Innovation is
Transcription
Innovation is
www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in 15.356 Creating “breakthrough” products and services N I . E V S S Professor Eric von Hippel MIT Sloan School of Management .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 1 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Agenda z Introduction z Who really develops breakthroughs? z Course Structure & Logistics N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 2 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Who am I? z Head of the Technological Innovation and Entrepreneurship Group (TIE) at Sloan z You may find it comforting to know that I have real-world innovation experience as a venture co-founder and R&D manager z Research focus: The “fuzzy front end” of the innovation process – how it works, how to make it better. z Studies in: Industrial products (like semiconductors); consumer products (sports equipment); OS software N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 3 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Periodic MAJOR innovation is essential: everything becomes a commodity eventually – and may even be entirely supplanted. Hot and proprietary once – now commodities: – 3M transparent “Scotch” tape. Marginal improvements kept it going for decades: >>Decorated “gift tape,” write-on tape, double-sided tape. N I . E – Aspirin >> Buffered, coated, child-sized, liquid… V S S Once hot – now entirely gone: – Battleships, record-players… .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 4 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in “Breakthrough” vs incremental innovation z A “breakthrough” innovation, as we use the term, is the first member of a major new product line in a firm: – The first gas-chromatograph (GC) – The first masking tape z “Incremental” innovations are improvements to existing product lines – Improved GC – Improved masking tape N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 5 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Why a course on developing breakthroughs? Because: z Periodic breakthroughs are ESSENTIAL to firms z Firms are (pretty) good at incremental innovation – but they don’t know how to develop breakthroughs systematically z Result: major innovations are often very rare and desperately sought by management: – In 5 3M Divisions studied less than 1 new product line introduced per Division every 2 years on average N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 6 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Introducing major innovation is not easy even when you understand the principles: Innovation is both essential and UNWANTED z Change is disruptive – to be avoided if possible z Change obsoletes corporate expertise and production investments – Polaroid produces instant film and cameras – not digital! – Kodak produces film – not digital cameras! z N I . E V S S Change devalues personal “intellectual property” – I know Cobol – not C++! – I know tubes – not transistors! – I know manned aircraft – not drones! .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 7 www.onlineeducation.bharatsevaksamaj.net 8 www.bssskillmission.in Contrasting innovation methods Need and market life cycle curve Lead users Target users Time New methods are based on finding / encouraging and commercializing solutions developed by users themselves N I . E Traditional methods are based on “find a need and fill it” (Target users provide needs; Manufacturer develops solutions) .B V S S W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Essential Definitions The “functional” source of innovation depends upon the functional relationship between innovator and innovation: – An INNOVATION is anything new that is actually used (“enters the marketplace”) – whether major or minor. – An innovation is a USER innovation when the developer expects to benefit by USING it; N I . E V S S – An innovation is a MANUFACTURER innovation when the developer expects to benefit by SELLING it. .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 9 www.onlineeducation.bharatsevaksamaj.net 10 www.bssskillmission.in How we discovered that users develop many major new products Innovations Affecting First Device Major Improvement Minor Improvement Gas Chromatography 1 11 - Nuclear Magnetic Resonance Spectrometry 1 14 - Ultraviolet Spectrophotometry 1 Transmission Electron Microscopy W W 5 - 1 14 63 4 44 63 V S S .B W Total N I . E www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in www.onlineeducation.bharatsevaksamaj.net User - Dominated Steps 1 Signifcant instrument improvement invented, built and used by: Manufacturer Role 2 User diffuses results "how to do it's info via publication, symposia, visits etc. Inventive User 3 A few users (or a few dozen) built their own Other users ask instrument companies when a commercial version will be available N I . E V S S .B Invention, prototyping, first field use Information diffusion W W 11 www.bssskillmission.in Pre-commercial replication and use 4 Instrument company introduces commercial version Commercializing Instrument Company Commercial manufacture and sale This diagram is based on: von Hippel, Eric. “The Dominant Role of Users in the Scientific www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in Research Policy 5, no. 3 (July 1976): 212-39. Instrument Innovation Process.” W www.onlineeducation.bharatsevaksamaj.net 12 www.bssskillmission.in First device used in field developed and built by: Innovations Affecting % User User Mfg. Gas Chromatography 83% 10 2 Nuclear Magnetic Resonance Spectrometry 80% 12 3 Ultraviolet Spectrophotometry 100% Transmission Electron Microscopy W W 6 0 72% 44 17 77% 72 22 V S S .B W Total N I . E www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Gammaflow: A Completely Automated Radiommunoassy System (This image is available in Science, Vol. 194, October 1976.) N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 13 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in (Photograph of a Washington state police car with a system of air tubes attached to it. It is a homemade, lead user solution to the problem of volcanic ash damaging its engine.) N I . E - UPI Photo, May 26, 1980. V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 14 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in (Photograph of a unique method of irrigation in Kufra, using a center-pivot system that creates large circular fields.) N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 15 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in (Close-up photographs of the system that supplies water to fields using the center-pivot system.) N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 16 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in The World Wide Web – A User Innovation “Berners-Lee did not set out to invent a contemporary cultural phenomenon; rather, he says, “it was something I needed in my work.” He wanted to simply to solve a problem that was hindering his efforts as a consulting software engineer at CERN. Berners-Lee’s innovation was to apply hypertext to the growing reality of networked computers. He expanded the idea he had developed at CERN and made it available on the Internet in the summer of 1991. Technology Review, July 1996, p.34 N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 17 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Examples of Important Consumer Product Innovations Category Example Health Products Gatorade Personal Care Protein-base Shampoo Feminine Hygiene Sports Equipment Mountain Bike Mountain Climbing-Piton Apparel Sports Bra Food Chocolate Milk Graham Cracker Crust N I . E V S S .B Office W Computer Application Software W W White-out Liquid Electronic Mail Desk Top Publishing www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 18 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Exercise: identify your own examples of user innovation 1. Think of your experiences in a firm. – Did a product modification by a customer come to your attention? – Did your firm modify a product sold to you or develop a new one for in-house use? 2. N I . E Think of your experiences as a consumer in a field you really care about (a sport? type of cooking?) – – V S S Did you ever modify a commercial product you bought? Did you ever use a product in a new way? .