Open innovation versus user-driven innovation: Lego and Toyota cases
I recently had a discussion with a senior leader at a global fast-moving-consumer-goods company. We got into definitions of open innovation versus user-driven innovation. What are the similarities and the differences?
I am sure I will have such talks many times as open innovation starts to take off in the next few years. In such cases, you should not get too tied to your own viewpoint as you will often end up in a situation where both parties can be right to some extent. Stay flexible and try to move things forward rather than getting bogged down in a fight over semantics.
I believe the differentiator is the level of involvement you get from external partners, customers or suppliers. What usually happens with user-driven innovation is that you seek and get a feedback tool that helps you listen to customers or partners. You primarily use it in the early idea-generating phases and later as you set up a feedback loop. But you still turn the idea into a business almost entirely through your internal innovation capabilities.
It becomes open innovation when you not only get ideas from external sources but also let external sources become key players in the process of turning ideas into a business. You can get an overview of the similarities and the differences by looking at a couple of projects at Lego.
Adult fans of Lego start companies
LEGO Mindstorms: LEGO Mindstorms is a line of Lego sets combining programmable bricks with electric motors, sensors, Lego bricks, and Lego Technic pieces (such as gears, axles, and beams). It is a huge hit and early-on adult fans of Lego (AFOL’s) were invited to help develop new designs and uses for Mindstorms. Nevertheless, Lego still controls the value chain almost 100%. This is changing as some AFOL’s have started their own companies and have begun working with Lego in a more formal manner. I think this is a good example of user-driven innovation that – however – is getting closer to open innovation.
LEGO Architectures: On July 14th, 2008, Lego announced a partnership with Brickstructures, Inc. which is a privately held company established to promote the use of LEGO Bricks in relation to architecture. The idea is to offer a line of famous landmarks from around the world celebrating influential architects and movements that have shaped cities and cultures. With models developed in collaboration with architects, LEGO Architecture will work to inspire future architects, engineers and designers around the world with the LEGO brick as a medium. Brickstructures bring the knowledge of architecture to the table. This is key input to the joint venture.
Could Lego build this knowledge by themselves? Probably. But instead they decided to apply open innovation principles making it possible to reap benefits such as:
• speed up the development of the new products and thus increase revenues and market share
• shorten time to market for the new products and accelerate profits
• reduce direct spending on the development costs (idea generation as well as future development)
• improve the success rate of the new line
Why not innovate with Toyota?
Toyota recently launched an initiative that provides another good case for what user driven innovation is. Check out www.toyota.com/whynotinnovate. I find the contest quite interesting, but it is clearly a tool for generating new ideas. It is not designed as an open innovation invitation to partners. Sure, Toyota has open innovation initiatives, but not this one.
Wikipedia definitions
You should also check out the Wikipedia definitions for user innovation and open innovation:
User innovation: User innovation refers to innovations developed by consumers and end users, rather than manufacturers. Eric von Hippel of MIT ‘discovered’ that most products and services are actually developed by users, who then give ideas to manufacturers. This is because products are developed to meet the widest possible need; when individual users face problems that the majority of consumers do not, they have no choice but to develop their own modifications to existing products, or entirely new products, to solve their issues. Often, user innovators will share their ideas with manufacturers in hopes of having them produce the product, a process called free revealing.
Open innovation: The central idea behind open innovation is that in a world of widely distributed knowledge, companies cannot afford to rely entirely on their own research, but should instead buy or license processes or inventions (e.g. patents) from other companies. In addition, internal inventions not being used in a firm’s business should be taken outside the company (e.g., through licensing, joint ventures, spin-offs). In contrast, closed innovation refers to processes that limit the use of internal knowledge within a company and make little or no use of external knowledge.
