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Got a Great Idea? Maybe You Should Give It Away

My contribution to Jay Rosen’s Assignment Zero is this IM Interview with MIT professor Eric von Hippel stems from me being intrigued by two topics — lead users and free revealing –explained in depth in his book Democratizing Innovation. But I was surprised as the interview started to be a little testy even though I like what von Hippel says. However, before we go there, here’s a quick primer on the lead-users and freely-revealing concepts. The former says that manufacturers who find lead users, who are adapting products for their own uses, will have an advantage over manufacturers who just try to intuit or even do market research on which products might work. In his book von Hippel writes:

…people at the leading edges of important trends will be experiencing needs today (or this year) that the bulk of the market will experience tomorrow (or next year).

Makes sense. My own lead user interest is in journalism; who is doing innovative stuff that can make for more robust journalism in the future.

In this excerpt from his book, von Hippel explains why it may be better to freely revealing your best ideas rather than keep them secret, because you hope to some day cash in on them:

… free revealing can provide innovators with significant private benefits as well as losses or risks of loss. Users who freely reveal what they have done often find that others then improve or suggest improvements to the innovation, to mutual benefit (Eric Raymond, 1999). Freely revealing users also may benefit from enhancement of reputation, from positive network effects due to increased diffusion of their innovation, and from other factors. Being the first to freely reveal a particular innovation can also enhance the benefits received, and so there can actually be a rush to reveal, much as scientists rush to publish in order to gain the benefits associated with being the first to have made a particular advancement.

So that was von Hippel unfiltered, now below in this IM Interview, I am taking a skeptic’s role and challenging part of what he says above, want to get in your comments do it here or over at the von Hippel section at Assignment Zero where this will also be posted later today:

Leonard Witt: Hi Eric, thanks for taking time from your busy schedule at MIT to do this. So let’s get started. Your book Democratizing Innovation, intrigues me because so much of it is counterintuitive, and we will get into that, but first tell me what does Democratizing Innovation mean?

Eric von Hippel: It means that users of products and services–both firms and individual consumers–are increasingly able to innovate for themselves.

Witt: Can you give me an example?

von Hippel: Sure – it is easier today to design a custom integrated circuit (A field programmable logic devices or FPLD) for yourself – using sophisticated tools that are now available – than it was 5 years ago.

Witt: Yikes, Eric, not many of the readers are going to know a thing about integrated circuits. How about another example that a lay person can understand and maybe see herself doing?

von Hippel: Sure — how about it is easier to compose and orchestrate your own music than it used to be — using sophisticated software that is now out there. For fun stuff, look at Lots of great do-it-yourself projects that would have been very difficult to do a few years ago — now easy with modern tools and CAD software.

Witt: So we can do more and be more innovative. How does that matter on a societal or economic level?

von Hippel: There is tremendous waste in the current manufacturer-centered innovation process — most — about 80% — of products companies design for users are not what users actually want. So all that company investment goes down the drain. That is costly in terms of social welfare. In contrast, when users develop what they want for themselves, they get exactly what they want.

Witt: So this is a good segue into your concept of “lead users.” Tell us about that. Who are they, what do they do and how do they differ from early adopters?

von Hippel: “Users” are firms or individual consumers that expect to benefit from using a product or a service. In contrast, manufacturers expect to benefit from selling a product or a service. “Lead users” are ahead of the majority of users in their populations with respect to an important market trend, and they expect to gain relatively high benefits from a solution to the needs they have encountered there. Since lead users are at the leading edge of the market with respect to important market trends, one can guess that many of the novel products they develop for their own use will appeal to other users too and so might provide the basis for products manufacturers would wish to commercialize. This turns out to be the case.