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 19 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in History of “AOL Instant Messenger” Instant Messaging is a User Innovation z By 1987 MIT Lab for Computer Science had thousands of “Athena” workstations online and difficulties diffusing system admin info rapidly. Developed “Zephyr” instant message system. z MIT students begin to use for general instant messaging. z Other universities adopted Zephyr-like programs First Commercial Product 9 years later z 1996 Israeli firm Mirabilis put out comml product ICQ z 1998 Mirabilis acquired by AOL N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in Source: Rapp, David. “I’ve Got to Get a Message to You.” Technology Review, October 2002. 20 www.onlineeducation.bharatsevaksamaj.net 21 www.bssskillmission.in Ongoing evolution of Wi-Fi User Activities to Date z Users discover possibilities and begin free sharing of wireless networks z Users Modify Wi-Fi antennas to greatly increase range z Widespread implementation occurs – travelers find “hot spots” as they travel, can get Internet access, send e-mail from the highway etc. Traditional Supplier Responses? z No one will want it – no network security z We think this might be service stealing… should stop. N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in Source: October 2002 Technology Review www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in User and Manufacturer Innovations Differ Users tend to develop Functionally Novel innovations: z The first sports-nutrition bar z The first scientific instrument of a new type Manufacturers tend to develop Dimension of Merit Improvements: z A better-tasting sports-nutrition bar z Improvements to an existing type of scientific instrument N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 22 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Users innovate when it pays… for them Only “Lead User” innovations form the basis for new products and services of value to manufacturers. “Lead Users” are users that: 1. Have needs that foreshadow general demand in the marketplace; 2. Expect to obtain high benefit from a solution to their needs. (Such users are more likely to innovate – “Necessity is the mother of invention!”) N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 23 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Lead users at leading edge of curve N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 24 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Adopter Categorization According to Innovativeness N I . E V S S .B W W Diagram based on: Rogers, E. M. Diffusion of Innovations. New www.bssnewgeneration.in York: Free Press,www.bsslifeskillscollege.in p. 182. www.bsscommunitycollege.in W 25 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Course topics – – – – – – – – – – Where breakthroughs come from and why Finding lead users – and their innovations Conventional market research – the path to incrementalism Brainstorming and creativity Build it and they will come (MIT Media Lab) Ethnographic methods Why users reveal their innovations Toolkits for user innovation User innovation communities Resistance to innovation N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 26 www.onlineeducation.bharatsevaksamaj.net 27 www.bssskillmission.in Course logistics z The Wait List z Grading: – Class attendance and participation – Two mini-papers (7 pages) z 50% 50% For each paper: 1. Choose a topic covered in this class that especially interests you. 2. Briefly explain topic Devote 1-2 pages to this. No extra reading needed here: derive from class lectures and discussions, assigned readings and other sources of information that you may already have. N I . E V S S 3. Expand in the direction of your interest. Fine to draw in your personal experience and views in addition to findings from extra reading on the topic. .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in 15.356 The Lead User idea generation method N I . E V S S Professor Eric von Hippel MIT Sloan School of Management .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 28 www.onlineeducation.bharatsevaksamaj.net 29 www.bssskillmission.in Contrasting innovation methods Need and market life cycle curve Lead users Target users Time New methods are based on finding / encouraging and commercializing solutions developed by users themselves N I . E Traditional methods are based on “find a need and fill it” (Target users provide needs; Manufacturer develops solutions) .B V S S W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Essential Definitions 1. An INNOVATION is anything new that is actually used (“enters the marketplace”) – whether major or minor. 2. The “functional” source of innovation depends upon the functional relationship between innovator and innovation: • • N I . E V S S An innovation is a USER innovation when the developer expects to benefit by using it; An innovation is a MANUFACTURER innovation when the developer expects to benefit by selling it. .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 30 Many industrial and www.bssskillmission.in consumer products have roots in user innovation. www.onlineeducation.bharatsevaksamaj.net Consumer product examples: Category Example Health Products Gatorade Personal Care Protein-base Shampoo Feminine Hygiene Sports Equipment Mountain Bike Mountain Climbing-Piton Apparel Sports Bra Food Chocolate Milk Graham Cracker Crust N I . E V S S .B Office W Software W W White-out Liquid Electronic Mail, Desk Top Publishing www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 31 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Users innovate when it pays… for them Only “Lead User” innovations form the basis for new products and services of value to manufacturers. “Lead Users” are users that: 1. Have needs that foreshadow general demand in the marketplace; 2. Expect to obtain high benefit from a solution to their needs. (Such users are more likely to innovate – “Necessity is the mother of invention!”) N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 32 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Lead users at leading edge of “need curve” N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 33 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in The World Wide Web – A Lead User Innovation “Berners-Lee did not set out to invent a contemporary cultural phenomenon; rather, he says, “it was something I needed in my work.” He wanted to simply to solve a problem that was hindering his efforts as a consulting software engineer at CERN. Berners-Lee’s innovation was to apply hypertext to the growing reality of networked computers. He expanded the idea he had developed at CERN and made it available on the Internet in the summer of 1991. Technology Review, July 1996, p.34 N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 34 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Adopter Categorization According to Innovativeness N I . E V S S .B W W Diagram based on: Rogers, E. M. Diffusion of Innovations. www.bsscommunitycollege.in New www.bssnewgeneration.in York: Free Press,www.bsslifeskillscollege.in p. 182. W 35 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Product area selected for pilot test of lead user methods: Computer-Aided-Design systems Used to lay out printed circuit boards (PCB-CAD) N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 36 www.onlineeducation.bharatsevaksamaj.net 37 www.bssskillmission.in In PC-CAD Lead Users were innovating Routine Users were not Expected Lead Type of Questions We User Attribute Asked At Front of What are your: “High Density” z Avg. Number of layers? Trend? z Avg. Line width (mils)? (1988 data) High Need For “Are you satisfied with your Improved present PCB CAD system? System? Active In Did you build own PCB Solving Own CAD System Problem? Number in Sample N I . E V S S .B W W W LEAD Users Routine Users 6.8 11 4.1 15 No It’s OK 82% Yes 1% Yes 33 99 Based on: Urban, Glen L.,www.bsscommunitycollege.in and von Hippel, Eric. “Lead User Analyses for the Development of New www.bssnewgeneration.in www.bsslifeskillscollege.in Industrial Products.” Management Science 34, no. 5 (May 1988): 569-82. Consumer product innovators are lead users too www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Sports equipment user Characteristics Innovators Noninnovators Difference 4.29 5.84 p<0.001 “I have new needs which are not satisfied by existing products.” 