[ox-en] Innovation by User Communities: Learning From Open-Source Software
- From: Stefan Merten <smerten oekonux.de>
- Date: Sat, 08 Sep 2001 23:37:47 +0200
Hi lists!
Yesterday Stefan Merten wrote:
Last week (9 days ago) Robert Gehring wrote:
Leider gibt es im Netz nur den Abstract, den ganzen Artikel müßte man
käuflich erwerben ($15+S&H+customs, wenn ich es richtig gesehen habe). Aber
vielleicht interessiert auch der Abstract den einen oder die andere.
Published in the "Sloan Management Review".
Ja, klingt ziemlich interessant - auch (oder gerade?) wenn die Quelle
eher Buisness-orientiert ist. Ich versuche mal per eMail den Artikel
vom Autor zu bekommen.
Which I did immediately:
Yesterday Stefan Merten wrote:
I read the abstract of your article in the "MIT Sloan Management
Review" on their web site and found it pretty interesting.
I'm involved in the (German) Oekonux Projekt (http://www.oekonux.de)
discussing the possible impacts of the principles of Free Software on
society. The aspect you focus in your article is one of many
interesting aspects in this regard.
Is it possible, that you send me your article by e-mail? If so, may I
distribute it to the German mailing list to discuss this further? I
could ask people to comment in English so you may participate in the
result if any.
And got an immediate positive result :-) :
Today Eric von Hippel wrote:
Happy to have you do that. Article attached.
So, if you respond please use English if possible and add
evhippel mit.edu
to the `Cc:'.
Please note the seemingly interesting web sites he included in his
signature:
http://mit.edu/evhippel/www
http://opensource.mit.edu
So here is the article (read while transcribing it from a PDF by hand,
so any errors are mine).
Mit Freien Grüßen
Stefan
--- 8< --- 8< --- 8< --- 8< --- 8< --- 8< --- 8< --- 8< --- 8< --- 8< ---
Innovation by User Communities: Learning from Open-Source Software
Creating complex products with limited manufacturer involvement is a
growing phenomenon occurring in markets as diverse as windsurfing gear
and open- source software.
Eric von Hippel
Imagine product development without manufacturers. Today's user
innovation communities are making that idea increasingly real.
Open-source software projects, among others, have led to innovation,
development and consumption communities run completely by and for
users. Such communities have an advantage over the
manufacturer-centered development systems that have been the mainstay
of commerce for hundreds of years. Each using entity, whether an
individual or a corporation, is able to create exactly what it wants.
It need not rely on a manufacturer to act as its agent. Individual
users in a user innovation community do not have to develop everything
they need on their own but can benefit from others freely shared
innovations.
Examples of User Innovation Communities
User innovation communities existed long before the advent of
open-source software and extend beyond it. They are not limited to
information products such as software code. Some develop physical
products. Consider and compare two examples of early-stage user
innovation communities - one in software, the other in sports.
Apache Open-Source Software
Apache open-source software is used on Web server computers that host
Web pages and provide appropriate content as requested by Internet
browsers. Such computers are the backbone of the World Wide Web.
The server software that evolved into Apache was developed by Rob
McCool (at that time a University of Illinois student) for, and while
working at, the National Center for Supercomputing Applications
(NCSA). The source code as developed and periodically modified by
McCool was posted on the Web so that users at other sites could
down-load, use, and further modify and develop it.
When McCool departed NCSA in mid-1994, a small group of webmasters who
had adopted his server software for their own sites decided to
continue developing it. Eight users gathered all the documentation and
bug fixes and issued a consolidated patch. This patchy server software
evolved over time into Apache. Extensive user feedback and
modification yielded Apache 1.0, released on Dec. 1, 1995.
After four years and many modifications and improvements contributed
by many users, Apache became the most popular Web server software on
the Internet, garnering many industry awards for excellence. Despite
strong competition from commercial software developers such as
Microsoft Corp. and Netscape, it is currently in use by approximately
60% of the millions of Web sites worldwide.
