Section 5: Innovation toolkits
Innovation toolkits are a practical application of the work on task partitioning and sticky information listed in other sections of this eBook. Firms and collaborative innovation projects are finding toolkits a very useful way to organize and support innovation that is distributed among users and between users and producers.
von Hippel, E. (1998). Economics of product development by users: The impact of `sticky' local information. Management Science, 44(5), 629-644 (PDF)
Abstract: Those who solve more of a given type of problem tend to get better at it--which suggests that problems of any given type should be brought to specialists for a solution. However, in this paper we argue that agency-related costs and information transfer costs ("sticky" local information) will tend drive the locus of problem-solving in the opposite direction--away from problem-solving by specialist suppliers, and towards those who directly benefit from a solution and who have difficult-to-transfer local information about a particular application being solved, such as the direct users of a product or service. We examine the actual location of design activities in two fields in which custom products are produced by "mass-customization" methods: application-specific integrated circuits (ASICs) and computer telephony integration (CTI) systems. In both, we find that users rather than suppliers are the actual designers of the application-specific portion of the product types examined. We offer anecdotal evidence that the pattern of user-based customization we have documented in these two fields is in fact quite general, and we discuss implications for research and practice.
von Hippel, E. (2001). Perspective: User toolkits for innovation. Journal of Product Innovation Management, 18(4), 247-257. doi: 10.1016/S0737-6782(01)00090-X (PDF)
Abstract: Manufacturers must accurately understand user needs in order to develop successful products-but the task is becoming steadily more difficult as user needs change more rapidly, and as firms increasingly seek to serve "markets of one." User toolkits for innovation allow manufacturers to actually abandon their attempts to understand user needs in detail in favor of transferring need-related aspects of product and service development to users along with an appropriate toolkit.
User toolkits for innovation are specific to given product or service type and to a specified production system. Within those general constraints, they give users real freedom to innovate, allowing them to develop their custom product via iterative trial-and-error. That is, users can create a preliminary design, simulate or prototype it, evaluate its functioning in their own use environment, and then iteratively improve it until satisfied. As the concept is evolving, toolkits guide the user to insure that the completed design can be produced on the intended production system without change.
Pioneering applications in areas ranging from the development of custom integrated circuits to the development of custom foods show that user toolkits for innovation can be much more effective than traditional, manufacturer-based development methods.
User toolkits for innovation are specific to given product or service type and to a specified production system. Within those general constraints, they give users real freedom to innovate, allowing them to develop their custom product via iterative trial-and-error. That is, users can create a preliminary design, simulate or prototype it, evaluate its functioning in their own use environment, and then iteratively improve it until satisfied. As the concept is evolving, toolkits guide the user to insure that the completed design can be produced on the intended production system without change.
Pioneering applications in areas ranging from the development of custom integrated circuits to the development of custom foods show that user toolkits for innovation can be much more effective than traditional, manufacturer-based development methods.
von Hippel, E., & Katz, R. (2002). Shifting Innovation to Users via Toolkits. Management Science, 48(7), 821-833. (PDF)
Abstract: In the traditional new product development process, manufacturers first explore user needs and then develop responsive products. Developing an accurate understanding of a user need is not simple or fast or cheap, however. As a result, the traditional approach is coming under increasing strain as user needs change more rapidly, and as firms increasingly seek to serve 'markets of one.' Toolkits for user innovation is an emerging alternative approach in which manufacturers actually abandon the attempt to understand user needs in detail in favor of transferring need-related aspects of product and service development to users. Experience in fields where the toolkit approach has been pioneered show custom products being developed much more quickly and at a lower cost. In this paper we explore toolkits for user innovation and explain why and how they work.
Thomke, S., & von Hippel, E. (2002). Customers as Innovators: A New Way to Create Value. Harvard Business Review, 80(4), 74-81.
Abstract: Product R&D at many companies is a major bottleneck. The difficulty is that fully understanding the needs of just a single customer can be an inexact and costly process--to say nothing of the needs of all customers or even groups of them. In the course of studying product innovation across many industries, authors Stefan Thomke and Eric von Hippel have found several companies that have adopted a completely new, seemingly counterintuitive, approach to product R&D. Essentially, these companies have abandoned their efforts to understand exactly what products their customers want; instead, they equip customers with tool kits to design and develop their own products. Doing so can create tremendous value, but capturing that value is hardly a simple or straightforward process. Not only must a company develop the right tool kit, but it must also revamp its business models and management mind-set. When companies relinquish a fundamental task--such as designing a new product--to customers, the two parties must redefine their relationship, and this change can be risky. With custom computer chips, for instance, companies traditionally captured value by both designing and manufacturing innovative products. With customers taking over more of the design, companies must now focus more on providing the best custom manufacturing. In other words, the location where value is created and is captured changes, and companies must reconfigure their business models accordingly. This article offers basic principles and lessons for industries undergoing such transformations.
Franke, N., & Hippel, E. V. (2003). Satisfying heterogeneous user needs via innovation toolkits: the case of Apache security software. Research Policy, 32(7), 1199-1215. doi: 10.1016/S0048-7333(03)00049-0 (PDF)
Abstract: Manufacturers customarily provide only a few product variants to address the average needs of users in the major segments of markets they serve. When user needs are highly heterogeneous, this approach leaves many seriously dissatisfied. One solution is to enable users to modify products on their own using "innovation toolkits." We explore the effectiveness of this solution in an empirical study of Apache security software. We find high heterogeneity of need in that field, and also find that users modifying their own software to be significantly more satisfied than non-innovating users. We propose that the "user toolkits" solution will be useful in many markets characterized by heterogeneous demand.
DeMonaco, H. J., & von Hippel, E. (2007). Reducing Medical Costs and Improving Quality via Self-Management Tools. PLoS Medicine, 4(4), e104 EP -. doi: 10.1371/journal.pmed.0040104. (PDF)