Final 2.009 presentations provide new ideas for athletes, patients, hobbyists, and even horses.
A survey led by Sloan Professor Eric von Hippel (management) found that consumers preferred the ideas for electronic home-banking services developed by a group of lay "lead users" over those already tested and found popular by a leading northeastern bank.
The banking concepts suggested by the lead users-in this case, individuals who on their own had already found novel ways to address personal banking needs electronically-were favored over those proposed by the bank by 69 percent of survey respondents. Only 14 percent found the bank's services preferable, while 19 percent rated them as equal.
The concept of employing lead users in the development of new products has been a research staple of Dr. von Hippels' for years. He and co-researcher William Riggs, associate professor at the Georgia Institute of Technology School of Management, say lead users have two particular traits that make them so important to product development. First, they face needs that will eventually be general in a marketplace but face them months or even years before most others; second, they expect to benefit significantly by obtaining a solution to those needs.
Both characteristics are important to obtaining valuable market research, they say. The first is significant because users who have real-world experience with a need can provide the most accurate data regarding it. And when needs evolve rapidly-as they often do-only users at the front of the trend will have experience with "tomorrow's needs today." The second characteristic is important because those who expect a high benefit from a solution tend to experiment on their own-and so can provide the richest data on both needs and solutions.
IDEAS WERE 'NOVEL'
The home-banking lead users developed ideas "that showed significant novelty relative to current banking practices in the US," according to Professors von Hippel and Riggs. The plan proposed that consumers enter their planned payments into banking computers immediately, and have banks pay these out at user-defined times and in user-defined ways. Banks would then keep "checkstub" records for users, automatically add records for non-check transactions like ATM transactions, and reconcile user accounts automatically.
The user would have instant feedback on the checking account balance that would result if planned deposits and payments occur as scheduled-no more overdrafts as a result of faulty bookkeeping. Also, if desired, the user would have instant information about the impact of planned expenses on the planned budget for the household.
According to Professors von Hippel and Riggs, managers of the telecommunications firm with whom the researchers worked judged the lead users' ideas as providing "significantly better service concepts" than the more conventional marketing research study they conducted with the bank. That study generated ideas which for the most part were already being offered by some banks to their home banking customers.
The managers also felt that the lead-user method-from identifying home-banking trends through generating novel service ideas-was significantly faster and cheaper than the market research methods they normally used. The experiences of the home-banking project are "consistent with other field experience, which tends to find that concept development via lead user studies tend to be twice as fast and half as costly as more conventional concept development methods," Professors von Hippel and Riggs wrote.
Professor von Hippel's studies of the lead-user concept began with the development of scientific instruments and has since branched into other industries. In a recent article in Industry Week, he said his investigations showed that users "were actually the developers of 82 percent of all commercialized scientific instruments studied."
The working paper, entitled "A Lead User Study of Electronic Home Banking Services: Lessons from the Learning Curve," is available from MIT Document Services. Reference working paper number 3911-96.
(This article originally appeared in the fall 1996 issue of R.O.I. published by the Sloan School of Management).
A version of this article appeared in MIT Tech Talk on November 20, 1996.