Lead Users vs. Lead Customers and the Role of Toolkits

I recently had the honor to meet with Eric von Hippel. Eric is the Head of the Innovation and Entrepreneurship Group at the MIT Sloan School of Management and the author of "The Sources of Innovation" and "Democratizing Innovation."

I wanted to be sure that I clearly understood Eric's concept of "lead users" and to discuss with him my contention that lead users are often your "lead customers." He disagrees with my contention. Lead users may not be your customers, Eric explains, because they’re the people who couldn’t find the product or solution they needed from your firm (or any others), so they designed their own solutions.

Of course, Eric identified "lead user innovation" and has studied it deeply for more than two decades. As I understand Eric's distinction, lead users would have been your customers if you had a solution that worked for them. But you may not. So they’ve gone elsewhere and designed their own successful solutions. Lead users may be your early adopter customers—the ones who really push the envelope. But they also include people who probably aren't currently on your radar. "Lead users are a much broader category than customers of a specific firm," Eric explains in "Democratizing Innovation." "Lead users that generate innovations of interest to manufacturers can reside…at the leading edges of target markets, and also in advanced analog markets". Analog markets are fields that may be adjacent to yours, but which you don't currently serve (and may not intend to serve), but which you can learn from.

I believe one of the main points Eric is making is that you will have a much higher success rate in innovating new products or processes if you discover products or processes that lead users have already invented (as opposed to trying to invent de novo in your labs). Then you can commercialize those user-led innovations and know that you're meeting a real customer need (assuming that this lead customer represents more than a market of one).

One of the best mass-market examples of harnessing "lead user" innovation in an analog market (one that you’re not currently serving) is Apple’s commercialization of the iPod/iTunes combination. Apple was in the computer business, not the music business, and really not in the consumer electronics business at the time it introduced the iPod.

The practices of downloading music by the track, creating digital playlists, swapping both playlists and tracks of music, and creating customized radio programs were all developed and socialized by lead users. These lead user patterns were so obvious that I chronicled them in my book, "The Customer Revolution," which was published in the spring of 2001. Apple’s first iPod wasn’t announced until October 23, 2001. Apple’s iTunes music store wasn’t unveiled until April 28, 2003. I don’t know whether Steve Jobs read my book. But he was certainly tuned into the same patterns that I was seeing.

Perhaps because Apple wasn’t in the music industry, it was easier for Steve to see these patterns and to figure out how to commercialize them than it was for those entrenched in the music biz. Steve’s major "innovation" was coming up with a business model and selling it to music studios: selling music for 99 cents a track, letting users move their music from their iMacs or PCs to their portable players, yet preserving copy protection, so they couldn’t share tracks with thousands of others for free. Lead customers came up with the notion of "podcasting"—simply migrating or extending the behavior they had already been doing in creating personal radio programs and making it easier for customers to download and carry them around.

Another one of Eric von Hippel’s key insights, and one that I agree with based on our own 25 years of experience working with customers, is that it is often very difficult and costly (using traditional market research and/or one-on-one customer visits) for any company to truly understand each customer’s context and constraints, deep knowledge of her domain, and the real result she wants to achieve. Yet without that knowledge, you can’t harness customer innovation. You may have deep knowledge of the solutions you offer. But it’s difficult to have deep enough knowledge of your customers’ domain space to cost effectively co-create with them. You’re better off, according to Eric, giving customers the tools to capture their own domain knowledge and design their own solutions.

Customers create new solutions in order to accomplish their desired outcomes. We call that combination of deep customer context, conditions of satisfaction and desired outcomes, and the ideal experience and results that customers design, a Customer Scenario®. Eric is skeptical that you could garner enough customer context, customer knowledge and that you could co-design actual solutions using our Customer Scenario® Mapping technique to actually innovate (of course he hasn’t experienced such a session). In listening to me describe a typical Customer Scenario® Mapping engagement, he saw it as "a good form of market research," but not a way to truly tap into lead user innovation. For that purpose, he prefers the approach of providing toolkits that lead users can use to design their own solutions. Of course, I believe that there’s a place for both approaches, as part of the portfolio of approaches and tools you’ll be using to tap into customer-led innovation.

I agree with Eric that toolkits bridge the gap perfectly between your company’s deep solution knowledge and domain expertise, and your customers’ deep problem space knowledge and domain expertise. If you can furnish toolkits to your lead customers that enable them to create innovative new solutions, you are correctly partitioning the product development job—the customer creates what they know and care about, the company supplies their domain expertise as well as the ability to produce, manufacture, and supply the customers’ creation. Once you’ve provided toolkits to lead users, they’re no longer lead users, they have now become lead customers—you know who they are and they’re using your tools.

