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authorRalph Amissah <ralph@amissah.com>2010-08-22 17:58:53 -0400
committerRalph Amissah <ralph@amissah.com>2010-08-24 11:55:11 -0400
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treed1968a2261c3032189519188cba0a7edcc5b4340 /data/v2/samples/democratizing_innovation.eric_von_hippel.sst
parentmarkup sample, viral sprial, many url fixes (diff)
markup samples, corrections to book indexes
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@@ -105,7 +105,7 @@ The whole sport of high-performance windsurfing really started from that. As soo
By 1998, more than a million people were engaged in windsurfing, and a large fraction of the boards sold incorporated the user-developed innovations for the high-performance sport.
The user-centered innovation process just illustrated is in sharp contrast to the traditional model, in which products and services are developed by manufacturers in a closed way, the manufacturers using patents, copyrights, and other protections to prevent imitators from free riding on their innovation investments. In this traditional model, a user's only role is to have needs, which manufacturers then identify and fill by designing and producing new products. The manufacturer-centric model does fit some fields and conditions. However, a growing body of empirical work shows that users are the first to develop many and perhaps most new industrial and consumer products. Further, the contribution of users is growing steadily larger as a result of continuing advances in computer and communications capabilities.
-={Intellectual property rights:See also Private-collective innovation|copyrights and|innovation and+2;Copyrights:See Intellectual property rights;Manufacturers:government policy and+2;Product development+2;Users:See also Lead Users|government policy and;Economic benefit, expectations of by lead users:by manufacturers+;Economic benefit, expectations of by lead users:by manufacturers+12;Government policy:manufacturer innovation and+2;Manufacturers:expectations of economic benefit by+26}
+={Intellectual property rights:See also Private-collective innovation|copyrights and|innovation and+2;Copyrights:See Intellectual property rights;Manufacturers:government policy and+2;Product development+2;Users:government policy and;Economic benefit, expectations of by lead users:by manufacturers+5;Economic benefit, expectations of by lead users:by manufacturers+12;Government policy:manufacturer innovation and+2;Manufacturers:expectations of economic benefit by+26}
In this book I explain in detail how the emerging process of user-centric, democratized innovation works. I also explain how innovation by users provides a very necessary complement to and feedstock for manufacturer innovation.
@@ -115,7 +115,7 @@ The ongoing shift of innovation to users has some very attractive qualities. It
% check government policy
Users, as the term will be used in this book, 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. A firm or an individual can have different relationships to different products or innovations. For example, Boeing is a manufacturer of airplanes, but it is also a user of machine tools. If we were examining innovations developed by Boeing for the airplanes it sells, we would consider Boeing a manufacturer-innovator in those cases. But if we were considering innovations in metal-forming machinery developed by Boeing for in-house use in building airplanes, we would categorize those as user-developed innovations and would categorize Boeing as a user-innovator in those cases.
-={Users:See also Lead users|characteristics of+2;Manufacturers:characteristics of+2}
+={Users:characteristics of+2;Manufacturers:characteristics of+2}
Innovation user and innovation manufacturer are the two general "functional" relationships between innovator and innovation. Users are unique in that they alone benefit /{directly}/ from innovations. All others (here lumped under the term "manufacturers") must sell innovation-related products or services to users, indirectly or directly, in order to profit from innovations. Thus, in order to profit, inventors must sell or license knowledge related to innovations, and manufacturers must sell products or services incorporating innovations. Similarly, suppliers of innovation-related materials or services---unless they have direct use for the innovations---must sell the materials or services in order to profit from the innovations.
={Innovation:See also Innovation communities|functional sources of;Suppliers}
@@ -156,7 +156,7 @@ Research provides a firm grounding for these empirical findings. The two definin
User-innovators with stronger "lead user" characteristics develop innovations having higher appeal in the general marketplace. Estimated OLS function: Y = 2.06 + 0.57x, where Y represents attractiveness of innovation and x represents lead-user-ness of respondent. Adjusted R^{2}^ = 0.281; p = 0.002; n = 30. Source of data: Franke and von Hippel 2003.
!_ Why Many Users Want Custom Products (Chapter 3)
-={Custom products:heterogeneity of user needs and+2;User need+2;Users:See also Lead users|innovate-or-buy decisions by+8|needs of+2}
+={Custom products:heterogeneity of user needs and+2;User need+2;Users:innovate-or-buy decisions by+8|needs of+2}
Why do so many users develop or modify products for their own use? Users may innovate if and as they want something that is not available on the market and are able and willing to pay for its development. It is likely that many users do not find what they want on the market. Meta-analysis of market-segmentation studies suggests that users' needs for products are highly heterogeneous in many fields (Franke and Reisinger 2003).