3.27 4.38 p<0.001 “I am dissatisfied with the existing equipment.“ 3.90 38 Lead User Characteristic (1): Being Ahead of the Trend * “I improved or developed new techniques in my sport.” Lead User Characteristic (2): High Benefit from Innovation * N I . E 5.13 p<0.001 V S S Sports equipment study: Franke and Shah (2003) .B *7-point rating scale: 1 = very accurate; 7 = not accurate at all W W W Based on: Nikolaus Franke & Sonali K. Shah. “How Communities Support Innovative Activities: Assistance and Sharing Among www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in Sports Enthusiasts.” Denver, CO: Academy of Management, Technology & Innovation Management Division (August 2002): Table 3. 39 Many lead users innovate www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Industrial products n % innovating Printed Circuit CAD 136 24.3% Pipe Hanger Hardware 74 36% Library IT Systems 102 26% Software security features 131 19.1% Surgical Equipment 262 22% N I . E Consumer products V S S Outdoor Products “Extreme” sports equipment Mountain biking equipment .B W W W 153 9.8% 197 37.8% 291 19.2% Table source: Franke, Nikolaus, and Eric von Hippel. “Finding Commercially Attractive User Innovations: An Exploration www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in and Test of “Lead User” Theory.” MIT Sloan School of Management Working Paper No. 4402-03, July 2003. Used with permission. As innovator LU characteristics go up – so www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in does innovation attractiveness 40 N I . E V S S .B W W W Source: Franke, Nikolaus, and Eric von Hippel. “Finding Commercially Attractive User Innovations: An Exploration and www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in Test of “Lead User” Theory.” MIT Sloan School of Management Working Paper No. 4402-03, July 2003. Used with permission. www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in 41 Performance Assessment of Lead User Research at 3M Research Team: Prof. Gary Lilien, Penn State University; Prof. Pam Morrison, University of New South Wales; Dr. Kate Searls, ASI Associates, Mary Sonnack, Division Scientist, 3M; Prof. Eric von Hippel, MIT N I . E (For the complete article and other Lead User Videos and articles: Go to leaduser.com on the Web) V S S .B W W For more information on the following 7 slides, see: Lilien, Gary L., Pamela D. Morrison, Kathleen Searls, Mary Sonnack, Eric von Hippel. “Performance Assessment of the Lead User Idea Generation Process.” MIT Sloan www.bsscommunitycollege.in www.bssnewgeneration.in School of Management Working Paper No. 4151, January 2001. www.bsslifeskillscollege.in Management Science, forthcoming. W Assessment Results: Lead User vs. Non-Lead User www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Funded Ideas LU Ideas (n=5) NON-LU Ideas (n=42) 42 Sig. “Newness” of Idea z Novelty compared to competition z Newness of needs addressed Projected Profitability z % market share in year 5 z Estimated sales in year 5 Strategic Value z Strategic importance z Fit with Strategic plan Intellectual prop. protection Fit with mfr. Capabilities z Fit with distribution channels W W W 0.01 0.09 68% $146m 33% 18m 0.01 0.00 9.6 9.8 7.3 8.4 0.08 9.24 7.1 6.7 7.8 8.8 6.7 8.0 0.80 0.92 0.61 V S S .B z 6.8 5.3 N I . E Fit with Business z 9.6 8.3 www.bsscommunitycollege.in www.bssnewgeneration.in Note: Items measured on www.bsslifeskillscollege.in 10 pt. Scale, 10=high, 1=low www.onlineeducation.bharatsevaksamaj.net 43 www.bssskillmission.in Essential Definitions “Breakthrough:” z Determines Future Business Growth and Margins z Major Product line >20% of Division Sales Incremental improvement: z Valuable to existing business z Extension to existing line E V N I . Traditional 3M Method S S .B W W W LU Method At 3M Incremental Breakthrough 41 1 0 5 www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Example of a LU innovation on 3M website “3M's Major Innovations” Commercialized 2001 z 3M ™ Inflata-Pak™ Air Cushion Packaging. This packaging eliminates the need for peanuts or bubble wrap while protecting fragile items for shipping. Made of tough, durable plastic, it conforms to odd shapes and seals itself. N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 44 www.onlineeducation.bharatsevaksamaj.net 45 www.bssskillmission.in Lead User concept generation projects cost more than traditional ones Person Days Total Cost Traditional 3M concept development stage 60 $30,000 Lead User concept development stage At 3M 154 V S S N I . E $100,000 (plus coaching) .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in ACTIVITY: Think about possible Lead Users in your markets Step 1 Select a specific market & specific major trend to think about Step 2 Brainstorm possible lead users within that target market z Which types of individuals or firms have needs at the leading edge of the trends? z Which ones have a high incentive & the resources to solve their leading edge needs? Step 3 N I . E V S S Brainstorm possible lead users outside target market z Which types of users in other fields & applications are facing a similar need but in a more demanding form? .B Step 4 W W Specify what you might learn from each type of LU W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 46 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Example of searching for lead users outside your target market Medical X-Ray Instead of a “board of leading radiologists”… Look for users facing higher needs than anyone in target market: Examples: People who need even high resolution than anyone doing medical imaging N I . E Experts in semiconductor chip imaging V S S .B Image enhancement (“pattern recognition”) specialists W W W Experts who process photographs from space probes www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 47 www.onlineeducation.bharatsevaksamaj.net 48 www.bssskillmission.in Organizing to use the LU Method Manufacturer All Users Testing Market Research Solution Data R&D Need Data Technical Service Service Solution Data N I . E Need Data Sales Sales V S Solution Data Need Data S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Finding out what users really need: “trial and error” and “sticky information” N I . E V S S Professor Eric von Hippel MIT Sloan School of Management .