Witt: Give another lay friendly example.

von Hippel: By the way, lead users are ahead of early adopters because there is nothing there yet to adopt at the leading edge — lead users have to develop what they need for themselves. Mountain bikes is a good example. There were none until users who wanted to be the first to go down mountains on a bike built them for themselves

Witt: You spend at least some of your time teaching mega corporations how to find and work with lead users. But won’t that be an avenue to co-opting new ideas before they filter out into the general public? For example, what if Time-Warner had discovered blogging early on, what might the blogosphere be like today? Doesn’t that worry you?

von Hippel: Companies want well-established needs and biggish markets before they jump in. They WANT users to go first. Users also tend to form the first companies to exploit a new user innovation. For example, snowboards were developed by users — and Burton Snowboards was a company founded by a lead user.

Witt: That helps answer my next question, which was what’s in it for the lead user? Is it more than an expense paid trip to let’s say 3M headquarters? I was watching your video on lead users, and it was not apparent to me how the lead users cashed in on their ideas along with the big companies that would adopt or adapt the ideas.

von Hippel: Lead users get a return because they build what they need for themselves. They don’t have to sell copies in order to benefit – that is the HUGE way that they differ from manufacturers. If they freely reveal what they have done, the whole user community — and manufacturers too — can benefit.

Witt: Yeah, but if they freely reveal, which means, giving away their ideas to the public how can that help themselves individually? The average person would think that’s nuts and it even runs counter to some economic theory on innovation. So help us out here.

von Hippel: If you make a mountain bike for yourself you benefit – right? You get to ride down a mountain. It is fine if you want to patent what you have done and try to sell the rights to a company. No one is stopping you. But if a lot of your buddies are building mountain bikes too and giving the designs away for free you are not likely to be able to sell your patent. The basic idea is that Intellectual Property is going away in most fields – and you have to compete with free. So — if you want to be a user and build a bike — enjoy the bike. If you want to manufacture the bike and make money do that. But don’t grumble if you don’t want to go to that effort and others go ahead and manufacturer what you and others design as users.

Witt: Yeah, but in your video you show how some companies are making $300 million on lead user ideas, and what does the lead user get, a lousy mountain bike. Seems unfair. What do you think?

von Hippel: If you don’t want someone to profit from your ideas, don’t give them away — and hope no one else gives away a similar idea. Again — you are free to try and sell them. The open source software guys say the same thing. “If you want to sell something, don’t give it away!”

Witt: I’m an advocate of open source because I thought it might not only democratize innovation, but level the playing field too. This makes it sound like if you give up your ideas you are sucker. Yochai Benkler says when people start to feel they are getting taken, they will stop sharing nicely. Is what you are saying a precursor to end of sharing nicely?

von Hippel: Sharing nicely will win, because if you get grumpy and go away someone else will be willing to share. Company profits will also go down as intellectual property decreases in value – and you will no longer be miserable because some company is making too much money from user designs. Let’s go on to another topic – read Chapter 6 in my book Democratizing Innovation which you can download for free.

Witt: Right, actually I am surprised that this discussion took this turn because when I read the free revealing chapter it seemed like it was a good idea to freely reveal. Since our readers might not read the chapter, just give a couple more examples why people do freely reveal. Something to make it more understandable to the skeptic.

von Hippel: I give away my books – which took me a lot of effort to write – because I want my ideas to spread and also want others to improve them and teach me things in turn. This will happen faster and at a larger scale because I am giving the book away. Beyond that example — no pain no gain. Ask them to read the book.

Witt: That I will do. Listen everyone, read Eric von Hippel’s book. You can download it right here. Final question, in your mind where is the free revealing, open source taking us and how will it help the average person?

von Hippel: If you want to design stuff for yourself or in collaboration with others, this opportunity will be increasingly available. You will benefit by getting exactly what you want. If you just want to adopt what others have developed, more options will be available to you at a cheaper price. In innovation, things are going in the right direction for both innovating and non-innovating users.

Witt: Great interview. One last thing you don’t have a fantastic secret idea that you have been holding back that you want to share here for the first time, do you?

von Hippel: Nope – but if I think of one I will freely reveal it!

Witt: Thanks again, I truly enjoyed it.

von Hippel: You are most welcome!

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