={Reisinger, H.}
@@ -165,7 +165,7 @@ Mass manufacturers tend to follow a strategy of developing products that are des
={Apache web server software;Manufacturers:lead users and}
!_ Users' Innovate-or-Buy Decisions (Chapter 4)
-={Custom products:heterogeneity of user needs and+3|manufacturers and+3|agency costs and+2;User need+3;Users:needs of+3;Manufacturers:innovation and+9|innovate-or-buy decisions and+4;Users:See also Lead Users|agency costs and+2}
+={Custom products:heterogeneity of user needs and+3|manufacturers and+3|agency costs and+2;User need+3;Users:needs of+3;Manufacturers:innovation and+9|innovate-or-buy decisions and+4;Users:agency costs and+2}
Even if many users want "exactly right products" and are willing and able to pay for their development, why do users often do this for themselves rather than hire a custom manufacturer to develop a special just-right product for them? After all, custom manufacturers specialize in developing products for one or a few users. Since these firms are specialists, it is possible that they could design and build custom products for individual users or user firms faster, better, or cheaper than users could do this for themselves. Despite this possibility, several factors can drive users to innovate rather than buy. Both in the case of user firms and in the case of individual user-innovators, agency costs play a major role. In the case of individual user-innovators, enjoyment of the innovation process can also be important.
={Agency costs+1;Manufacturers:custom products and+2;Custom products:users and+3;Economic benefit, expectations of by lead users:by manufacturers+13}
@@ -180,7 +180,7 @@ A small model of the innovate-or-buy decision follows. This model shows in a qua
={Innovation communities:social welfare, and;Manufacturers:social welfare and+21;Social welfare:manufacturer innovation and+21|user innovation and+21}
Chapter 4 concludes by pointing out that an additional incentive can drive individual user-innovators to innovate rather than buy: they may value the /{process}/ of innovating because of the enjoyment or learning that it brings them. It might seem strange that user-innovators can enjoy product development enough to want to do it themselves---after all, manufacturers pay their product developers to do such work! On the other hand, it is also clear that enjoyment of problem solving is a motivator for many individual problem solvers in at least some fields. Consider for example the millions of crossword-puzzle aficionados. Clearly, for these individuals enjoyment of the problem-solving process rather than the solution is the goal. One can easily test this by attempting to offer a puzzle solver a completed puzzle---the very output he or she is working so hard to create. One will very likely be rejected with the rebuke that one should not spoil the fun! Pleasure as a motivator can apply to the development of commercially useful innovations as well. Studies of the motivations of volunteer contributors of code to widely used software products have shown that these individuals too are often strongly motivated to innovate by the joy and learning they find in this work (Hertel et al. 2003; Lakhani and Wolf 2005).
-={Hertel, G.;Lakhani, K.;Wolf, B.;Innovation process;User:See also Lead users|innovation process and, 7;Free software:See also Open source software;Hackers;Herrmann, S.}
+={Hertel, G.;Lakhani, K.;Wolf, B.;Innovation process;Users:innovation process and+7;Free software:See also Open source software;Hackers;Herrmann, S.}
!_ Users' Low-Cost Innovation Niches (Chapter 5)
={Users:low-cost innovation niches of+3}
@@ -214,7 +214,7 @@ Active efforts by innovators to freely reveal---as opposed to sullen acceptance-
={Innovation communities+3}
Innovation by users tends to be widely distributed rather than concentrated among just a very few very innovative users. As a result, it is important for user-innovators to find ways to combine and leverage their efforts. Users achieve this by engaging in many forms of cooperation. Direct, informal user-to-user cooperation (assisting others to innovate, answering questions, and so on) is common. Organized cooperation is also common, with users joining together in networks and communities that provide useful structures and tools for their interactions and for the distribution of innovations. Innovation communities can increase the speed and effectiveness with which users and also manufacturers can develop and test and diffuse their innovations. They also can greatly increase the ease with which innovators can build larger systems from interlinkable modules created by community participants.
-={Users:innovation communities+2}
+={Users:innovation communities and+2}
Free and open source software projects are a relatively well-developed and very successful form of Internet-based innovation community. However, innovation communities are by no means restricted to software or even to information products, and they can play a major role in the development of physical products. Franke and Shah (2003) have documented the value that user innovation communities can provide to user-innovators developing physical products in the field of sporting equipment. The analogy to open source innovation communities is clear.
={Franke, N.;Shah, S.;Free software;Innovation communities:open source software and|physical products and|sporting equipment and;Open source software:innovation communities and}
@@ -304,7 +304,7 @@ The studies cited in table 2.1 clearly show that a lot of product development an
!_ Table 2.1
Many respondents reported developing or modifying products for their own use in the eight product areas listed here.
