About the dispute between Open and User Innovation

I think lead users create value for the specific set of early adopters so as a consequnce, UI can capture the value from the early adopters. I could also see the number of cases where these UI ultimately worked as catalyst for product innovation and consequently contributed to boost the value capture. Kayak and surfboard cases show how UI contributed to the proliferation of value capture. Point here is, User Innovation and User Innovation driven business model is different subject. Business model constitues the value creation, value capture and value network that eventually mediates the firm's relationship with other firm on the value creation and capture. Equally Open Innovation and Open Business model is different subject.

Anyway, Professor Joel West has been observed the difference between UI and OI and finally published the perspective on UI/OI and Cumulative Innovation. Enjoy the reading. CH.


About the dispute between Open and User Innovation
Written by Alexander Schroll 22 January 2010

If you are working or researching in the area of innovation, you will propably know Eric von Hippel (MIT, Sloan School of Management) and Henry Chesbrough (UC Berkeley). Both represent a stream in innovation research. Although, the scientific world should pull together, it is quite interesting to find both groups separating themselves from each other. This is true on individual level, but also on university level.

On the one hand we have the user innovation community, which is led by Eric von Hippel. He pioneered research work on Lead Users (his books Sources of Innovation, 1988 and Democratizing Innovation, 2005 are available for free download!) and today the research community is dealing with topics like Lead Users, User Entrepreneurship, Innovation Communities, free revealing of IP (Intellectual Property), Toolkits for Innovation and Design, and Open Source. Leading schools in this area are MIT, WU Vienna, RWTH Aachen but also TU Berlin, Bocconi (and many more). On the other hand we have the open innovation community, which is led by Henry Chesbrough. He coined the term 'open innovation' and wrote several books about open innovation. Interests of this research community are mostly focusing around the organization and process of open innovation within the firm, Intellectual Property Rights, Innovation Intermediaries, and regional/national innovation systems and policies. Leading schools in this area are the UC Berkeley, Hasselt University, San Jose State University, Copenhagen Business School, WHU Koblenz, University of St. Gallen, and Imperial College London.

In academia, researchers often belong only to the one group which is dominant in the specific university. To my knowledge only few researchers are working in both fields simultaneously, for instance Joel West (with his work open source) and Frank Piller (with his work on toolkits).
User Innovation (UI) is the older concept and is still very popular in the academic world. But since creation of the term 'Open Innovation' (OI), OI has received a lot of awareness and is actively discovered and used by firms - because they finally recognize how they can benefit from User Innovation. But the subliminal controversy between these research steams cannot solely be accounted to a difference in industry awareness and the resulting jealousy. There are also other major differences.

Open Innovation = value capture, User Innovation = value creation. Both research streams were born (or profited) from the socio-economic changes in the last decades: shorter product-life cycles, more complex technologies, increasing difficulty to identify consumer needs and the emergence of new technologies (internet, mass customization). Although both research streams have similarities; they greatly differ regarding the business model.

For instance, the user innovation researchers have written a lot about value creation through lead users and online communities at LEGO. But there was never written something about value capture at LEGO. The whole research stream mostly focuses on methods for value creation (through toolkits, communities etc.). Hence, it seems that value capture is not an interesting question for the user innovation researchers. Chesbrough argues that some researchers even find it highly inconvenient that companies are now using user innovation to make money (this seems to be the direct critique of von Hippel).

Chesbrough's observation is certainly true. Last year, at the User and Open Innovation Workshop in Hamburg, von Hippel really didn't seem to be happy about the way things are going with open innovation, especially how open innovation is perceived by companies.
In the 1980's, von Hippel was the first one realizing the great potential of user innovations. But today companies are increasingly using and commercializing user innovation (and then also protecting the innovations through patents), which is a trend that became even stronger with the rise of the open innovation concept. And von Hippel doesn't seem to like this commercialization of innovations that were created in the locus of the user. According to his latest book, I think that he would prefer free revealing of user innovations with no IP protection (e.g. open source).

