Here’s a conversation I had with Andy Hargadon, author of How Breakthroughs Happen: The Surprising Truth About How Companies Innovate (I’ve posted on this book before, so background info’s available here, here, here and here):

Renee: Do you have an opinion about the role of consumers in innovation? My company has a consumer panel (screened for creativity and further trained in creativity techniques), which we use for ideation projects. It had not occurred to me to analyze the use of this consumer panel via social network theory, but while reading your book I got to thinking about that.

Our projects are all for consumer products, so using consumers for ideation, especially those screened for past product category usage, makes sense from the point of view that the consumers have both domain relevant knowledge (as potential users of the new product) and have creativity skills. But now I am wondering if we are also getting some benefit from the collection of small worlds the consumers are all from, and the weak ties they have to a number of various groups including our panel.

Andy: Consumers have always played an influential role in the innovation process. Perhaps even the most influential role. The idea of open source innovation that has been popularized with the Linux movement is actually older than most every other model of innovation. Eric Raymond's distinction between cathedral and the bazaar approaches to managing software development is right: With cathedrals representing the large, centrally controlled development projects and bazaars the open source, emergent projects. But the bazaar has been around a lot longer than the cathedral.

Good old-fashioned Yankee ingenuity came mostly from the "open source" nature of the early mechanical equipment used in agriculture and manufacturing. The wheels, gears, cranks, belts, pulleys, sifting, sorting, bundling, bobbing, and weaving were all right out there. If anything broke, workers in the field and factory fixed it — and if they were worth anything, improved on whatever it was that broke. James Watt "invented" the steam engine when he was asked to repair a Newcomen engine and turned it from a single-stroke to a two-stroke piston action. Much of America's rapid advances in industrialization in the 19th century came from these self-taught mechanics who moved from fixing equipment in their small towns to developing their own more radical innovations. Edison learned much of his trade as a telegraph operator and repairman tinkering with the existing equipment. So did Ford, Elmer Sperry, and countless others. That's open source, and that's customer innovation.

Is this bad? It depends on whose perspective you take. McCormick (of the reaper) and many others found that farmers and local craftsmen were knocking off their products (and improving upon them) in ways that both made it hard for them to amass fortunes, but also in ways that rapidly improved on the technologies. Patent and copyright laws protect the first to claim legal ownership, but deny the origins of their work and, as badly, forestall future improvements by others. Witness the digitally-improved but unauthorized version of Star Wars, Episode One which removed 20 minutes of the annoying Jar Jar Binks - Lucas and Company moved quickly to shut down the offending site but I, for one, would rather have seen the open-source version. Would Windows still be what it is if frustrated users everywhere could have made countless small changes to it?

The trick is, of course, finding that balance between neither shutting down such customer innovation nor trusting in it completely. In the first case, by holding too tightly to a new product or service you can easily miss the unexpected opportunities that others see in the technology. Prodigy, in the late 1980s, could have become America Online had they recognized that their customers, who were more interested in emailing each other than buying online merchandise, were right. Instead they insisted on hewing to their own vision and ignoring valuable customer input. In the second case, the open source movement is famous for not financially rewarding original developers. This is understandably a hard model for companies to pursue.

So how can companies involve users in the innovation process a la open source, but retain control in the process? Eric von Hippel, of MIT, has talked about the importance of identifying lead users - those customers who are pushing the boundaries of your products. These lead users can be great resources for identifying ways to improve the technology or enter new markets. This can take place in the development process, through intense involvement with lead-user customers in the generation of novel products. But it can also happen in the field, through ongoing relationships with users. Rather than trying to be the first to introduce a new product, this latter strategy means being the first to improve on the innovation - because someone will. Companies can use the development process, and the first releases of a new product to forge close relationships with customers who can help them identify ways to improve their own offerings. In this way, customers are helping with the generation of innovations, but they are doing so with something real in their hands, on their screens, etc... and so can make much more informed and practice-driven suggestions.

Inherent in this strategy, however, is the assumption that the first product introduced is not the right one but that it has given the company a head start over others in learning what the technology can do and what the market wants it to do. As Raymond says of open-source software development, "given enough eyeballs, all bugs are shallow." With enough people using a new technology, the chances increase dramatically that someone out there will have an easy but powerful idea for improvement - but only if they can get at the underlying technology, learn about it, see it in action, and experiment with it. The Model T was designed to be maintained with a screwdriver and a paint scraper (to clean the soot off the pistons). The original operating systems were open to everyone to hack and improve. Try that with a modern engine or modern OS.

How can your company exploit its connections to customers (and from the sounds of it, the kinds of customers who are often lead-users) to involve them in the initial and ongoing generation of innovation?

Renee: In a social network sense, our consumer panelists can serve as connectors between small worlds, with those of us who work with the panel serving as facilitators that make the actual bridge (at least, if we do our part right). We had not really thought of our panelists as lead users…but in a sense, that’s exactly what they are. Here’s a definition I found of von Hipple’s lead users: "Lead users are potential customers have essentially been dissatisfied with currently available products, but need a product to solve their problem. Lead users then develop their own solutions (i.e., product)."

All of our panelists have what we call “idea-centric creativity,” the ability to come up with new product ideas. This would, I think ,be a characteristic of the lead user, too. I believe the main difference is that for any given project, we select panelists with some level of relevant product-category experience. We wouldn’t put together a group of people who only have experience with the specific product our client makes (as the true lead user would). For us, that’s too close-in for true inventive recombination. Panelists with product category experience, though, along with their idea-centric creative skills, are able to come up with the most relevant ideas. Another approach is to mix our consumers with a company’s lead-user customers and/or internal R&D people, so that the product knowledge of the one group plays off the creativity skills of the other.

So in a sense you could describe what we would do as setting up an opportunity for our panelists to act as lead users, to generate the kind of ideas you would get from lead users.