-={Lüthje, C.+1;Urban, G.+1;Franke, N.+1;Herstatt, C.+1;Morrison, Pamela+1;von Hippel, E.+1;Lead users:Apache web server software and+1r|library information search system and+1|mountain biking and+1|outdoor consumer products and+1|pipe hanger hardware and+1|printed circuit CAD software and+1|surgical equipment and+;Library information search system+1;Mountain biking+1;Outdoor products+1;Pipe hanger hardware+1;Printed circuit CAD software+1;Surgical equipment+1}
+={Lüthje, C.+1;Urban, G.+1;Franke, N.+1;Herstatt, C.+1;Morrison, Pamela+1;von Hippel, E.+1;Lead users:Apache web server software and+1r|library information search system and+1|mountain biking and+1|outdoor consumer products and+1|pipe hanger hardware and+1|printed circuit CAD software and+1|surgical equipment and+3;Library information search system+1;Mountain biking+1;Outdoor products+1;Pipe hanger hardware+1;Printed circuit CAD software+1;Surgical equipment+1}
table{~h c4; 20; 45; 15; 20;
@@ -844,7 +844,7 @@ Those interested can easily enhance their intuitions about heterogenity of user
={Users:innovation and+4|innovate-or-buy decisions by+74}
Why does a user wanting a custom product sometimes innovate for itself rather than buying from a manufacturer of custom products? There is, after all, a choice---at least it would seem so. However, if a user with the resources and willingness to pay does decide to buy, it may be surprised to discover that it is not so easy to find a manufacturer willing to make exactly what an individual user wants. Of course, we all know that mass manufacturers with businesses built around providing standard products in large numbers will be reluctant to accommodate special requests. Consumers know this too, and few will be so foolish as to contact a major soup producer like Campbell's with a request for a special, "just-right" can of soup. But what about manufacturers that specialize in custom products? Isn't it their business to respond to special requests? To understand which way the innovate-or-buy choice will go, one must consider both transaction costs and information asymmetries specific to users and manufacturers. I will talk mainly about transaction costs in this chapter and mainly about information asymmetries in chapter 5.
-={Custom products:users and+3;Innovation process+3;Manufacturers:innovation and+3;Transaction costs+3;Users:innovation process+3|and paying for innovations}
+={Custom products:users and+3;Innovation process+3;Manufacturers:innovation and+3;Transaction costs+3;Users:innovation process and+3|and paying for innovations}
I begin this chapter by discussing four specific and significant transaction costs that affect users' innovate-or-buy decisions. Next I review a case study that illustrates these. Then, I use a simple quantitative model to further explore when user firms will find it more cost-effective to develop a solution---a new product or service---for themselves rather than hiring a manufacturer to solve the problem for them. Finally, I point out that /{individual}/ users can sometimes be more inclined to innovate than one might expect because they sometimes value the /{process}/ of innovating as well as the novel product or service that is created.
@@ -1841,7 +1841,7 @@ Users that innovate and wish to freely diffuse innovation-related information ar
={Lessig, L.}
!_ R&D Subsidies and Tax Credits
-={Government policy:&D subsidies and+3}
+={Government policy:R&D subsidies and+3}
In many countries, manufacturing firms are rewarded for their innovative activity by R&D subsidies and tax credits. Such measures can make economic sense if average social returns to innovation are significantly higher than average private returns, as has been found by Mansfield et al. (1977) and others. However, important innovative activities carried out by users are often not similarly rewarded, because they tend to not be documentable as formal R&D activities. As we have seen, users tend to develop innovations in the course of "doing" in their normal use environments. Bresnahan and Greenstein (1996a) make a similar point. They investigate the role of "co-invention" in the move by users from mainframe to client-server architecture.~{ See also Bresnahan and Greenstein 1996b; Bresnahan and Saloner 1997; Saloner and Steinmueller 1996. }~ By "co-invention" Bresnahan and Greenstein mean organizational changes and innovations developed and implemented by users that are required to take full advantage of a new invention. They point out the high importance that co-invention has for realizing social returns from innovation. They consider the federal government's support for creating "national information infrastructures" insufficient or misallocated, since they view co-invention is the bottleneck for social returns and likely the highest value locus for invention.
={Bresnahan, T.;Greenstein, S.;Mansfield, E.;Users:co-invention and}
@@ -2270,7 +2270,7 @@ _* Recall that Urban and von Hippel (1988) tested the relative commercial attrac
={Urban, G.;Printed circuit CAD software}
_* Herstatt and von Hippel (1992) documented a lead user project seeking to develop a new line of pipe hangers---hardware used to attach pipes to the ceilings of commercial buildings. Hilti, a major manufacturer of construction-related equipment and products, conducted the project. The firm introduced a new line of pipe hanger products based on the lead user concept and a post-study evaluation has shown that this line has become a major commercial success for Hilti.
-={Herstatt;Pipe hanger hardware}
+={Herstatt, C.;Pipe hanger hardware}
_* Olson and Bakke (2001) report on two lead user studies carried out by Cinet, a leading IT systems integrator in Norway, for the firm's two major product areas, desktop personal computers, and Symfoni application GroupWare. These projects were very successful, with most of the ideas incorporated into next-generation products having been collected from lead users.
={Bakke, G.;Olson, E.}