On the other hand, Chesbrough doesn't like the non-presence of value capture in user innovation research. Although Chesbrough highly recommends reading 'Democratizing Innovation', he criticizes that the word 'business model' is not even mentioned in the index. Actually, the word is mentioned only 8 times in the whole book (220 pages). In the 2006 book 'Open Innovation: Researching a New Paradigm', the word is mentioned around 30 times - just in the first chapter!
But user innovation researchers are not only 'forgetting' about the important dimension of value capture. I would even assume deeper underlying differences of the involved researchers on socio-economic or political level.

How to combine User and Open Innovation?Obviously it would be better if both research communities would work together. Therefore, the next big advancement in user and open innovation research will be the combination/consolidation of these two literature streams. A first step is done by Joel West and Marcel Bogers with their paper 'Contrasting Innovation Creation and Commercialization within Open, User and Cumulative Innovation'. In this paper they introduced the term 'distributed innovation'. They define distributed innovation as a metacategory for prior research on innovation processes that cross organizational boundaries or take place entirely outside an organization. The paper is definitely worth reading and has some very interesting thoughts in it. But personally I don't think that we need yet another term for open and user innovation.

A major part of the OI concept describes the acquisition and the commercialization of IP. Although open innovation is profiting from collaborative activities (including free revealing from users), OI describes a much broader concept than UI does. Therefore, I would describe open innovation as a generic strategy of the firm (hence, the main focus is value capture) and user innovation (lead user method, toolkits, communities) is one method or tool for OI (hence, a strong focus on value creation). Consequently, user innovation would be a part of open innovation. Although there is no personal judgment about the importance of each research stream in this categorization, I am sure that some researchers on UI wouldn't be too happy about being a substream of OI.
This article represents my personal opinion and far be it from me to vilify someones work. Please consider this article as a summary of the evident differences between OI and UI and as an invitation to further collaboration between OI and UI researchers. If you feel insulted or if you disagree with me, please contact me by email.

Source: open-innovation.net, http://www.open-innovation.net/blog/79-about-the-dispute-between-open-and-user-innovation.html

Written by By Anthony Townsend in The Future Now Blog




Moving Beyond Open Innovation

Opening up R&D organizations to outside ideas has become a powerful weapon in the strategic arsenal of research managers. As Henry Chesbrough writes, “[O]pen innovation is a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology.” This strategy has been associated with notable commercial successes, such as Procter & Gamble’s SpinBrush, sourced not from internal R&D but rather a group of inventors in Cleveland. Increasingly, we see a coterie of firms from IBM to GlaxoSmithKline orienting their research strategy around open approaches.
But even textbook applications of open innovation still reflect a traditional emphasis in large organizations on large bets and big breakthroughs. In the end, what open innovation accomplishes is a shift of source for some big breakthroughs, from inside the company’s R&D organization to the outside.
The lightweight innovation models emerging in the web industry certainly make great use of open innovation. Twitter, one of the fastest growing social web services has sourced almost its entire innovation ecosystem outside the company’s control. This inversion is so complete, that most of the in-house innovation has been inferior to that of third parties using its standard Application Program Interface. These firms, numbering in the tens of thousands have built a rich array of popular innovations around Twitter’s core open platform.
But openness is not the only trick these companies are employing to innovate fast and cheap and with great relevance to their users’/customers’ needs. Indeed, they have taken the principles of open innovation and put it at the core of their R&D strategy. But on top of this they are layering new strategies – rapid incubation, de-construction of problems into small pieces and the incremental evolution of platforms.
Let’s look at each of these innovations lightweight models are bringing to the process of innovation:

