Lead User Innovation

In most industries, R&D is done by a specific in-house department. However, for many products there is a leading edge group of users who buy the product and immediately make modifications to meet their very unique needs. Eric von Hippel (2005) of the MIT Sloan School of Management has studied the impact of "lead users" on the development of new features for products. He describes this effect in windsurfing, mountain biking, and open source software. These customers are effectively an external R&D lab for the company’s products. von Hippel argues that they need to be enrolled by the company as partners in identifying and developing features for the next generation of products. Three criteria must exist for this to be effective: (1) the users must have an incentive to innovate, (2) they must have an incentive to reveal their innovations and share them, and (3) their work must be at a competitive level with innovations created internally and by competing companies.

von Hippel’s book Democratizing Innovation is available as a free download on his web site: http://web.mit.edu/evhippel/www/books.htm