High-Performance Windsurfing
High-performance wind-surfing, the evolution of which was documented
by MIT doctoral candidate Sonali Shah in a March 2000 MIT Sloan
working paper (http://opensource.mit.edu), requires gear suitable for
midair jumps and turns. Previously, windsurfers used their boards
essentially as small, agile sailboats, and the boards specifications
reflected that.
The fundamentals of high-performance windsurfing were developed in
1978 in Hawaii by users. Larry Stanley, a pioneer in the sport,
explained to Shah how a major innovation in technique and equipment
came about.
"In 1978," Stanley recalled, "Jurgen Honscheid came over from West
Germany for the first Hawaiian World Cup and discovered jumping, which
was new to him, although Mike Horgan and I were jumping in 1974 and
1975. There was a new enthusiasm for jumping, and we were all trying
to outdo each other by jumping higher and higher. The problem was that
... the riders flew off in midair because there was no way to keep the
board with you - and as a result, you hurt your feet, your legs and
the board.
Then I remembered the `Chip,' a small, experimental board we had built
with foot straps, and thought, `It's dumb not to use this for
jumping.' That's when I first started jumping with foot straps and
discovering controlled flight. I could go so much faster than I ever
thought and when you hit a wave it was like a motorcycle rider hitting
a ramp; you just flew into the air. All of a sudden not only could you
fly into the air, but you could land the thing and not only that, but
you could change direction in the air!
The whole sport of high-performance windsurfing really started from
that. As soon as I did it, there were about 10 of us who sailed all
the time together, and within one or two days there were various
boards out there that had foot straps of various kinds on them and we
were all going fast and jumping waves."
By 1998 more than a million people were engaged in windsurfing, and a
large fraction of the boards sold incorporated the user-developed
innovations for the high-performance sport.
Both user innovation communities have evolved and become more complex.
Although they look different on the surface, they are similar in
fundamental ways. Both grew to include many thousands of volunteer
participants. Participants in open-source software projects interact
primarily via the Internet, using various specialized Web sites set up
by other volunteer users. (See "Free and Open-Source Software.")
Participants in innovating sports communities tend to interact by
traveling to favorite sites and contests for their sport. Most users
of open-source software simply use the source code, relying on
interested volunteers to write new code, debug existing code, answer
requests for help posted on Internet help sites, and help coordinate
the project. Similarly, as Shah and Nikolaus Franke show in an April
2001 MIT Sloan working paper, most participants in an evolving sport
simply play the game, relying on those so inclined to develop new
techniques and equipment, try out and improve on innovations,
voluntarily provide coaching and help coordinate group activities such
as meets.
Often, commercial enterprises attach to or complement user innovation
communities. Red Hat and VA Linux Systems are well-known examples of
commercial involvement in the open-source software context;
professional sports leagues and commercial producers of sports
equipment are examples in the case of sports communities.
User Innovation Communities Shouldn't Exist, But They Do
Manufacturers, not users, traditionally have been considered the most
logical developers of innovative products for two reasons. First, the
financial incentives have seemed higher for manufacturers than for
users. After all, a manufacturer has the opportunity to sell to all
users what it develops. Individual user-innovators, on the other hand,
typically can expect to benefit financially only from their own use of
their innovations. In order to benefit from diffusion of an innovation
to the other users in a marketplace, innovating users would have to
obtain intellectual-property protection and set up licensing
arrangements - costly endeavors with uncertain outcomes.
Second, manufacturers, through their production, distribution and
field-support capability, appear to have an edge in getting widespread
diffusion of an innovation. Such tasks involve large economies of
scale for physical products. How could users accomplish them as
cost-effectively as manufacturers? One might imagine users uniting in
a fit of passion - such as the indignation many computer hackers feel
toward Microsoft. But as a stable part of an ordinary economic
landscape? Never!
Yet, impossible or not, user communities clearly do innovate.
Moreover, when products they develop compete head-to-head against
products developed by manufacturers - Apache against Microsoft's and
Netscape's server software, for example - the former seem capable of
beating the latter handily in the marketplace. Not only do the
communities exist, they even triumph. As Galileo is said to have
murmured after officially recanting his statement that the earth moves
around the sun: "And yet it moves!" What is going on?
