation niches

• Innovation niches Mountain bikes during mid
  70s
• 1974 Mike Sinyard founds Specialized Bicycle
  Imports. Yamaha introduces a fully suspended kids
  bike called the Moto-Bike. At the California
  State Cyclocross Championships in Marin, two
  riders show up on Schwinn cantilever frames
  equipped with multi-speed gearing and drum
  breaks.
• 1976 Charlie Kelly commissions Craig Mitchell to
  construct the first mountain bike frame. Trek
  begins producing it's first products hand built
  steel road frames. The first mountain bike race
  on Marin's Repack road is won by Bob Burrowes.
• 1977 Joe Breeze produces the first batch of 10
  custom mountain bikes under the name Enduro. Anne
  Caroline Chausson, 1996 World Junior Down Hill
  Champion is born.
• 1978 Twenty-year old Tom Ritchey builds his
  first mountain bike. Velo Club Tamalpais formed.
  Members include Otis Guy, Gary Fisher and
  Charlie Kelly.

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Users Low cost innovation niches

• Innovation niches Mountain bikes during mid 70s

The first recognition of the new kind of bikes
emerging from Marin County came in 1978.
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Why users often freely reveal their innovations

• Evidence of free revealing
• Ex
• Game industry
• Linus
• Bikes and foot straps of fun boards
• Free exchanges of information and advices amongst
  professionals

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Why users often freely reveal their innovations

• Others often know something close to your
  secret
• Because it is a question of personal ethics
• Because it is only a small innovation or
  improvement
• As a contribution to a community which values
  sharing behaviour and gives credits for this
• As a way to build a community to play

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Why users often freely reveal their innovations

• Low ability to profit from patenting
• Patenting is a costly and difficult process
• Innovating may not be the user business
• Positive Incentives for free revealing
• Reputation (Lerner and Tirole 2002)
• Prevent patenting by others
• Make possible for manufacturers to learn
• Questions
• Innovators (users) support all the cost of
  innovation
• Users as innovators Collective action

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Innovation communities

• Informal cooperation amongst users
• How is it organised?
• User innovation is widely distributed
• Individuals or firms develop innovation that
  serve their particular needs -gt Low cost
  innovation niches
• Linuss law in software debugging

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Innovation communities

• Innovation communities
• Def as meaning nodes consisting of individuals or
  firms interconnected by information transfer
  links which may involved face to face, electronic
  or other communication
• Users or firms as members AND contributors
• Community
• Often specialized
• Contributors and non contributors have free
  access
• Convergence and meeting points

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Innovation communities

• History of Free Software Foundation
• Early days of informatics No package software
• 1969 Defence Advance Research Projects Agency
  established a network with its contractors and
  100s univ.
• Communal hacker culture- IA at MIT creates a code
• 1984 MIT licensed the code. No free access to
  the source code
• R. Stallman was distresses by the loss of the
  source code and the privatisation trend in the
  software industry
• 1985. Creation of the Free Software Foundation
• Basic License General Public License to open
  contribution to the source code
• Appache
• Fetchmail

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Conclusion and best practices

• Newness Consumer/user, THE heart of the
  innovation process
• Three different strategies
• Dont believe users your engineers and
  marketers are the best test the products
• It is important to co-develop products Pre-test,
  experimentation
• Users are innovators lets follow them.

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Conclusion and best practices

• 1. Integrating lead users as a source of
  innovation
• Identifying lead users in advanced analog fields
• Example of ABS from aircraft industry to
  automotive industry
• Difficult to identify Pyramiding rather than
  snowballing
• Von Hippels experiment at 3M
• Differentiate projects carried out with lead
  users involvement (5) and projects based on
  traditional market research based idea generation
  (42)

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Conclusion and best practices
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Conclusion and best practices
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Conclusion and best practices

• 2. Toolkits for user innovation and custom design

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Conclusion and best practices

• 2. Toolkits for user innovation and customized
  design
• Repartitioning of development tasks
• Learning through trial and error
• Appropriate space solutions
• Related to industry (semi conductor Vs. windsurf)
• Related to size of the market
• Expertise of users
• Strata experiment

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Conclusion and best practices

• 3. Joke rhubarb pie
• Sharon Richardsons contribution
• Analyses on the game industry
• Focuses not on single product but on family of
  product (including incremental innovation to
  extent products life)
• Differentiate rating of mass market and rating of
  lead users on new released games

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Conclusion and best practices

• Sharon Richardsons contribution
• Dependent variable contribution to Franchise
  performance i.e. the capacity of a team to
  develop a family of product by the redeployment
  of acquired on a game to series of interlinked
  games

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Conclusion and best practices

• 4. In-house or networking
• Von Hippel basic assumption in house
• However
• User-innovators are also those who set up
  start-ups
• Complementary assets on complementary products
• Core competencies?
• Possibility of alliances