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 49 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Innovation is: 1. A problem-solving process based upon directed trialand-error 2. Carried out at the site of “sticky information” N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 50 Trial and error is THE fundamental problem-solving process www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Initial Specification • Start by designing what you THINK will work (directed T&E) Design Build • Develop a thought experiment, a simulation or a prototype Run • Test your design in a real or simulated use environment Iterate Analyze N I . E V S S • Analyze what happened, revise your design, try again till satisfied .B W W Done W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 51 Directed trial and errorwww.bssskillmission.in is THE fundamental problemwww.onlineeducation.bharatsevaksamaj.net solving process Initial Specification Design • I will outline a paper about X • I will write a draft Build Iterate • I will see if my room-mate likes it Run Analyze N I . E • I will learn from the comments and revise the paper V S S .B W W Done W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 52 Directed trial and errorwww.bssskillmission.in is THE fundamental problemwww.onlineeducation.bharatsevaksamaj.net solving process Initial Specification Design • I will design a rocket • I will build it Build Iterate • I will flight test it Run Analyze N I . E • It crashed: I will analyze what went wrong so I can redesign V S S .B W W Done W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 53 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in TRY YOUR OWN EXAMPLE Initial Specification Design • ___________________ Build • ___________________ Iterate • ___________________ Run N I . E Analyze • ___________________ V S S .B W W Done W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 54 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Innovators / problem-solvers require information about both a need and a solution approach zNeed information is usually found at user sites. zSolution information is usually found at manufacturer sites. N I . E Product Manufacturer Solution Information Product User S .B SV Need Information W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 55 But bringing full and accurate need and solution information together is often VERY difficult www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Why? Because information is often “sticky” - very costly to transfer from place to place z Information needed by developers may be tacit – Can you tell your child how to ride a bike? z A lot of information is often needed by developers – “You didn’t tell me you were going to use the product that way!” N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 56 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in 57 A result: user and manufacturer innovations differ in kind Users tend to develop Functionally Novel innovations: z The first sports-nutrition bar z The first scientific instrument of a new type Manufacturers tend to develop Dimension of Merit Improvements: z A better-tasting sports-nutrition bar z Improvements to an existing type of scientific instrument N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Example of the impact of sticky information on the locus of innovation: Fifty percent of all prescriptions written in the U.S. are written for “off-label” uses of prescription drugs – New prescription drugs are generally developed in the labs of pharmaceutical firms – sites where much specialized information about drug development has been build up over the years. N I . E – Off-label applications are generally found by patients and physicians. They apply the drugs many times under widely varying field conditions – and discover unanticipated positive (or negative) effects thereby. (“Doctor: this blood pressure medication you gave me is causing my hair to regrow!”) V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 58 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Studies show this effect clearly Sample of 24 inventory control system innovations by 7-11 Japan and NEC (For this diagram, see: Ogawa, Susumu. Does sticky information affect the locus of innovation? Evidence from the Japanese convenience-store industry. Research Policy 26, 7-8, April 1998. Figure 1, p. 78.) N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 59 www.onlineeducation.bharatsevaksamaj.net 60 www.bssskillmission.in Product or service design tends to move to the site of the crucial sticky information Manufacturer-Based Design (DOM products) Manufacturer design tasks User design task • Have solution information • Acquire need info from user • Design product Need Info Source N I . E User-Based Design (Functionally novel products) V S S Manufacturer design task Solution Info Source W W W .B User design tasks •Have need information • Acquire solution information •Design product www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in www.onlineeducation.bharatsevaksamaj.net 61 www.bssskillmission.in Product or service design tends to move to the site of the crucial sticky information : EXAMPLE Manufacturer-Based Design (DOM products) Manufacturer design tasks User design task Need Info Source Video Game Engine N I . E User-Based Design (Functionally novel products) V S S Manufacturer design task Engine Interfaces W W W .B User design tasks Video game mods www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in www.onlineeducation.bharatsevaksamaj.net 62 www.bssskillmission.in Product or service design tends to move to the site of the crucial sticky information : EXAMPLE Manufacturer-Based Design (DOM products) Manufacturer design tasks DOM: Smoother-running skateboard wheels User design task Need Info Source N I . E User-Based Design (Functionally novel products) V S S Manufacturer design task Tools and materials W W W .B User design tasks The Skateboard www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Sticky information and the (failed) “waterfall” innovation process Manufacturer to user: “Specify what you want – We will negotiate a contract to deliver exactly that! The manufacturer labors to meet the specification. Delivers the completed product! N I . E V S S User to manufacturer: “Now that I try it out, I find that this is NOT what I want!” Manufacturer to user: “It IS what you contracted for!” .B W The problem: Due to sticky information the agreedon specification was not complete www.bsslifeskillscollege.in and accurate www.bsscommunitycollege.in www.bssnewgeneration.in W W 63 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in “Rapid prototyping” innovation processes as a solution MFR ACTIVITY USER ACTIVITY User provides initial specification Manufacturer develops prototype Manufacturer incorporates changes User evaluates and improves /changes specifications V S S .B W W W N I . E User iterates until satisfied www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 64 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Learning by doing Users have the advantage of problem-solving in their own use environments as they “do” a desired activity – they are “learning by doing.” Examples: – Airlines learn how to maintain their planes more efficiently as they do that work – they “go down the learning curve.” N I . E – Skateboarders learn to do new things on their boards as they skate. They don’t go into the lab and do R&D – they are learning by doing V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 65 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Learning by doing can be incredibly cheap for users within their own narrow niche of “doing” (Photograph of windsurfers.) N I . E Photograph courtesy of Lisa A. Devlin. Used with permission, http://www.windwardskies.com/ V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 66 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in 67 Learning by doing can be incredibly cheap for users within their own narrow niche of “doing” Mountain bike innovation • “When I do tricks that require me to take my feet off the bike pedals in mid-air, the pedals often spin, making it hard to put my feet back onto them accurately before landing.” I added a foam ring around the pedal axle near the crank. This adds friction, and prevents the pedals from free-spinning when my feet are off.” Development of instant messaging at MIT N I . E In 1987 MIT Lab for Computer Science had thousands of Athena workstations online and difficulties diffusing system administration information rapidly. V S S On-site programmers programmed the “Zephyr” instant message system. MIT students quickly begin to use Zephyr for general instant messaging. .