Conditions That Favor User Innovation Communities
User communities engaged in innovation, development and consumption
are most likely to flourish when three conditions are met: At least
some users have sufficient incentive to innovate; at least some users
have an incentive to voluntarily reveal their innovations and the
means to do so; and user-led diffusion of innovations can compete with
commercial production and distribution. When only the first two
conditions hold, a pattern of user innovation and trial will occur,
followed by commercial manufacture and distribution of any innovations
proven to be of general interest.
Incentives for Users To Innovate
Users have sufficient incentive to innovate when they expect the
benefits of innovating to exceed their costs. Many users engaged in
the development of open-source software and novel sports equipment
consider that condition to be met. The costs incurred by innovating
users, many of whom report enjoying as well as benefiting from their
efforts, can be extremely low or even negative. Empirical research
documents that user innovation exists in many fields and is
concentrated in the most advanced and motivated lead-user segment of
the user community. My 1988 book, "The Sources of Innovation," showed
that such was the case for industrial products and processes, and
recently it has been shown to be true for consumer products as well.
As Christian Luthje reported in a 2000 University of Munich working
paper, 10% of German lead users of outdoor consumer-sports equipment
actually improved their equipment or created entirely new equipment.
With hundreds of thousands of such users in Germany, there is a
tremendous amount of user innovation in that category alone.
Consider the saying "If you want something done right, do it
yourself." In the case of product and service development, the adage
holds true for users in part because a manufacturer cannot know what
users want as well as they themselves do - and in part because, even
knowing exactly what users want, the manufacturer lacks the incentive
to match their wishes in every detail.
New-product developers must have accurate information on users' needs
and the context of use if they are to create products that will meet
those needs precisely. Such information is generated at user sites,
but it is typically "sticky": costly to transfer from users' sites to
outside developers. (For example, the conditions that cause software -
or jumping windsurfers - to crash are available for free at the site
of a user with the problem but can be difficult to reproduce
elsewhere.) Also, because users' needs and habits constantly change,
the necessary information cannot be transferred to manufacturer-based
developers all at once. Rather, it evolves at the user site as the
user experiments with prototype innovations. Recall that the
windsurfers discovered that they could control the direction of a
board when it was in the air only *after* they began experimenting
with their prototype foot straps.
Manufacturers are the agents of users with respect to new products and
services. It is their job to develop and build what users want and
need; they do not want the products for themselves. If manufacturers'
incentives don't match those of users, users end up paying an "agency
cost" when they delegate design to manufacturers. That agency cost
often takes the form of products not being the best possible fit with
users needs. Manufacturers want to spread their development costs over
as many users as possible and hence design products that are a close
enough fit to induce purchase from many users. One can see that
incentive at work in the users' groups manufacturers set up to get
advice on desired product improvements. At group meetings,
manufacturer representatives seek specifications for new products that
many user-members would find acceptable and commonly urge them to make
"really difficult compromises."
Manufacturers explain that they cannot afford to design and build a
product unless many users will buy it: a view that is reasonable but
likely to retard innovation. As research shows, innovations that only
a few leaders use today may be in general demand tomorrow -
particularly if lead users have a chance to innovate, to learn by
doing and to develop the general utility of their innovations.
Incentives for Users To Reveal Innovations Freely
Progress and success in user innovation communities is contingent on
at least some users freely sharing their innovations with others.
Without that, each user would have to develop the innovation anew,
which would create a huge system-level cost, or else innovators would
have to protect and license their innovations and collect revenues,
burdening user communities with high overhead.
Research has shown that users in a number of fields do freely reveal
details of their innovations to other users and even to manufacturers.
Users in open-source software communities post improvements and code
on project Web sites, where anyone can view and download them for
free. Free revealing is also present in the sports innovation example:
Innovating users gather on the beach, inspect one another's creations,
and imitate or develop additional modifications that they, in turn,
freely reveal.
