Interview Eric von Hippel

The business practices of doing everything out in the open

Leonard Witt interviews Eric Von Hippel over AIM, also posted at his blog: PJNet.org

Eric von Hippel, who has literally shattered the iron walls around “innovation” and brought it to the realms of every man; every user, speaks to Leonard Witt on his concepts around lead user and free revealing. The MIT Sloan School of Management professor, whose highly acknowledged book, "Democratizing Innovation", talks of “users of products and services – both firms and individual consumers" _ innovating and developing the exact product that they want and then freely sharing the information, sharply contrasts this democratic process from the hitherto closed door world of manufacturing.

Von Hippel talks of people at the leading edges of important trends who will be experiencing needs today that the bulk of the market will experience tomorrow and argues that it may be better to freely reveal one's best ideas rather than keep them secret because one could cash in on them some day.

Leonard Witt: Your book "Democratizing Innovation" intrigues me because so much of it is counterintuitive. 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.

Q: Can you give me an example?

A: 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 five years ago.

Q: 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?

A: 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 Instructables.com. 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.

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

A: There is tremendous waste in the current manufacturer-centered innovation process. Most, about 80 percent, 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.

Q: So this is a good segue into your concept of "lead users." Tell us about that. Who are they? What do they do? How do they differ from early adopters?

A: "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.

Q: Can you give another lay-friendly example?

A: Mountain bikes are 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

Q: 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? What if Time-Warner had discovered blogging early on, what might the blogosphere be like today? Doesn't that worry you?

A: 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.

Q: 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.

A: 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.

Q: 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.

A: 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.

Q: 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?

A: 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!"

Q: 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?

A: 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.

Q: 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.

A: 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.

Q: 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?

A: 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.

Q: 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?

A: Nope - but if I think of one I will freely reveal it!

Hi All:

I am Leonard Witt and will be doing the intervew for this story. Any of you from MIT have a direct line to von Hippel? I have emailed him and phoned, but haven't gotten a response. Will keep trying. Any help would be appreciated.