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in 68 Learning by doing can be incredibly cheap for users within their narrow niche of “doing” Example: “I‘m a mountain biker and a human movement scientist working in ergonomics and biomechanics. I used my medical experience to improve my mountain bike. (Consider the cost if that person had not been a biker and had to learn the sport to innovate – or did not have medical training and tools “in stock.”) N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Exercise: think of your own instances of learning by doing Example: I worked out the quickest route from home to school. 1. 2. Think about the process you used to determine the quickest route. Notice the low incremental cost to you. For example, since your trip from home to school was a trip you took “anyway,” the cost of each experiment was minimal. (It would cost much more to hire someone to do this experiment who did not have to take that trip “anyway.”) N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 69 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in How can you reduce iteration? Repeated shifts of problem-solving sites during product development can be very costly – what can you do to reduce the need for it? 3. Reframe the initial product or service design problem which draws on two sticky information sites into sub-problems – each of which draws on sticky information location at only one site N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 70 www.onlineeducation.bharatsevaksamaj.net 71 www.bssskillmission.in Example: Custom Integrated Circuit Design “Full custom” chip development procedure Manufacturer Develops Chip And circuit N I . E V S S User Expresses Need ASIC custom chip development procedure Manufacturer Designs basic chip W .B W W User Designs Circuit www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Example “Full-custom” IC Design vs “Gate Array IC Designs” N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 72 www.onlineeducation.bharatsevaksamaj.net 73 www.bssskillmission.in Shifting innovation to users Economics of sticky information tends to shift the locus of problemsolving to users. For custom design projects, manufacturer information is standard from project to project but user need differs Example: Each ASIC design may require the same information from the ASIC manufacturer, but unique information from the ASIC user. ASIC Manufacturer N I . E W .B W W V S S ASIC user ASIC user ASIC user www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Quantitative market research for incremental improvement innovations N I . E V S S Professor Eric von Hippel MIT Sloan School of Management .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 74 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Incremental innovation is important. Quantitative market research can identify needs for incremental change Major new product lines are rare – incremental improvements are by far the most common type of project in product and service development. So it is important to learn to do incremental innovation well. Examples: z z N I . E Many incremental improvements to 3M transparent “Scotch” tape over the years. Convenient tape dispenser; decorated “gift wrap tape,” writeon tape, double-sided tape. V S S .B Many incremental improvements to aspirin over the years. Buffered aspirin, coated, child-sized tablets, liquid formulation, time release capsules… W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 75 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in There are several ways to generate ideas for incremental product and service improvements z Observation of users: “Many users are using / modifying our products this way – let’s add that feature for them.” z Sales channel inputs: “My customers are asking for masks in pediatric sizes – I said we could do that for them.” z “Me too / me better: “Competitors are getting good sales with their pancake mix with fruit added – lets do fruit and nuts!” z Traditional quantitative marketing research. N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 76 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Traditional quantitative marketing research is designed to identify only incremental needs (but not always understood to have that in-built bias). Traditional market research focuses on target market customers 1. What need information do target market customers have? 2. How do you get information from them? 3. How do you analyze their information? N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 77 In traditional market research trial and error is being done 78 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in – but manufacturers rather than users are doing it Initial Specification Design • Mfr-based designers design a product based on user need Build • Mfr builds a prototype Run • Does market tests Iterate N I . E Analyze • Analyzes – finds areas for improvement. V S S .B W W Done W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in www.onlineeducation.bharatsevaksamaj.net A typical target market www.bssskillmission.in Typical Target Market N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 79 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Target market users have need but not solution information. Example: PCB-CAD study N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 80 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Target market customers have need information - not solution information to offer market researchers For more information on this study, see: Urban, Glen L., and von Hippel, Eric. Lead User Analyses for the Development of New Industrial Products. Management Science 34, no. 5, May 1988: pp. 569-82. N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 81 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in The needs of target market customers are “fixed” on the “middle of the road” “Functional fixedness” says that people don’t stray much from the needs and solutions they directly experience. N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 82 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in How quantitative market research gets information on needs from target market customers z The process starts by identifying 10-30 product attributes target market customers think are important for a type of product (say, a cell phone). Usually, a focus group is used to identify these. z This procedure creates a barrier to out-of-the-box innovation. If an attribute is not listed by ordinary users – it cannot enter into later analytical steps. For example, if camera functionality is not listed as a cell-phone attribute – it is gone! N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 83 84 Analysis centers on product attributes that many target users describe as important www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in (Rarely mentioned attributes are dropped as outliers) Cell Phone Attribute Attribute level desired Phone size Attribute Importance Medium Keypad size Low Signal pickup High Cost (Camera?) N I . E V S S ? High B . This type of analysisW leads directly to DOM improvements along Commonly-understood W attributes = incremental innovation W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in A few market segments with common weightings are identified – mass manufacturers want to “build for the masses.” Cell Phone Attribute Attribute level desired Phone size 85 Attribute Importance High Keypad size Low Signal pickup High N I . E Cost Cost-conscious segment Luxury segment V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in Low Even for incremental products