Presentation is loading. Please wait.

Presentation is loading. Please wait.

Creating Breakthrough Products and Services with the Lead User Method Professor Eric von Hippel MIT Sloan School of Management

Similar presentations


Presentation on theme: "Creating Breakthrough Products and Services with the Lead User Method Professor Eric von Hippel MIT Sloan School of Management"— Presentation transcript:

1 Creating Breakthrough Products and Services with the Lead User Method Professor Eric von Hippel MIT Sloan School of Management

2 Copyright © 2003 Eric von Hippel Essential Definitions The “functional” source of innovation depends upon the functional relationship between innovator and innovation: An INNOVATION is anything new that is actually used (“enters the marketplace”) – whether major or minor. An innovation is a USER innovation when the developer expects to benefit by USING it; An innovation is a MANUFACTURER innovation when the developer expects to benefit by SELLING it.

3 Copyright © 2003 Eric von Hippel How we discovered that users develop many major new products Innovations Affecting First Device Major Improvement Minor Improvement Gas Chromatography111- Nuclear Magnetic Resonance Spectrometry 114- Ultraviolet Spectrophotometry 15- Transmission Electron Microscopy Total44463

4

5 Copyright © 2003 Eric von Hippel First device used in field developed and built by: Innovations Affecting % UserUserMfg. Gas Chromatography83%102 Nuclear Magnetic Resonance Spectrometry 80%123 Ultraviolet Spectrophotometry 100%60 Transmission Electron Microscopy 72%4417 Total77%7222

6 Copyright © 2003 Eric von Hippel Gammaflow: A Completely Automated Radiommunoassy System Source: Science Vol 194 October 1976

7 Copyright © 2003 Eric von Hippel The World Wide Web – A Lead User Innovation “Berners-Lee did not set out to invent a contemporary cultural phenomenon; rather, he says, “it was something I needed in my work.” He wanted to simply to solve a problem that was hindering his efforts as a consulting software engineer at CERN. Berners-Lee’s innovation was to apply hypertext to the growing reality of networked computers. He expanded the idea he had developed at CERN and made it available on the Internet in the summer of Technology Review, July 1996, p.34

8 Copyright © 2003 Eric von Hippel Examples of Important Consumer Product Innovations CategoryExample Health ProductsGatorade Personal Care Protein-base Shampoo Feminine Hygiene Sports Equipment Mountain Bike Mountain Climbing-Piton ApparelSports Bra Food Chocolate Milk Graham Cracker Crust OfficeWhite-out Liquid Computer Application Software Electronic Mail Desk Top Publishing

9 Copyright © 2003 Eric von Hippel History of “AOL Instant Messenger” Instant Messaging is a User Innovation By 1987 MIT Lab for Computer Science had thousands of “Athena” workstations online and difficulties diffusing system admin info rapidly. Developed “Zephyr” instant message system. MIT students begin to use for general instant messaging. Other universities adopted Zephyr-like programs First Commercial Product 9 years later 1996 Israeli firm Mirabilis put out comml product ICQ 1998 Mirabilis acquired by AOL Source: October 2002 Technology Review

10 Copyright © 2003 Eric von Hippel Ongoing evolution of Wi-Fi User Activities to Date Users discover possibilities and begin free sharing of wireless networks Users Modify Wi-Fi antennas to greatly increase range Widespread implementation occurs – travelers find “hot spots” as they travel, can get Internet access, send from the highway etc. Traditional Supplier Responses? No one will want it – no network security We think this might be service stealing… should stop. Source: October 2002 Technology Review

11 Copyright © 2003 Eric von Hippel Users aren’t always the innovators Innovations Samples:UserManufrSuplrOtherNATotal (N) Scientific Instruments77%23% Semicon & PC Crd Process67%21%-12%649 Pultrusion Process90%10%---10 Tractor Shovel Related6%94%---11 Engineering Plastics10%90%---5 Plastics Additives8%92%--416 Industrial Gas-Using42%17%33%8%-12 Thermoplastic-Using43%14%36%7%-14 Wire Stripping Equip25%75%--28 Connector Attaching Equip4%13%83%--12 Sports Equipment58%27%-15%-48

12 Copyright © 2003 Eric von Hippel Factors influencing the sources of innovation 1.Relative ability to profit from an innovation Firm with highest innovation-related profit expectations most likely to innovate. 2.“Sticky information” transfer costs Firm with stickiest local information needed for innovation most likely to innovate. 3.Agency costs Always creates tendency towards user innovation “I will do it myself because I want something exactly right for me – You are only willing to make something almost-right for many.” 4.Coordination costs Always creates tendency towards user innovation “By the time you can physically get here to do what I need, I might be bankrupt – so I have to do it myself (Example, solving semiconductor production problems – loss rates as high as $10,000 per minute!)

