Open Innovation and Lead User Innovation

– Open Innovation is a term originated and developed by Henry Chesbrough in his book “Open Innovation: The new imperative for creating and profiting from technology” in 2003.

Open Innovation explains how companies have changed from a research and development model where all the ideas came from the company itself (Closed Innovation) to a new model in which the new ideas come from the company and external sources, such as universities, spin-offs, licensing or joint ventures. The concept is based on the current situation we are living, where the availability of highly educated people is higher than any other time in our History. As Chesbrough says:”Nowadays there is too much knowledge available in too many areas all over the world to try to do it all yourself”. So the companies have started to look for other ways to increase the efficiency and effectiveness of their innovation processes outside their walls, becoming more permeable to the transference of ideas.

Two examples of companies that have developed this system are Intel, which transferred to their company external ideas from universities and start up’s and created platforms where people could take advantage of their technologies; and IBM, that collaborated in the creation of open source software like Linux or Java and then created complementary goods that are based in them.

– Eric von Hippel coined the term Lead User Innovation in 1986 and promulgated it with his book “Sources of Innovation” in 1988 and a series of journal articles.

Lead users are those who identify a need before it exists in the market. They are only a little portion of the company’s general market and as a result the manufacture is not interested in them. However, for the users a solution is necessary, so they have to innovate and create something to solve their need. When the solution is created others appreciate it and want to start to produce it too, and then, when the market is growing and a solution to the need is created, a company starts to develop the project. As a result the manufactures are benefiting from the users who have created the product for free using them as a pool of new ideas as a source of innovation.

But the manufacture is benefiting twice, as the innovation implemented by lead users create something to use it nor to sell it and the improvements they made are real new functional capabilities to solve a real problem.

Once the manufacture community has denoted the importance of the feedstocks the lead users are offering, the companies are interested in allying with them, interested in adapting the innovation from the users to create new and valuable products. The Lead User Method explains how to identify the lead users and integrate them in the company as product.

– To conclude, it can be said that Open innovation and Lead user innovation are connected as they both share the view of information as a public and fundamental good. Although Lead User Innovation is an older concept, it was the creation of the Open Innovation theory, which has is actively discovered and used by firms, what awoke the companies and show them how they can benefit from Lead User Innovation. Open Innovation describes a much broader concept than Lead User Innovation, as it is a tool to create value but only in the user side. However, we need all the potential of the community to develop the Open Innovation concept.

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