This spring I had the pleasure of lecturing at MIT in two different courses on innovation – both taught by the always fascinating Eric Von Hippel. The first was to a group of MBA students and Sloan Fellows at the MIT Sloan School of Management as part of a course entitled, “Innovation in the Internet Age: Emerging Trends“. The purpose of my lecture was to provide a real-world example of a company struggling to rapidly evolve an innovative web platform using as a case study, Knowligent’s IP Portfolio software for managing innovation and intellectual property.
In my session, I briefly recounted Knowligent’s experiences innovating a complex enterprise system and the way that customers essentially negotiate to introduce their ideas into the design of the product. Eric’s objective for bringing me in to lecture was to provide proof for his overarching thesis – which is essentially that a lot of innovation comes from end-users, and companies that embrace this reality are better off for it. Of course this is absolutely true, and Eric has become a sort of collector of cases and evidence in support of this “Open Innovation” idea. The students were very intellectually engaged and a lively discussion ensued over the basic issue of whether customer-driven ideas can be trusted to lead a company’s innovation in the right direction. It was typical of MIT – very probing, questioning, and spirited – and it was a lot of fun! A few things came out of the discussion and my subsequent pondering after that I feel are particularly interesting and useful…
1. Enterprise software is actually a pretty good example of an industry where innovation has been heavily user-driven. Many if not most business software companies originated out of home-grown IT projects within companies for from corporate “wish lists”. Even after a project has spun-out, the vendor tends to be dependent on a small group of corporate customers for at least the first few years of their development, and these customers can exercise enormous power over the development trajectory of the product.
2. However, although a majority of ideas for new features and capabilities originate with end-users, only a small subset tend to have broad appeal. That is, customers can quite easily produce a large volume of ideas for new functions mostly because they have so many jobs to do. But these features make for complex, and usually expensive, software. If the vendor isn’t vigilant in controlling the code base, this significantly restricts the appeal of the software and I think that this can be a very dangerous trap for a software company to fall into.
3. More importantly, it is arguable that these user-driven features aren’t really “innovation” at all. Just because a customer demands certain features doesn’t mean that they are innovating for you. Much of the time this is really just “invention” (as distinct from “innovation”), and often it isn’t even that. The danger is that companies may come to think that they are innovating because they are adding a lot of new “features” to their products.
4. Enterprise/business software seems at the moment also to be a good example of another interesting theory of innovation – namely Clayton Christensen’s idea of “Disruptive Innovation”. Disruption usually happens when new products are introduced that actually offer less of the kind of functionality traditionally demanded by the existing (and influential) customers. So, running counter to the urge to create customer-driven “bloat-ware” is an urge to create software that is actually less functional but which may be easier and cheaper to deliver and use and is frequently innovative in other dimensions. For examples, I point to Google Docs, 37 Signals, and Mint.com as just a few of my personal favorites demonstrating this kind of disruptive innovation in the world of software. In other words, the current tide of “innovation” in software seems to be moving in the opposite direction than the one that big and influential enterprise customers may want to go. As the theory predicts, over time these offerings will likely become ever more functional and ultimately displace their predecessors. It’s this changing of the dimension of innovation that makes disruptive innovation so powerful.
The question that comes out of all this is whether your biggest and most influential customers are likely to lead you in a direction that makes you more or less innovative. My own feeling and experience (from the world of management software) is that involving customers and end-users in driving your product design usually makes you more inventive but can make your products less innovative overall. It is probably true that this will be different in other sectors. However, at the very least this supports the idea that there is a need to carefully evaluate the direction your customer input is driving you and to distinguish between “inventiveness” and “innovation”.
I found your site on technorati and read a few of your other posts. Keep up the good work. I just added your RSS feed to my Google News Reader. Looking forward to reading more from you down the road!
I am an academic studying service innovation. I spent a number of years as a product manager in online and software B2B applications and have benefitted from discussions with von Hippel over the past few years.
I found this posting to be very interesting. My quick thoughts (I might be back for more):
von Hippel recognized the trap of being too customer-oriented a decade before Christensen.
Lead user research was a methodology designed to (1) identify the most demanding users and (2) use tools to uncover tacit/sticky information that users can’t easily communicate. For radical innovation, lead users sometimes had to be users totally outside your customer base.
If you work to recognize the most demanding users, and use tools to uncover sticky or tacit information you will definitely be both more inventive and innovative. If instead you focus on your average customer and communicate through surveys, casual conversation, or focus groups you are toast.
Thanks for your comment Gary, and I completely agree with what you say. My point was simply that many software companies often don’t think about the difference between adding features and “innovating”. And this is a trap that many fall into because they do not have any kind of model for differentiating. It is essential to be clear about the dimension(s) of merit that matter for innovating in your market.
On the other hand, for a lot of reasons enterprise software vendors interact primarily with their most demanding and sophisticated customers/users (very much the “lead users”) and work very closely with them – usually at their location for extended periods of time learning about their needs and ideas. This can lead to some very important benefits – especially the “filling-out” of the product with all the capabilities it needs to support the full needs of the customer.
However, I am also convinced that this process is difficult to manage, not only because these big customers can come to exert enormous power over the design trajectory (and can “bully” the vendor into making the product in the customer’s image), but also because this can have the effect of narrowing the product’s market appeal to the segment that looks exactly like them. The company may actually end up with a very innovative and sophisticated solution, but it won’t matter much if there are only 10 customers that can appreciate it. What is needed is a method for determining which “lead users” and which ideas are truly representative of broader future market trends. This has been notoriously difficult for many companies in the world of business software. This is one reason why your point about communicating with users outside of your customer base may be so useful for identifying key dimensions of innovation. Thanks again for your comments!