Thoughts in 2014
With more than 15 published papers (articles or chapters) about open innovation, I’m guessing many know me mostly for my OI work. (Clearly the majority of my cites have OI in the title). Of these articles, two articles in 2009 and 2012 compare open and user innovation, the latter with Marcel Bogers (who did his diss at EPFL on UI).
My most recent effort comparing OI and UI was last year’s book chapter in New Frontiers in Open Innovation. I wrote it with Frank Piller, one of Europe’s best known open innovation scholars.
One goal of the chapter (entitled “Firms, Users, and Innovation: An Interactive Model of Coupled Open Innovation”) was to contrast open and user innovation. Our thoughts were summarized in Table 1 (before we went on to look at coupled OI).
§ Chesbrough (2003, 2006)
§ Von Hippel (1988, 2005)
Focal actor of study
§ Firm (R&D Lab)
§ Individual user
§ Knowledge is widely dispersed beyond any one firm
§ Innovations must be aligned to a firm’s business model
§ Firms should embrace both internal and external alternatives
§ Users have unique “sticky” information
§ When enabled, they will solve their own needs
§ Many will freely reveal to others
Focal object of transfer
§ Technological knowledge in form of IP or technologies
§ Information about needs and ideas how to transfer need into solution
Typical institutional arrangement for knowledge transfer
§ Research contracts
§ In- and out-licensing; IP transfer agreements
§ Tournament-based crowdsourcing for technical solutions
§ Lead user method
§ User communities
Representative IP practices
§ Licensing contracts
§ Free revealing
§ Open source or creative commons licenses
Governance of innovation process
§ Private model
§ Collective or private-collective model
Motivations of actors to engage in distributed innovation
§ Monetary incentives
§ Innovation is seen as a “money market”
§ Incentives of self-use
§ Social incentives
§ Innovation is seen as a “social market”
Key managerial decision
§ Building absorptive capacity
§ Defining and defending IP
§ Internal organization for OI
§ Defining metrics for OI
§ Identifying lead users
§ Establishing bridging strategies to lead user innovation
§ Defining fair regimes of coordination
§ Opening- up IP
Other streams of related research
§ R&D networks / strategic alliances
§ University-firm research contracts
§ Absorptive capacity theory
§ “Voice of the customer” methods of market research in innovation
§ Participatory design
§ Social production
Table 1: Contrasting open and user innovation
In teaching earlier this month
Insight #1: Three Types of User Innovators
My class used the Bogers & West (2012) paper to discuss how open innovation compares to vertical integration and user innovation. It’s a short conceptual article that’s relatively light on jargon; the article also provides a bridge between a brief OI lit review and the Lettl et al (2006) article on medical device UI by doctors.
One idea is that there are two types of user innovators. The article emphasizes UI is by individuals but “A limited amount of research considers innovations by user firms.” The Piller & West (2014) chapter (which they did not see) also positions OI as being about firms and UI being about individuals.
In discussing UI, I realized that this concept in the earlier article was inaccurate. In the end, firms don’t create inventions; people do. The IP world recognizes that patents and other creative works are created by individuals — not firms — even it ends up being assigned to their employers. (This is not to ignore that the work to bring it to market is done by a firm — only to focus on where the discovery or idea comes from originally.)
So really, research on user innovation has considered (at least) three different types of user innovators:
- Individuals acting on their own behalf (citizens, consumers, etc.). This is the focus of most of the UI work of von Hippel and others of the past 20 years.
- Employees working on their own behalf. I would expect this would cover most research on user innovators who become user entrepreneurs in the course of their job, such as that the doctors in Lett et al (2006). (Since firms control the IP of their employees, I imagine this will mainly be in a university or other academic setting).
- Employees who are innovating on their employer’s behalf. The exemplar here are the IT system administrators who decided to patch the NCSA HTTPd server, creating the open source Apache server (Behlendorf, 2006); since the sysadmins worked for companies that operated web servers, this was not only within the scope of their work but — as it turned out — crucial to the success of their web hosting efforts in the late 1990s. (From a quick read, I think this is probably the main story of on Hippel’s original 1988 work on engineers innovating test instruments.)
Some additional work needs to be done to distinguish these cases. For example, I recall seeing a conference paper (can’t find the cite) about how nurses can be user innovators. So if (as I recall) they are doing local sub optimizations to make their daily routine more efficient (or less tedious), is this to benefit the firm? Or is this for their own benefit? (Are there cases that combine both?)
Insight #2: Commercializing OI vs UI
My students asked if (or what) the difference was between the innovations that come from OI vs. UI. We talked about firm economic utility vs. individual personal utility (or intrinsic reward), but that seemed incomplete.
Instead, I thought about the fraction of user innovations (vs. OI innovations) that will be diffused to others.
My thinking was the transaction costs of bringing a (vertically integrated) producer innovation to market will mean that only the most valuable innovations will come to market. Similar, for open innovation (external innovations), firms will generally not contract to acquire an innovation unless it’s valuable enough to be worth the transaction costs.
Conversely, the relatively low transaction costs of many forms of user innovation (such as those envisioned in von Hippel 2005) would mean that more (if not most) of these innovations will be disseminated. So trivial innovations that occur inside a firm will be the ones that never see the light of day, while all but the simplest user innovations have the opportunity for diffusion.
At first glance, this seems related to the Baldwin & von Hippel (2011) model of user vs. producer innovation. But their variables are on the costs of the innovation, whereas I’m suggesting that if we assume a random (exogenous) variation in the value of an innovation, some will make it to market and others won’t. I guess theirs emphasizes rationale discounting of the future cost of innovation, whereas mine assumes more of a serendipitous conception that gets pursued based on its value (rather than its cost).
Baldwin, Carliss, and Eric von Hippel. "Modeling a paradigm shift: From producer innovation to user and open collaborative innovation." Organization Science 22, 6 (2011): 1399-1417.
Behlendorf, Brian. "Open source as a business strategy." In Chris DiBona, Sam Ockman, and Mark Stone (Editors), Open Sources: Voices of the Open Source Revolution, Sebastapol; O’Reilly and Associates, 1999, pp. 149-170.
Bogers, Marcel, and Joel West. "Managing distributed innovation: Strategic utilization of open and user innovation." Creativity and Innovation Management 21, 1 (2012): 61-75.
Lettl, Christopher, Cornelius Herstatt, and Hans Georg Gemuenden. "Users' contributions to radical innovation: evidence from four cases in the field of medical equipment technology." R&D Management 36, 3 (2006): 251-272.
Piller, Frank and Joel West, “Firms, Users, and Innovation: An Interactive Model of Coupled Open Innovation,” in Henry Chesbrough, Wim Vanhaverbeke and Joel West, eds., New Frontiers in Open Innovation, Oxford: Oxford, 2014, pp 29-49.
Shah, Sonali K., and Mary Tripsas. "The accidental entrepreneur: The emergent and collective process of user entrepreneurship." Strategic Entrepreneurship Journal 1, 1‐2 (2007): 123-140.
Von Hippel, Eric. The Sources of Innovation. New York: Oxford:, 1988.
Von Hippel, Eric A. Democratizing Innovation. Cambridge, Mass.: MIT Press, 2005