Eric and I both agreed that the way in which Lego recently involved a dozen of its lead customers in a Mindstorms User Panel for a year to co-design the next generation Mindstorms NXT product is a great example of user-led innovation. These lead users/customers were selected because they were the most advanced users of Lego’s first-generation Mindstorms robotics software.

As we move towards more and more mass customization, and experience a marketplace consisting of the "Long Tail" (as coined by Wired’s Chris Anderson,) of millions of highly-specialized applications, the more important it is going to be to have:

1. tools that lead customers can use to design their own solutions as well as,
2. recognition, reputation-building among their peers, deep listening, and engagement by subject matter experts in your company and,
3. community involvement and other incentives to encourage them to share their innovations with others.

Of all the companies I’ve researched to-date for my book, the one that stands out as having learned how to harvest customer-led innovation the best is National Instruments. For 20 years, lead customers have been using NI’s LabVIEW graphical design tools to develop solutions for a huge range of problems in hundreds of industries. Even more impressive are the ways in which National Instruments has built and sustained its community, the number of inventions that the customer community gives back to other members, and the vibrant ecosystem that surrounds it. I was delighted to discover that LabVIEW software is the toolkit that Lego picked back in 1998 to co-design the software—Robolabs—that powers the educational version of its original Mindstorms product. Then, LabVIEW was selected "over a company in Redmond" as the single platform upon which the second generation of Mindstorms, Mindstorms NXT, is based.

You’ll be reading my case studies about both companies soon in my book, Outside Innovation.

[post updated 2.23.2006 7:48pm for "cut and paste flub"]

Comments

[Zu'bi]

Hi Patty,
It seems my last post was not successful. I have a question to ask? When you talk about Lead Users vs Lead Customers do you included corporate Users/Customers? It seems that the only dimension of compariosn is the final customers here, wouldn't corporate Lead Users be beneficial in this comparison? or is there no such thing as Corporate Lead Users?

Many thanks Patty, I sincerely enjoy your blog.

Zu'bi Al-Zu'bi
Durham University Business School
Durham

[Dana Richardson]

Hi Patty- Have been away for a while doing a little developing of my own, it feels good to be back, your intellectual center is like a breath of fresh air. Patty this idea of lead user innovation is fascinating. My thought is to wonder if when approaching to the situation of the market - what assigns pricing? .99 for a piece of downloadable seems arbitrary? If it is, I'm certain Jobs researched it thoroughly befor assigning it, but if its not, then my question would be something about marketing costs and how such might be established. ---Yes as you might guess...I'm fishing here...have you looked at
http://www.eLance.com? Sort of an odd place...but it seems to be working? - Thanks for you bringing to us such fascinating material.
- Dana

[Patty Seybold]

Hey Matt,
Thanks for the pointer. I'd love to chat with you about your innovation toolkit and some of the results you've seen. And how you've been able to fold these back into services you can use..

I'd love to be a fly on the wall for your second venture as well...

Let's set up a time to chat...

Patty

[Matt Locke]

Hi Patty,

You might be interested in the open innovation projects we're developing at BBC New Media in the UK. I've long been a fan of Eric Von Hippel's ideas on user innovation, and we launched our own 'toolkit' environment last May - http://backstage.bbc.co.uk

Backstage provides RSS feeds of BBC news, weather and other content, and encourages lead-users to 'build your stuff with our stuff'. The resulting ideas and prototypes are hosted on users sites, but linked to from the backstage site. We've see a huge number of prototypes generated by this community, and we're starting to go out to the developers and commission some of the prototypes into full services. We're also experimenting with design challenges on the site (eg a recent competition to 'hack the tv schedule').

The main driver for launching backstage was the recognition that users were hacking their own services using our content anyway, and that we should embrace this and provide the tools to make it easier, rather than rty and stop it. We're also developing other open innovation projects to increase the number of ideas we get from outside the BBC. The second of these - Innovation Labs - is aimed at independent New Media companies in the UK, and we're just about to go into 3 weeks of rapid prototyping with teams selected through this process. The innovation Labs site is at http://open.bbc.co.uk/labs

It'd be good to know whether these projects have parallels in the case studies for your book - looking forward to reading it!

matt

[Patty Seybold]

Received this note from Eric von Hippel--

Hi, Patty - thanks for the interesting comments in your blog - very glad
our information is useful to you!!

I forgot to mention that I learned interesting things about your vs my approaches by reading your blog entry - very clearly done - thanks!!

Eric