How are we to understand free revealing? It does not make conventional
economic sense. In theory, innovating users should attempt to keep
their innovations secret. After all, innovating users spend money and
time to create their innovations, and revealing them without
compensation to noninnovating users, either directly or via a
manufacturer, should represent a loss.
Users will reveal innovations when their benefits outweigh their
costs. In the case of user innovation communities, the costs of
revealing are generally low. In a July 2000 MIT Sloan working paper,
Dietmar Harhoff and colleagues identified two kinds of costs
associated with revealing an innovation: the cost associated with the
loss of proprietary intellectual property and the cost of diffusion.
Innovating users generally will expect intellectual property losses to
be low if their rivalry with potential adopters is low. (Thus town
libraries share information freely because they serve different
populations, do not seek to gain market share from one another and
have little rivalry.) Even rivals who would prefer not to reveal an
innovation will do so if they expect that others will reveal it if
they do not, as K. Lakhani and I demonstrated in a May 2000 MIT Sloan
working paper. That belief is held by many open-source software
project participants. Also, users that cannot hide their innovations,
such as high-performance windsurfers experimenting on the open beach,
must reveal them.
When the costs of freely revealing an innovation are low, even a low
level of benefit can be adequate reward. Various researchers,
including Josh Lerner and Jean Tirole (in a March 2000 working paper
for the National Bureau of Economic Research) and Georg von Krogh (in
a spring 1998 California Management Review article) have observed that
adequate rewards may include improved reputations, expected
reciprocity and helping to build a community.
Innovation Diffusion by Users
Full-function communities in which users actually produce their
innovations, bypassing manufacturers, can exist only when user
manufacture and distribution can compete with commercial production
and distribution. In the case of open-source software, innovations can
be produced and distributed essentially for free on the Web because
software is information rather than a physical product. In the case of
the sports innovation example, however, innovations in equipment are
embodied in a physical product that requires physical production and
distribution and involves economies of scale. The result for physical
products generally is that innovation can be be carried out by users
and within user innovation communities, but production and diffusion
of products incorporating those innovations is usually handled by
manufacturing companies. (See "Methods of Distributing User
Innovations.")
Ongoing Exploration of User Innovation Communities
The advent of the World Wide Web and the consequent proliferation of
open-source software development projects has led to a growing
academic focus on the phenomenon of user innovation communities in
general and open-source software in particular. Thousands of
open-source software projects provide natural laboratories for
studying the phenomenon. Areas of interest include the conditions
under which open-source software projects are likely to succeed, how
they can be managed most successfully and what attracts volunteers.
Our understanding of such issues is expanding daily.
However, the phenomenon is changing even as we study it. The rationale
for user innovation, followed by manufacturer production in the case
of physical products, is compelling, and joint user-manufacturer
innovation models are evolving rapidly. An example I explore in the
summer 2001 Journal of Product and Innovation Management comes from
the field of custom integrated circuits. Customers are provided with
tool kits that allow them to make innovations. Each year, thousands of
customers use such tool kits to design billions of dollars' worth of
custom circuits that are both precisely suited to their needs and
easily producible in manufacturers' facilities.
But what is most exciting is that innovation communities composed of
users and for users, communities that according to traditional
economic views shouldn't exist, work well enough to create and sustain
complex innovations without any manufacturer involvement. This means
that in at least some, and probably in many, fields users can build,
consume and support innovations on their own. As we learn to
understand such communities better, we will be in a position to
improve them and systematically extend their reach and attendant
advantages throughout the economy.
Eric von Hippel is a professor at MIT Sloan School of Management.
Contact him at evhippel mit.edu.
Reprint 4248 Copyright 2001 by the Massachusetts Institute of
Technology. All rights reserved.
Graphic
Methods of Distributing User Innovations
For information products,general distribution within and beyond the
user community is carried out by the community itself - no
manufacturer required.
Innovating lead users => User community
For physical products,general distribution typically requires
manufacturers.
Innovating lead users => Manufacturer => Routine user
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