Stephan, I like your comment that one should not get hung up on semantics and instead work on understanding each other, because often there are valuable ideas all around. Yet sometimes there is value in clarifying what one means when using a term because companies have internal language where a common word takes on special specific meanings in that company. Another situation which is the one I think you are addressing, is the same word or phrase can mean different things to people from different companies (or universities).
With respect to user-driven innovation and open innovation, in general most who say user-driven innovation are referring to an innovation process which includes user input, as you said. Open innovation most often refers to the members of the innovation team, who are from different organizations, usually different companies, industries and/or universities. I don't think they're exclusive of each other. A project can have both, one or the other, or neither. Best practices seem to lean towards having both.
Stephan, open innovation, as I understand it based on its original description, refers to innovation that is achieved via an innovative network of partners/suppliers that is usually purposefully initiated and orchestrated by the main producer(s) of innovation. Thus I think that the main differences between open vs. user-driven innovation are:
Partners in open innovation do not have to be users of the innovation.
Users are essential for input/initiating the user-driven innovation, although may not get involved in making innovation happen (later steps). Although naturally the producers have to be "open" to receiving and acting upon input.
However, one may argue that a name as "open" innovation should be well… open: might include any format that goes beyond the boundaries of a single organization.
Although in the case of this model of Open innovation the user is of course the initiator and the focus point of the supply network – e.g. the car manufacturer.
Hi Stephan
Like some of the other commentors, I agree that it is not helpful to get hung-up on semantics. Companies do though, so it is useful to have an understanding of the differences between different types of innovation and when they should be used. No one single way of innovation, whether internal R&D, lead-user, open or even crowdsourced (as an extreme form of open innovation) or anything else come to that is enough by itself to be successful. All types need to be mixed and matched to the innovation job in hand; innovating products, services experiences, capabilities or business models.
For me the key difference is not so much who is involved but how they go about finding innovations. If we take the innovation fitness landscape as a starting point, there are obviously some peaks on the landscape where innovation is greater and is more successful in the market. The job of the corporate innovator is to find those peaks. That's where success lies. (This contrasts with the job of the inventor, which is not related to success, or at least not in a structured way.)
Lead-user innovation suggests that customers who are pushing the boundaries of innovation (producing new mashed-up products which help them get important jobs done better) is the best way to look for the innovation peaks. It assumes that customers are actively innovating and gives them toolkits to help them do so. This can be very successful as von Hippel and others show. And many companies are successful with lead-user innovation. But I have some problems with the assumption that customers are covering all innovation peaks. There just aren't enough customers. And customers tend to solve problems using common information in similar ways, which would lead to clustering around a few of the many innovation peaks. I haven't seen lead-user innovation used much for capability or business model innovation either.
In contrast to this bounded search, open innovation suggests that outsiders are already investigating all the innovation peaks, or at least could be co-opted to do so. It typically provides them with problems to be solved and lets outsiders get on with the job of finding innovative solutions themselves. Sometimes outsiders are as committed to finding a solution as lead-users are, but more often than not they are not. They are just outsiders searching the innovation landscape. As Chesbrough and others show, this too can be very successful. It has helped many companies to find solutions to problems that they simply couldn't have found themselves, irrespective of how many employees they have. But it comes at a cost. Managing disparate groups of outsiders or letting them manage themselves is expensive. Ideas have to be packaged so that outsiders can understand them. They have to be presented to outsiders and solutions gathered. And then there are IP issues to be overcome. And there is no guarantee that al the innovation peaks are being covered either. Nor that the solutions actually help solve problems that customers actually have and where they need help that they are willing to pay for.
Lead-user and open innovation are both valuable tools in the innovators armoury. But they are just that; tools. They are not the be-all and end-all. It is all too easy to get hung up on the semantics and to forget that the purpose of innovation is actually to provide new products that satisfy customers unmet needs and your commercial objectives.
Graham Hill
Customer-driven Innovator
[...] http://stefanlindegaard.com/2009/01/26/open-innovation-versus-user-driven-innovation-lego-and-toyota… [...]