Product Conceptualisation with the Lead User Method Professor Erkko Autio (adapted from a web...

Product Conceptualisation with the Lead User Method

Professor Erkko Autio

(adapted from a web presentation by Professor Eric von Hippel, MIT Sloan School of Management)

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Market Pull or Technology Push?

Market Pull Because...

By being technologically oriented companies only invent 'better mouse traps' no one needs. . .

Market Pull Because...

By being technologically oriented companies only invent 'better mouse traps' no one needs. . .

Technology Push Because... By being solely market driven companies only develop low-quality products that lack long-term value to customers and to themselves. . .

Technology Push Because... By being solely market driven companies only develop low-quality products that lack long-term value to customers and to themselves. . .

40-20%60-80%

of successful products

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Difficulty of Researching Technology Markets

”Had I asked end customers, all they would have said is that they need a faster horse”

- Henry Ford

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Users Develop Many Major New Products

Innovations Affecting

First Device

Major Improvement

Minor Improvement

Gas Chromatography 1 11 -

Nuclear Magnetic Resonance Spectrometry

1 14 -

Ultraviolet Spectrophotometry

1 5 -

Transmission Electron Microscopy

1 14 63

Total 4 44 63

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First Device Used in Field Developed By…

Innovations Affecting

% User User Mfg.

Gas Chromatography 83% 10 2

Nuclear Magnetic Resonance Spectrometry

80% 12 3

Ultraviolet Spectrophotometry

100% 6 0

Transmission Electron Microscopy

72% 44 17

Total 77% 72 22

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The World Wide Web – A Lead User Innovation

“Berners-Lee did not set out to invent a contemporary cultural phenomenon; rather, he says, “it was something I needed in my work.” He wanted to simply to solve a problem that was hindering his efforts as a consulting software engineer at CERN.

Berners-Lee’s innovation was to apply hypertext to the growing reality of networked computers. He expanded the idea he had developed at CERN and made it available on the Internet in the summer of 1991.

Technology Review, July 1996, p.34

(also documented by Prof Ari-Pekka Hameri)

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Examples of Important Consumer Product Innovations

Category Example

Health Products Gatorade

Personal Care Protein-base ShampooFeminine Hygiene

Sports Equipment Mountain BikeMountain Climbing-Piton

Apparel Sports Bra

Food Chocolate MilkGraham Cracker Crust

Office White-out Liquid

Computer Application Software

Electronic MailDesk Top Publishing

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Linux is User-Driven Innovation

• Computing science assistant Linus Torvalds develops a core of an operating system at the University of Helsinki. The project starts as a course assignment

• Torvalds needs certain functionalities that are not included in commercially available systems, so he continues developing his own system, partly as a hobby

• He puts his system onto the public domain and invites others to develop further features into the system

• The work catches on and Linux is born

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Users Aren’t Always the Innovators

Innovations Samples: User Manufr Suplr Other NA Total (N)

Scientific Instruments 77% 23% - - 17 111

Semicon & PC Crd Process 67% 21% - 12% 6 49

Pultrusion Process 90% 10% - - - 10

Tractor Shovel Related 6% 94% - - - 11

Engineering Plastics 10% 90% - - - 5

Plastics Additives 8% 92% - - 4 16

Industrial Gas-Using 42% 17% 33% 8% - 12

Thermoplastic-Using 43% 14% 36% 7% - 14

Wire Stripping Equip 25% 75% - - 2 8

Connector Attaching Equip 4% 13% 83% - - 12

Sports Equipment 58% 27% - 15% - 48

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Factors Influencing Sources of Innovation

1. Relative ability to profit from an innovation– Firm with highest innovation-related profit expectations most likely to innovate

2. “Sticky information” transfer costs– Firm with stickiest local information needed for innovation most likely to innovate.

3. Agency costs– Always creates tendency towards user innovation

“I will do it myself because I want something exactly right for me – You are only willing to make something almost-right for many.”

4. Coordination costs– Always creates tendency towards user innovation

“By the time you can physically get here to do what I need, I might be bankrupt – so I have to do it myself (Example, solving semiconductor production problems – loss rates as high as $10,000 per minute!)

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User and Manufacturer Innovations Tend to Differ

Users tend to develop Functionally Novel innovations

• The first sports-nutrition bar

• The first scientific instrument of a new type

Manufacturers tend to develop Dimension of Merit Improvements

• A better-tasting sports-nutrition bar

• Improvements to an existing type of scientific instrument

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Users Innovate When It Pays… For Them

Only “Lead User” innovations form the basis for new products and services of value to manufacturers

“Lead Users” are users that:

1. Have needs that foreshadow general demand in the marketplace;

2. Expect to obtain high benefit from a solution to their needs. (Such users are more likely to innovate – “Necessity is the mother of invention!”)– John Heebøll: “Where is the pain?”

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Time

Only lead user prototypes available

Commercial versions of product available

# of usersperceiving need

Lead Users Face “Emerging Needs” Now

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Lead Users Lead Markets

– Ahead of the market – Benefit significantly

– Ahead of the market – Benefit significantly

Innovators Early adopters

Early majority

Late majority

Laggards

Lead users

Time of adoption

Number of customers that adopt the product at a given moment in time

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Use of Method: Example

Computer-Aided-Design systems Used to lay out printed circuit boards (PCB-CAD)

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In PC-CAD Lead Users Were Innovating - Routine Users Were Not

Expected Lead User Attribute

Type of Questions Asked LEAD Users

Routine Users

At Front of “High Density” Trend?

What are your:• Avg. Number of layers?• Avg. Line width (mils)?

(1988 data)

6.811

4.115

High Need For Improved System?

“Are you satisfied with your present PCB CAD system?

No It’s OK

Active In Solving Own Problem?

Did you build own PCB CAD System

82% Yes

1%Yes

Number in Sample

33 99

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Lead User Method Steps

• Identify important industry trend (has to be central to industry development)

• Identify potential lead user groups with regard to trend• Verify if potential lead users

– Stand to benefit from improved trend preformance– Actually lead in terms of the trend– Have actively tried to solve the bottleneck

• Carry out focus group discussions– Identify attractive product or service concept features

• Develop a concept prototype• Test this concept among wider user audience (early adopters)• Develop the product• Sell, sell, and sell!