By: Karin Wall
There is an urgent need to rethink the way firms innovate. We need to change from a manufacturer-active perspective to a user-active perspective, according to professor Nikolaus Franke of Vienna University. The Lead user method, Toolkits for user innovation and Innovation communities. These are three ways that firms can apply to benefit from users innovativeness and create better innovations and more value and growth.
Professor Nikolaus Franke is Director of the Institute for Entrepreneurship and Innovation at the Vienna University of Economics and Business Administration. He is also Director of the TU/WU Entrepreneurship Center, a joint technology transfer organization together with the Technical University Vienna, Academic Director of the MBA in Entrepreneurship and Innovation. Together with Professor Christopher Lettl he leads the User Innovation Research Initiative Vienna. Franke was one of the keynote speakers at the recent European innovation conference in Lund, Sweden.
At the conference you spoke about user driven innovation: How can user´s experiences be effectively implemented in new products and services?” Why do you focus on that and why is it important?
Currently, we are in an era of transition, in a paradigm change.
– At the User Innovation Research Initiative of WU Vienna, we study user innovation. We want to understand how companies can benefit from user creativity. Currently, we are in an era of transition, in a paradigm change. For many years, the producer was considered the main actor in the innovation process. It was the producer who identified customer needs not yet met via market research, and then developed a product or service intended to fill this niche. The customers were assumed to be passive in this paradigm.
Suddenly, we have thousands of inter-related users with an aggregate innovation power that goes way beyond the capabilities of a single producer.
– In the past years it became clear, however, that this is not a very effective way of doing business. Users have always been active and creative, but the advent of the internet definitely boosted this potential. Suddenly, we have thousands of inter-related users with an aggregate innovation power that goes way beyond the capabilities of a single producer. Imagine, in a company – even in a big one – you have only a few dozens of people working on the task while in many markets there are literally millions of users.
What would you say is the hottest trend in the field of innovation management today and why is that?
How can firms integrate user creativity and innovativeness in an effective way?
– The hot question is how to benefit from the great potential of users. How can firms integrate user creativity and innovativeness in an effective way? Simply asking your average customer “what ideas for new products do you have?” will not be successful. He will almost probably answer “well, we want the same products, only better and cheaper” – but this is something you suspected before, didn’t you? Sometimes they will point you to incremental innovations but that’s something that is quite well understood anyway.
We term them “lead users” because their needs foreshadow the needs of the market.
– Thus, the key is to use more sophisticated methods for getting some more radical ideas and solutions from the cutting-edge users. We term them “lead users” because their needs foreshadow the needs of the market. They have urgent needs and because the producers typically do not yet sense that there is a market solve the problem themselves.
Understanding innovation communities becomes key for success.
– This is much easier today than 20 years ago because a user easily finds peers on the web. Understanding innovation communities and finding a way how to use them, maybe even building a business model around them becomes key for success.
Everybody is talking about innovation and how important it is. Do you agree – is it really that important, and why is that?
– Many products simply are not as good as they could be. They are complicated, do not fit the problem, and contain functions nobody needs. And many problems still call for solutions. People are willing to pay a lot for products they really like. This suggests that companies may benefit a lot from delivering intelligent new products – maybe more than from just being cheaper.
We asked a sample 717 subjects to design their own individual watch with a toolkit that allowed self-design.
– To give you a practical example: we made an experiment in which we asked a sample 717 subjects to design their own individual watch with a toolkit that allowed self-design. Then we compared their willingness to pay for it with their willingness to pay for the 10 bestselling standard designs. Technical quality was identical. You could argue that this is an unfair comparison – after all, the later watches were designed by professionals, and the market has selected them as the most appealing designs. The user designs on the other hand mere pure amateur designs, created in a sketchy 10 minute design process.
Really good new solutions may create enormous value for customers.
– The stunning finding was that on average, user designers were willing to pay more than 100% more than for standards! Of course this example is not really about innovation. But it shows an important pattern of innovation management: really good new solutions may create enormous value for customers.
Which (or which ones) are the most important factors to create an innovative organisation?
– Beyond openness and the ability to integrate user creativity it is a top management that really cares for innovation and helps shaping a climate of creativity among employees. Of course firms also need structured processes and an organization that supports innovation. It is key to balance creativity and stability – of course it is not enough to just have original ideas. They need to be developed, tested, and marketed. But most firms have not problems with stability, their weakness is creativity.