Innovation processes were traditionally considered to be “closed”, meaning that products and services are developed exclusively by manufactures which employ Intellectual Property Rights (IPR) such as patents and copyrights in order to protect their investments in innovation. In this setting both user and manufacturer had different roles. The former was considered merely as a generator of needs while the latter as the actor in charge of identifying those needs and who subsequently designs new products in accordance with those specifications (von Hippel 1988).
However, studies of the sources of innovations have recognized limits of the traditional view by showing that many innovations are developed by users. For example, Von Hippel in 1976 first analysed the role of users in the innovation process, discovering that approximately 80% of major improvements in scientific instruments came from users, laying the foundations of the “user-centered (democratized) innovation process” (von Hippel 2005). According to von Hippel’s theory, users recognize their needs and the ways to satisfy them so that they can directly benefit from the innovation developed, which is also freely shared by others.
As a result, manufacturers carry out only the commercial diffusion.
In particular, it has been found out that commercially attractive products tend to be developed by “lead users” (Urban and von Hippel 1988), namely users who show two main features leading to two different effects: users experience need much earlier in time that the majority of users will experience (information effect) and they obtain greater benefits from satisfying their current needs (incentive effect). According to this new theoretical view, users’ benefits derive from using and not from selling the innovation which is a reason why users are willing to reveal for free their ideas to their peers or to companies (Franke and Shah 2003).
In consequence, companies find it valuable to involve users in the New Product Development (NPD) process, and to establish new forms of Collaborative Innovation (Prandelli, Sawhney and Verona 2008), recognizing the importance of adopting an “open approach” (Chesbrough 2003) to look for ideas and solutions also outside firms’ boundaries as being aware that “not all the smart people work for us”.
Generally it is a problem solving situation that leads users to seek for a solution: the consumer has more access to “sticky” information compared to the ones owned by manufactures (von Hippel 1994). Those users are conscious about the inexistence or inapplicability of a solution in a certain context. As a consequence they create and experiment a novel solution to satisfy their own need by trial and error (von Hippel 2005). What is important for organizations is to be aware of the heterogeneity of individuals. Every user has a different problem solving approach and some knowledge that slightly differs from the knowledge of others, hence users can look at different angles of the problem (Raymond 2001).
Furthermore, Information and Communication Technologies (ICT) have greatly enhanced the ability of firms to expand their knowledge base by engaging external actors in their innovation process (Chesbrough 2003; Prahalad and Ramaswamy 2004; von Hippel 2005). Therefore, in order to exploit any commercial opportunity firms focus their attention on methodologies used for harnessing users’ creative potential. One of the most prominent methodologies adopted is the Lead-User Method which allows organizations to employ lead users in NPD (Hienerth, Poetz and von Hippel 2007) thus reducing the high risk of failure that characterizes the introduction of a new product. One of the pioneer companies which adopted this new approach is 3M: it hosts lead user workshops during where users often come up with new breakthroughs (von Hippel et al. 1999). Equally important, companies have to identify the most suitable users who are “on the top of the pyramid” through Pyramiding (Franke, Prügl and von Hippel 2009), which means looking for users from the target market and then moving toward analogous markets. One reason for this is specified by recent empirical research which shows that ideas from users of analogous markets are much more novel than those from users belonging to the target market (Franke and Poetz 2008; Hienerth, Poetz, von Hippel 2007). Furthermore, companies which are undertaking user innovation activity often wrongly believe that only users who have more experience with the problem tackled are able to find an appropriate solution. Empirical studies prove that problems are also solved by people coming from completely different industries, those who do not suffer from “functional fixedness” (Dunker 1945) without the constraint of existing logics. Moreover, users from analogous markets are not affected by the “local search bias”, given that they have never experienced of that problem, even if they have some experience coming from their professional or private life might be helpful in findings solution of the problem. In addition, companies employ other methodologies to identify and evaluate user’s ideas. Through Broadcasting, companies post a question highlighting their problems to a crowd of potential problem solvers (e.g. opening a thread in an online community) to identify promising ideas and the people behind them through self-selection (Poetz and Schmitt 2007). An example that confirms the effectiveness of the approach mentioned is Innocentive, the on-line knowledge broker between problem seekers and potential solvers. Companies sometimes spend more than six months trying to solve a specific problem. Thanks to Innocentive 30% of the problems posted are solved on average in 70 hours (Lakhani et al. 2007) which constitutes a win-win strategy. Another method which acquires importance thanks to the development of online communities is content analysis. Certain problems and their respective solutions are likely to be discussed on online platforms. In consequence companies can simply utilize passive content searching in order to identify user ideas (Hienerth, Poetz and von Hippel 2007).
After collecting users’ ideas, companies should proceed in the idea evaluation in order to check if the ideas are relevant to a wide range of consumers, thus checking whether there is a market for the idea/need proposed, namely to verify if the company can move up the “long tail” (Anderson 2004). This new concept developed by the Wired Editor-in-Chief considers that there are many products that can cover unexplored markets which are not profitable enough for companies to enter on them.
Evaluation of ideas is held by experts or by users through collaborative filtering, when users are asked to rank ideas in an explicit (voting or rating) or implicit (download, views or comments) way (Franke, Oberhauser and Schreier 2007). For example Threadless, a 2.0 company sells user-designs and nothing else. It is the community which designs and evaluates the T-shirts to be produced (Ogawa and Piller 2006). Nevertheless, the employment of these methodologies depends also on the innovation-related problem and the innovation goals. However, it is an emerging belief that for generating user’s ideas the interaction among users is vital and the role of online communities can be perceived as fundamental.
Within a community, users can discuss problems and find solutions together getting feedback from each other. As a result communities can increase the pace of innovation. Furthermore, communities facilitate interactions and learning which lead to brainstorming of ideas, creativity as well as information sharing (Jeppesen and Frederiksen 2006). Besides, users who interact in communities build a reputation and network relationships that enable the discovery of new opportunity and the fast spreading of new ideas.
However, what is important is that communities play a crucial role in the case of intangible goods such as software, where there is a code that needs to be shared and improved, as well as for physical products (Franke and Shah 2003). In the next section, the role of communities not only as a means of indentifying ideas, but also as a place which helps users to recognize a potential business opportunity (Jeppesen and Frederiksen 2006) will be highlighted.
 Source: Chesbrough, H.W. (2003) The Era of Open Innovation, MIT Sloan Management Review.