• Rapid Incubation. Lightweight innovation processes purposely shorten the design and incubation stage by launching new products and services early. As web entrepreneur Reid Hoffman put it, “If you're not somewhat embarrassed by your 1.0 product launch, then you've released too late.” The first public beta versions of Gmail and Twitter were written in a day and two weeks, respectively. FarmVille, the most popular game on the web today, was completed in five weeks. Lightweight web companies achieve this speed in part by focusing on barebones functionality – in fact, avoiding “feature creep” is a core principle of the “agile development” style of project management favored by many contemporary web software engineers. A recent retrospective survey of twenty popular websites noted how similar their present versions are compared to their initial launch. In the meantime, they have been endlessly tweaked and scaled, but the core results of the rapid prototyping process still contain the main added value. This suggests that lightweight innovation can quickly prove concepts to which traditional heavy R&D resources can be redirected to achieve scale, reliability, and precision.
• De-constructing problem solving. Open innovation largely sees crowdsourcing as a technique for idea generation, but lightweight innovation sees it as a way of broadly re-organizing the lab, the workshop, and the studio. Whereas open innovation transforms just one part of the R&D process, lightweight innovation threatens to completely re-plumb the entire pipeline ideas traverse on their way to market. Twentieth-century science and engineering was characterized by massive, micro-managed approaches to solving large and complex problems. In contrast, the incremental nature of lightweight models offers the advantage of distributing pieces of larger problems to an array of solvers. New technologies for communication and project management reduce the transactional overhead of coordinating such large and distributed teams.

Evolutionary, scalable platforms. In traditional R&D systems, platforms were big, capital-intensive projects that provided support services for a broad array of actors – such as the Human Genome Project. In lightweight models, platforms evolve constantly from the need to coordinate distributed actions. In contrast to the Human Genome Project, the BioBricks Foundation is developing tools to coordinate open source biological research, rather than seeking massive sustained NIH funding to build a traditional research platform of labs, conferences and journals. Furthermore, because lightweight R&D efforts thrive on everyday sharing and coordinating highly distributed teams, they are particularly good at creating new platforms that are open, scale well, and reset the baseline of knowledge and capabilities for everyone.

Lightweight innovation models are still in their infancy. It is not yet clear how they will translate outside the web software sector. It is tempting to dismiss this trend on the basis that the innovations it produces are merely incremental. Big research organizations need to produce big results. But while lightweight innovation’s focus is tactical that's not to say that it can only produce incremental advances (which it is very good at). Over time, small innovations produced by lightweight processes can add up to create significant breakthroughs in basic science, applied technology and business models.
The sheer speed at which lightweight models of innovation can evolve a series of incremental advances into major breakthroughs is both its most threatening characteristic to large organizations, and the most compelling one for thinking seriously about what can be learned from it. To compete with lightweight models, large organizations will need to learn how to evolve open innovation models that are more lightweight; agile, lean and user-driven.
How might this play out in practice? Rather than picking a handful of big projects to fund from an idea network of internal and external experts, organizations will need to build capacity for high-velocity, incremental and parallel innovation over long periods of time. It won’t be enough merely to source innovations outside the laboratory walls – those ideas need to be developed through lightweight R&D frameworks that can also engage large networks in prototyping.
This evolution from open innovation to lightweight innovation will lead traditional R&D managers into new territory. Focus on several key shifts:

• From open ideation to open prototyping – Companies that have adopted open innovation are getting better at sourcing ideas from outside laboratory walls, but the next step will involve sourcing working models and even accompanying business and manufacturing process innovations as well.
• From locking in IP value to unlocking IP value - Traditional R&D, even in open innovation frameworks, seeks to protect IP aggressively – lightweight innovation often seeks to find value in aggressively unlocking IP.
• From top-down priorities to bottom-up - More often than not, research priorities, budgets and assignments in traditional organizations are handled from the top-down. Lightweight innovation shifts a good deal of that organizing and planning to the bottom. GetSatisfaction.com epitomizes this approach, by combining technical support for web startups with user-driven innovation tools. In this sense, supporting and troubleshooting the current product and planning the next one become merged into a single activity.
• From big budgets to lean financing structures – In many large organizations, its hard to spend small amounts of money and be taken seriously. But making small investments quickly is the next big challenge. As veteran venture capitalist Alan Patricof recently commented, “Our biggest challenge today is to think smaller for venture capital”. For large companies, it will be even harder.

The differences don’t end there, but these are a few of the key incongruities that will need to be delicately managed.

