When we are talking about learning from the outside we can look to various sources of external knowledge. Examples of innovation where companies used outside-inside learning have gained interest of many business magazines and papers. I refer to the Senseo, where two companies combined their knowledge to develop a new coffee-experience; the Swiffer, where P&G collaborated with organizations and individuals around the world, etcetera.

In this topic there are two important questions to answer:

1. what are sources for external knowledge
2. how can companies learn from the outside

Concerning the first question we can learn from the MIT professor Eric von Hippel. In his book “democratizing Innovation” he argues that European companies must learn from customers and lead users. (Interesting: He introduced this topic in 1986!) The European Business Forum has published an interview with him

Innovation becomes democratized, because users of products or services are more and more able to develop the products themselves. To be able to leverage that customer creativity, companies should look at the ‘lead users’, those that are on the leading edge of the market. Companies are now realizing this, and interestingly, even manufacturers who previously said “don’t meddle with our products” are now starting to realize that they can make money from this.

Philips is a practitioner of this concept. They have set up a Dutch website Leadusers.nl, where they periodically collaborate with lead users to identify what new and innovative productsolutions can be offered. Previous research is done on sleepquality and the videophone.

To leverage the knowledge of lead users Von Hippel suggests the following strategy:

1. Develop a user-friendly toolkit for customers
2. increase the flexibility of your production processes
3. carefully select the first customers to use the toolkit
4. Evolve your tool kit continually and rapidly to satisfy your
   leading-edge customers.
5. Adapt your business practices accordingly.

Thomke S and von Hippel E 2002 - Customers as innovators - a new way to
create value, HBR

Funny to see that also Von Hippel has changed his approach to a more customer involved-strategy, compare the 2002 list with his 1986 list:

1. Identify an important market or technical trend;
2. Identify lead users who lead that trend in terms of (a) experience and (b)
   intensity of need;
3. Analyze lead user need data;
4. Project lead user data onto the general market of interest.

Hippel E. von 1986 - Lead Users_ a source of novel product concepts, Management Science

suggested reading:

• Eric von Hippel, Democratizing innovation, MIT Press 2005

This entry was posted on Wednesday, July 19th, 2006 at 11:03 am and is filed under Theory Building blocks, Innovation, Outside-Inside Learning. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.