13 Copyright © 2003 Eric von Hippel User and Manufacturer Innovations Differ Users tend to develop Functionally Novel innovations: The first sports-nutrition bar The first scientific instrument of a new type Manufacturers tend to develop Dimension of Merit Improvements: A better-tasting sports-nutrition bar Improvements to an existing type of scientific instrument

14 Copyright © 2003 Eric von Hippel Users innovate when it pays… for them Only “Lead User” innovations form the basis for new products and services of value to manufacturers. “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!”)

15 Copyright © 2003 Eric von Hippel Time Only lead user prototypes available Commercial versions of product available # of users perceiving need Lead users are now facing “emerging needs”

16 Copyright © 2003 Eric von Hippel

17 Product area selected for pilot test of lead user methods: Computer-Aided-Design systems Used to lay out printed circuit boards (PCB-CAD)

18 Copyright © 2003 Eric von Hippel In PC-CAD Lead Users were innovating - Routine Users were not Expected Lead User Attribute Type of Questions We Asked LEAD Users Routine Users At Front of “High Density” Trend? What are your: Avg. Number of layers? Avg. Line width (mils)? (1988 data) High Need For Improved System? “Are you satisfied with your present PCB CAD system? NoIt’s OK Active In Solving Own Problem? Did you build own PCB CAD System 82% Yes 1% Yes Number in Sample 3399

19 Copyright © 2003 Eric von Hippel

20 Performance Assessment of Lead User Research at 3M Research Team: Prof. Gary Lilien, Penn State University; Prof. Pam Morrison, University of New South Wales; Dr. Kate Searls, ASI Associates, Mary Sonnack, Division Scientist, 3M; Prof. Eric von Hippel, MIT For the complete article and other Lead User Videos and articles: Go to leaduser.com on the Web

21 Copyright © 2003 Eric von Hippel Overall study outcomes The 3M Assessment study showed: 8 X Higher Sales in Year 5 $146 vs. $18 Million per concept “The highest rate of new product line generation in 50 years for the 5 Divisions tested.”

22 Copyright © 2003 Eric von Hippel Assessment Results: Lead User vs. Non-Lead User Funded Ideas LU Ideas (n=5)NON-LU Ideas (n=42)Sig. “Newness” of Idea Novelty compared to competition Newness of needs addressed Projected Profitability % market share in year 5 Estimated sales in year 5 68% $146m 33% 18m Strategic Value Strategic importance Fit with Strategic plan Fit with Business Intellectual property protection Fit with mfr. Capabilities Fit with distribution channels Note: Items measured on 10 pt. Scale, 10=high, 1=low

23 Copyright © 2003 Eric von Hippel Essential Definitions “Breakthrough:” Determines Future Business Growth and Margins Major Product line >20% of Division Sales Incremental improvement: Valuable to existing business Extension to existing line IncrementalBreakthrough Traditional 3M Method 411 LU Method At 3M 05

24 Copyright © 2003 Eric von Hippel Lead User concept generation projects cost more than traditional ones Person DaysTotal Cost Traditional 3M concept development stage 60$30,000 Lead User concept development stage At 3M 154$100,000 (plus coaching)

25 Copyright © 2003 Eric von Hippel ACTIVITY: Think about possible Lead Users in your markets Step 1 Select a specific market & specific major trend to think about Step 2 Brainstorm possible lead users within that target market Which types of individuals or firms have needs at the leading edge of the trends? Which ones have a high incentive & the resources to solve their leading edge needs? Step 4 Brainstorm possible lead users outside target market Which types of users in other fields & applications are facing a similar need but in a more demanding form? Step 4Specify what you might learn from each type of LU

26 Copyright © 2003 Eric von Hippel Example of searching for lead users outside your target market Look for users facing higher needs than anyone in target market: People who need even high resolution than anyone doing medical imaging Image enhancement (“pattern recognition”) specialists Examples: Experts in semiconductor chip imaging Experts who process photographs from space probes Medical X-Ray Instead of a board of leading radiologists…

27 Copyright © 2003 Eric von Hippel Organizing to use LU Method


Download ppt "Creating Breakthrough Products and Services with the Lead User Method Professor Eric von Hippel MIT Sloan School of Management"

Similar presentations


Ads by Google