Source: businessweek, April 1, 2010

http://www.businessweek.com/innovate/content/mar2010/id20100330_486211.htm

Open Innovation's Challenge: Letting Go Is Hard To Do
Companies want R&D help from outsiders, but granting them authority is another matter
By Joel West


Open-source software provides an important example of how companies can leverage external sources of innovation. In practice, however, big high-tech companies often have a difficult time collaborating and sharing control.
While most people have heard of Linux, an open-source community founded by individual programmers, increasingly companies are sponsoring their own communities and supplying development resources, infrastructure, and initial technology in the hope of attracting individuals and other businesses to help them create products and services for potential users. Sponsors also set rules for developing and using cooperatively developed software, to align the community to corporate objectives and avoid time-consuming negotiations inherent in shared governance.
But the tighter their control, the harder it is to attract outside participation. Sharing seems particularly challenging for large companies that are used to having their own way and running their own ecosystems. In the past five years, three big companies have created new open-source projects and communities to adapt Linux for use in mobile communication devices. None would be mistaken for a grassroots democracy.

Early Breakthroughs

The first was Nokia (NOK), which in 2005 announced its Maemo project and released the first of its series of "Internet tablets" (the Nokia 770, followed by the N800, N810, and N900), which boast larger screens and form factors than Symbian-based smartphones. In 2007, Intel (INTC) announced it had cloned the Maemo code to create Moblin, a version of Linux that would run on its Atom processors rather the ARM-based CPUs used in Nokia and other mobile phones.
And most famously, Google (GOOG) announced its Android operating system, also in 2007. The first phone shipped a year later, and since then more than two dozen phones have been developed. Led by Motorola's (MOT) Droid, Android captured nearly 10% of the U.S. smartphone market last year.
In all cases, computer codes are shared, but production decisions are the sponsors alone. This situation is not unique to open source. Over the years, companies such as IBM (IBM), Intel, Microsoft (MSFT), Qualcomm (QCOM), and Sun Microsystems (JAVA) have created multicompany standardization consortiums in which they exerted de facto control.

Ways To Be Open

When Siobhán O'Mahony of Boston University and I investigated sponsored open-source communities, we identified three dimensions of openness: intellectual property, production, and governance. All companies using an open-source license (such as the GPL) provide access to IP, and some solicit outside code contributions, but only rarely do these businesses share actual governance. Without shared governance, outsiders have no assurance that the technology will evolve in ways that meet their own strategic objectives.
Since our paper was published in 2008, control-freak sponsors have become even more common. Communities are proliferating, but hosts continue to dominate production and decision-making in their Potemkin communities, whether through formal rules or by providing all the development resources and making all the day-to-day technology decisions.
When it comes to true cooperative technology development—what researchers call pooled R&D—Apple (AAPL) has proved to be an unlikely exemplar: The creation of the WebKit project from its Safari browser has enabled desktop-caliber mobile-phone browsers for Symbian, the iPhone, Android, and soon the BlackBerry.

Setting the Benchmarks

But the best role model is Eclipse, formed through IBM's 2001 donation of its Java development software. IBM executives decided to share control when they realized "they needed Eclipse to become independent to achieve their strategic goal to have the broader Java ecosystem adopt Eclipse," says Mike Milinkovich, executive director of the Eclipse Foundation. Since then, the foundation has been able to attract outside participation not only through its formal processes, but also through new bottom-up initiatives created and led by outsiders.
For better or worse, perceptions can be self-perpetuating. Nokia spent more than $400 million to buy out Symbian, the supplier of its smartphone operating system, so the handset maker could convert it to open source. After consulting directly with Eclipse, it created a nonprofit foundation and released more than 40 million lines of source code in February. Still, development remains almost entirely funded by Nokia, and it remains Symbian's dominant handset customer, as longtime partners Sony Ericsson and Samsung hedge their bets and former licensees such as Motorola have left entirely.
In an encouraging sign, though, Nokia and Intel agreed in February to merge the Maemo and Moblin projects to form MeeGo, which would be administered by the nonprofit Linux Foundation.
It's too soon to say whether Android, Symbian, or MeeGo will match Eclipse's benchmark for openness in governance and production. In the end, Eclipse worked because the community was convinced that IBM would let go, which it did after deciding true collaboration was in its own self-interest. It remains to be seen whether Google, Nokia, or Intel will do the same.

Joel West is professor of innovation and entrepreneurship at San José State University and author of the Open IT Strategies and Open Innovation blogs.