“We are in a Major Paradigm Shift”

We are in the middle of a huge shift in our economy. According to Eric von Hippel, one of the hottest names in the area of innovation, that also includes a major paradigm shift, from closed manufacturer-centered innovation to an innovation system centered on “open” - intellectual property-free - innovation that is often developed by users. Manufacturers have to learn how to adapt their business models to this.

Eric von Hippel is professor and Head of the Innovation and Entrepreneur Group at MIT, Sloan School of Management. He is known for pioneering research that has prompted a major rethinking of how the innovation process works. He is the originator of lead user theory and a leading voice on open methods of innovation development. He is also the author of the book “Democratizing Innovation”.

Innovation BY users – which is a very different thing than user-driven innovation.

At the European innovation conference in Lund, Sweden last week, he was one of the keynote speakers (online). InnovationManagement.se asked him a few questions:

Your will be talking about user driven innovation: Why do you focus on that and why is it important?

Manufacturer attention to user needs is increasingly irrelevant.

– Actually, I will be talking about innovation BY users – which is a very different thing than user-driven innovation.  “User-driven innovation” is a term that is conventionally used to mean that “manufacturer new product and service development must be driven by user needs.”  That is certainly true, but we are in the middle of a much larger shift in our economy in which manufacturer attention to user needs is increasingly irrelevant – because users are increasingly innovating for themselves rather than waiting for manufacturers to do that for them.

Manufacturers have to learn how to adapt their business models to this.

– We are in the middle of a major paradigm shift from closed, IP-protected manufacturer-centered innovation to an innovation system centered on “open” – intellectual property-free – innovation.  In this pattern, product and service innovations are increasingly being developed by users. Manufacturers have to learn how to adapt their business models to this. Some companies are succeeding very well.  For example, many manufacturers are now both developing and basing products on open source software – and making good profits.

What would you say is the hottest trend in the field of innovation management today and why is that?

Innovation projects in which many openly collaborate is a major trend today.

– Innovation projects in which many openly collaborate, for example, as in Open Source software projects or “crowdsourcing” projects is a major trend today. Research by economists and others is showing that open, collaborative innovation has the capability to drive out closed, producer innovation under many conditions.  Understanding of what is possible and effective is evolving very rapidly.

Major changes in intellectual property law and policy will be appropriate.

– It is important to note that there is also a lot of confusion on terminology right now.  For instance, “open innovation” is a term that I use to mean innovation that is freely accessible by all via an information commons.  That is how I use the term in this interview with you – and that is what people in open source software mean by the term.  Others use that same term to refer to the buying and selling of closed, proprietary intellectual property among firms.  Can be confusing unless you are careful.  Open in the sense of freely available to all is, I think, going to become the predominant pattern over time.  This suggests that major changes in intellectual property law and policy will be appropriate.

Everybody is talking about innovation and how important it is. Do you agree – is it really that important, and why is that?

– Interesting question.  Clearly, the answer depends on ”important for what and important to whom.”  Change is often profitable for innovators, but costly to many others who must abandon what they know, and own, and do in response to what the economist Joseph Schumpeter called the ”creative destruction” of innovation.  On the other hand, when the winds of creative destruction are active – as they certainly are today – firms must innovate and adapt or die.  Under those circumstances,  it is clear that many will think innovation very important.

Which (or which ones) are the most important factors to create an innovative organisation?

Innovation is resisted by many managers responsible for efficient production because it is disruptive to efficiency in the short term – even if vital to survival in the longer term.

– Let’s talk first about why firms and individuals typically resist innovation.  It is important to understand that the vast majority of effort and time in most firms is invested in producing existing products and services in a smooth and efficient manner.  Innovation is resisted by many managers responsible for efficient production because it is disruptive to efficiency in the short term – even if vital to survival in the longer term.

– Individual employees also often resist innovation because it often impacts the value of their personal knowledge and positions.  For example, consider the trend to open collaborative innovation we talked about earlier.  R&D employees often resist being asked to look outside for innovations – depending upon the behavior of management, they may quite reasonably view the outside as a competitor, as a rival: “If we ask outsiders to help with our job, our managers may think that we are dispensable.  Let’s not do that!”  Similarly, marketing research people who look for unmet user needs via surveys and focus groups find a lot of their tools are at risk of becoming obsolete if users become the innovators.

Organizations cannot expect their managers and employees to welcome and support innovation unless the benefits to them are real and made clear.

– Organizations cannot expect their managers and employees to welcome and support innovation unless the benefits to them are real and made clear, and the costs are honestly discussed, and mitigated as needed. This is clearly difficult to do – which is a major reason why innovations tend to come from outside of major firms.

Watch a related video with Eric von Hippel

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