quantitative analyses can mislead. Example: it is assumed that preferences for each factor vary linearly - often not true! www.onlineeducation.bharatsevaksamaj.net Cell Phone Attribute www.bssskillmission.in Attribute Importance Medium Attribute level desired Phone size Car-phone size Briefcase-portable at this size N I . E Pocket-portable at this size Too small to manipulate below this size V S S .B W W W 86 www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in What www.onlineeducation.bharatsevaksamaj.net happens when these methods are used to quantify existing demand 87 www.bssskillmission.in for familiar vs unfamiliar ideas after they have been developed? How would “functionally fixated” consumers assess cell phone cameras? Cell Phone Attribute Attribute level desired Phone size Keypad size N I . E Signal pickup Cost W W W Low V S S High ? ? .B (Camera?) Attribute Importance Medium www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in High www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in In sum: aspects of traditional methods that create a focus on incremental improvements Focus on: z “Center of the market” customers z Improvements only along attributes known to be important by target market customers for a product category Possible question for a paper: z Can quantitative methods be modified in some way to enable the generation of major new innovations? N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 88 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Firms organize around the way they think idea generation works (For this diagram, see: von Hippel, Eric. Users as Innovators. Cambrdige, MA: Technology Review 80, no. 3, January 1978, pp. 31-39.) N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 89 www.onlineeducation.bharatsevaksamaj.net 90 www.bssskillmission.in Contrasting innovation methods Need and market life cycle curve Target market users Lead users Time New methods are based on finding emerging needs among lead users. These lead users may also develop solutions. N I . E Traditional methods are based on finding needs among target market Users. Manufacturers then develop solutions .B V S S W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in 15.356 Trading and revealing information N I . E V S S Professor Eric von Hippel MIT Sloan School of Management .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 91 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Agenda 1. Why people freely reveal their innovations to manufacturers – and other users 2. Informal information trading N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 92 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Know-How Trading Patterns Among Steel Minimills For more information on this study and its results, see: von Hippel, Eric. Cooperation Between Rivals: Informal Know-How Trading. Research Policy 16, 1987, pp. 291-302. N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 93 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Steel minimills are far from mini in size and effect! For more information, see: Christensen, Clayton. The Innovator’s Dilemma. HaperBusiness, 2000. N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 94 www.onlineeducation.bharatsevaksamaj.net 95 www.bssskillmission.in Firms can increase the amount of information they possess by trading: Situation Pre-Trade Firm A Unit A Firm B Unit B Situation Post-Trade Unit B + Unit A V S S Unit A + Unit B N I . E .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in www.onlineeducation.bharatsevaksamaj.net Information trading can paywww.bssskillmission.in under SOME conditions 96 Consider the Total Profit (also sometimes called "rent") that a proprietary "unit" of knowhow yields to a firm exclusively possessing it as made up of two parts: Total Profit = Profit + ∆ Profit Profit = the portion of Total Profit which a firm expects after trading the unit of knowhow to another firm. (Both firms then possess the traded knowhow.) ∆ Profit is the extra Profit which a firm expects if it possesses the knowhow unit exclusively. Example: ASSUME TWO FIRMS START WITH KNOW-HOW UNITS OF DIFFERENT CONTENT BUT EQUAL VALUE: N I . E Before trade each firm has: Total Profit = Profit + ∆ Profit After trade each firm has: V S S Total Profit = 2 (Profit) .B Therefore trading pays only when Profit > ∆ Profit W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in KNOW-HOW TRADING AS A “PRISONER'S DILEMMA” www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in 97 Assume as before that two firms have one unit of unique proprietary know-how each. Assume also that each firm's unit, although different, has an identical Profit and ∆ Profit associated with it. Then, pre trade, each firm has: Total Profit = Profit + ∆ Profit. After a cooperative trade, R, each firm has: R = 2 Profit All four possible outcomes of a single play of this game are: T = 2 Profit + ∆ Profit P = Profit + ∆ Profit R = 2 Profit S = Profit. N I . E A Prisoner's Dilemma exists if T > R > P > S and 2R > T+S (A strategy of continuing cooperation has been shown empirically to pay best over many plays of a Prisoner's Dilemma game.) V S S Therefore, know-how trading pays (conditions for a Prisoner's Dilemma are met) if Profit > ∆ Profit but not if Profit < ∆ Profit .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in FIRMS THAT DO TRADE HAVE AN ADVANTAGE OVER NON-TRADERS Assume firms A and B trade $ research results with low competitive value but that Firm C does not trade Situation Pre-Trade Situation Post-Trade Firm A low unit + high unit low + low + high Firm B low unit + high unit low + low + high Firm C (nontrader) low unit + high unit N I . E SV low + high S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 98 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Information trading examples (1) Oil Geologists trade easily reproducible know-how; Profit > ∆ Profit Unless it involves an upcoming oil leasing competition; Profit < ∆ Profit (2) Aerospace engineers trade easily reproducible know-how; Profit > ∆ Profit N I . E V S S Unless it bears on a competition for an important contract; Profit < ∆ Profit .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 99 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in How Frequent is Know-how Trading? Minimill Personnel Sample: The results of this study can be found in: Schrader, Stephan. Informal technology transfer between firms: Cooperation through information trading. Research Policy 20, 1991, pp. 153-170. N I . E V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 100 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Oil Scouts Trade "Black Box" Information Only Firm A Type of Information Geologist Data Analysis Know-how Scout 101 Firm B Oil Well Logs Oil Well Cores Seismic Data Geologist Scout N I . E When Scouts can be used, Oil Companies tend to force their use. Hypothesized advantages: V S S - Specialists have better networks, are better traders; - Collects IOU's in one place, minimizing # outstanding, and time they are outstanding. .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in 102 Some Rules of Oil Scout Behavior (As per Scouting Association codes of ethics) - "A scout must represent only one company...". - "The information a scout obtains should be invariably first transmitted to the employer." N I . E - "A member may not dispose of information without the consent of the employer." V S S - "Scouts should never knowingly dispense information of an untrue or doubtful character". .B W Source: 1988 Houston Oil Scouts Association Code of Ethics W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Shifting Innovation to Your Customers via Toolkits for User Innovation Professor Eric von Hippel N I MIT Sloan SchoolE of. Management V S S .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 103 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in To develop a product or service, information about needs and about solutions must be brought together at a single site. Need information is usually found at user sites. Solution information is usually found at manufacturer sites. Software Supplier Solution Information V S S N I . E Software User Need Information .B 2003 Eric von Hippel W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 104 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in 105 Information is often “sticky” But need and/or solution information can be very costly to transfer from site to site – is often very “sticky.” Some reasons: Information needed by developers may be tacit Can you tell your child how to ride a bike? N I . E V S “You didn’t tell S me you were going to use the product that.B way!” W W W A lot of information is often needed by developers 2003 Eric von Hippel www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in 106 Impact of sticky information #1 1. Product or service design should move to the site of sticky information, “other things being equal.” That is: If need information is very sticky, and solution information is not, product design should be done at the user site; N I . E If solution information is very sticky, and need information is not, product design should be done at the manufacturer site (The traditional pattern). V S S .B 2003 Eric von Hippel W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in Problem-solving does move to sticky information sites www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Sample of 24 inventory control system innovations by Seven-Eleven Japan and NEC (For this diagram, see: Ogawa, Susumu. Does sticky information affect the locus of innovation? Evidence from the Japanese convenience-store industry. Research Policy 26, 7-8, April 1998. Figure 1, p. 78.) N I . E V S S .B 2003 Eric von Hippel W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 107 www.onlineeducation.bharatsevaksamaj.net 108 www.bssskillmission.in Manufacturer-Based Design Manufacturer design tasks User design task • Have solution information • Acquire need info from user • Design product Need Info Source N I . E User-Based Design Manufacturer design task S .B SV Solution Info Source 2003 Eric von Hippel W W W User design tasks •Have need information • Acquire solution information •Design product www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in Example of the impact of sticky information on the locus of innovation: www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in 109 Fifty percent of all prescriptions written in the U.S. are written for “off-label” uses of prescription drugs New prescription drugs are generally developed in the labs of pharmaceutical firms – sites where much specialized information about drug development has been build up over the years. N I . E Off-label applications are generally found by patients and physicians. They apply the drugs many times under widely varying field conditions – and discover unanticipated positive (or negative) effects thereby. (“Doctor: this blood pressure medication you gave me is causing my hair to regrow!”) V S S .B 2003 Eric von Hippel W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in 110 Impact of sticky information #2 2. If both need and solution information are sticky, problem-solving activity will tend to iterate between user and manufacturer sites, as information from each site is drawn upon for problem-solving MFR ACTIVITY USER ACTIVITY Manufacturer develops prototype N I . E V S S .B Manufacturer incorporates changes 2003 Eric von Hippel W W W User provides initial specification User evaluates and improves /changes specifications User iterates until satisfied www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in Evidence for repeated site shifts during problem solving www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in (For this chart, see: von Hippel, Eric and Marcie J. Tyre. How Learning by Doing Is Done: Problem Identification in Novel Process Equipment. Research Policy. 1994.) N I . E V S S .B 2003 Eric von Hippel W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 111 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in 112 How can you reduce iteration? Repeated shifts of problem-solving sites during product development can be very costly – what can you do to reduce the need for it? 3. Reframe the initial product or service design problem which draws on two sticky information sites into sub-problems – each of which draws on sticky information location at only one site N I . E V S S .B 2003 Eric von Hippel W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in Example: Custom Integrated Circuit Design www.onlineeducation.bharatsevaksamaj.net 113 www.bssskillmission.in “Full Custom” IC design vs ASIC / FPLD Design “Full custom” chip development procedure Manufacturer Develops Chip And circuit N I . E V S S User Expresses Need ASIC custom chip development procedure Manufacturer Designs basic chip 2003 Eric von Hippel W W W .B User Designs Circuit www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Example “Full-custom” IC Design vs “Gate Array IC Designs” N I . E V S S .B 2003 Eric von Hippel W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 114 www.onlineeducation.bharatsevaksamaj.net 115 www.bssskillmission.in Why all this leads to toolkits Economics of sticky information tends to shift the locus of problemsolving to users. For custom design projects, manufacturer information is standard from project to project but user need differs Example: Each ASIC design may require the same information from the ASIC manufacturer, but unique information from the ASIC user. N I . E ASIC Manufacturer .B V S S 2003 Eric von Hippel W W W ASIC user ASIC user ASIC user www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in With toolkits customers – not manufacturers need to “understand customer need” www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in “Find a need and fill it” model Toolkits model reverses information flow Need Information (“What do I want”) Solution Information (“What is possible?”) Solution Information (“What is possible?”) Need Information (“What do I want”) N I . Customers Supplier Supplier E V S S .B W “Market Research” 2003 Eric von Hippel W W 116 “Innovation Toolkits” www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in Customers You can’t afford to understand the needs of smaller customers www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in 117 Companies cannot afford to design custom solutions for smaller customers supplied customers Custom service threshold potential customers new markets for custom products (smaller customers) N I . E V S S .B 2003 Eric von Hippel W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in www.onlineeducation.bharatsevaksamaj.net 118 www.bssskillmission.in The Solution: LSI’s Development Toolkit Customers design chips that are produced by LSI User-friendly and integrated toolkit (using simulation and CAD technology) Traditional suppliers were reluctant to make tools available to markets (intellectual property) N I . E (Image of an advertisement by LSI Logic Corporation with the headline, “Design Our Gate Arrays On Your Workstation”.) V S S Fujitsu even refused to share its tools with US division 2003 Eric von Hippel .B W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in Innovation toolkits made many more customers accessible to LSI www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in 119 LSI toolkits tapped into customers that had not been served traditional customers OLD custom design threshold new customers N I . E LSI’s NEW threshold V S S new markets for custom products (yet smaller customers) .B 2003 Eric von Hippel W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in Increasing Chip Complexity The Pattern is Repeated: The Rise of Field Programmable Technologies www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Next Steps: Where is the New Growth? Full custom IC Supplier Gate Array and Standard Cells (e.g., LSI) N I . E V S S Field programmable technologies (e.g., Xilinx, Altera) .B 2003 Eric von Hippel W W Chip Designs Typically By: Customer or Custom Design Specialist Customer W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 120 Customers Increasingly Using Toolkits and Designing their Own Custom ICs www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in (For this World Semiconductor Trade Statistics chart, see: Thomke, Stefan, and Eric von Hippel. Customers as Innovators: A New Way to Create Value. Harvard Business Review, April 2002. Reprint No. R0204F.) N I . E V S S .B 2003 Eric von Hippel W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 121 2 major tasks for toolkit development www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in 122 A. Separate out development tasks that are custom “need-information –intensive” and assign those to users. Impact on Product architecture can be major Custom cake vs custom pizza; N I . E “Full-custom” IC vs custom ASIC V S B. Develop the tools users need to carry out the S need-intensive .Btasks assigned to them. W W W 2003 Eric von Hippel www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in (B) Toolkits for users contain: Tools to carry out trial-and-error design: 1. That are “user-friendly” 2. That offer the right “solution space” 3. That offer libraries of pre-designed modules 4. That can translate from user-language to producer language without error N I . E V S S .B 2003 Eric von Hippel W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 123 Toolkits should help users to do the trialand-error work of problem-solving in design www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Design • Design a possible solution Build • Develop models prototypes Run • Test model/prototype In real or simulated use environment N I . E V S S Analyze .B 2003 Eric von Hippel W W • Analyze findings previous step W Done www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 124 Tools to enable user to carry out design by trial-and-error www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in 125 Four steps in trial-and-error-process: ASICs example Design Design custom circuit Build Create functioning prototype Test Take prototype for a “test drive” Analyze Compare expected and actual results. If needed, do trial-anderror cycle again. (“Iterate”) N I . E V S S .B 2003 Eric von Hippel W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in 126 (1) Offer “user-friendly” tools “User-friendly” means that the user does not have to learn a new design language. Examples: Allow integrated circuit designers to use their customary design language: Boolean algebra Allow hair styling customers to use (virtual) mirror, comb and brush. N I . E V S S .B 2003 Eric von Hippel W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in www.onlineeducation.bharatsevaksamaj.net 127 www.bssskillmission.in Creating user-friendly design systems Identify the independent design dimensions that are important to the user. Give each design dimension a familiar, functional name (e.g., “thickener” instead of xanthan gum” Create a translator – hidden from the user – that translates each move by a user-designer in user solution space to a move in manufacturer solution space. (Flag the user when a user move can’t be done in manufacturer solution space.) N I . E V S S User Space .B 2003 Eric von Hippel W W W Supplier Solution Space www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in Translations can be “bumpy” – but must be error-free www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in Smooth movement across user solution space may involve bumpy translations on supplier map Example: “Jammy” flavor note User Map: Degree of Jamminess Low V S S N I . E Supplier Map: .B 2003 Eric von Hippel W W Range of Flavor System A W high Range of Flavor System B www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 128 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in (2) Offer the right “solution space” Toolkits must offer users a “solution space” that contains all the design variables and tools they need to create a design. Example: Hairstyling toolkits: N I . E Design variables offered: hair position, length, color, waviness; V S S Tools offered: virtual scissors, comb, colorants, curlers, straighteners. .B 2003 Eric von Hippel W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 129 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in 130 Flavor Design Toolbox for Users N I . E V S S .B 2003 Eric von Hippel W W W Screenshot of Flavor Design Toolbox software courtesy of John Wright, International Flavors and Fragrances. Used with permission. www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in (3) Offer pre-designed modules Custom designs are typically not totally unique. Toolkit libraries should contain pre-designed modules and modifiable “default designs” – so that users can concentrate their design work on the novel features of their designs. Examples: “Macrocells” for custom IC designs: microprocessor Modifiable “default designs” for hairstyles or for houses. N I . E V S S Modules should make “design sense” to a user-designer. (e.g., not “half a roof plus front door” for house designers, or “sautéed garlic plus onions” for chefs) .B 2003 Eric von Hippel W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 131 (4) Toolkits must enable “first-time,” error-free production of user designs www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in 132 User design language provided by toolkit must translate to production language without error: Sometimes this is easy: Translation from circuit design language (Boolean algebra) to IC producer’s digital device fabrication language. N I . E V S S Sometimes this is hard: .B Nestle Mexican Sauces toolkit 2003 Eric von Hippel W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in www.bssskillmission.in Creating Value with Toolkits: Experiences at GE Plastics www.onlineeducation.bharatsevaksamaj.net 30 years of in-house expertise on website (tools): $5 mill. cost Potential customers can solve their own design problems 2003 Eric von Hippel N I . E Automatic screening and tracking of potential customers V S S One third of new customers Sales threshold dropped by more than 60% W W 400 e-seminar for 8,000 potential customers per year About one million visitors p.a. Helpline calls dropped >50% .B W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in 133 www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in 134 Profiting from toolkits Users will benefit from toolkits in your industry if user needs are heterogeneous. If users will benefit, you must offer toolkits – or someone else will and get first mover advantage. Your business model may change when you offer toolkits – for better or for worse. N I . Example: ASIC foundries profited from a toolkit E V approach for the first 15 years – and then began to lose S S profit to specialist toolkit suppliers. B . W W W 2003 Eric von Hippel www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in www.onlineeducation.bharatsevaksamaj.net www.bssskillmission.in 135 How to start developing a toolkit It’s OK to start with something rough as long as it offers sufficient value to entice user experimentation. Simple release of in-house design tools is sometimes a sufficient for a start. Work with lead customers that really need your toolkit and so will be willing to work with you as you refine it. You don’t need superhuman insight to design and update toolkits – lead users will bump up against the edges of the solution space your toolkit offers and ask for more – or design toolkit improvements for themselves. N I . E V S S .B 2003 Eric von Hippel W W W www.bsscommunitycollege.in www.bssnewgeneration.in www.bsslifeskillscollege.in