How Do *Your* Customers Innovate?

This article on consumer innovation that appeared in The New York Times over the weekend was fascinating. It points to a new study conducted in the UK on the role customers play in innovation in consumer markets. A key finding was that:

“6.2% of UK consumers — 2.9 million individuals — have engaged in consumer product innovation during the prior 3 years. In aggregate, consumers’ annual product development expenditures are 2.3 times larger than the annual consumer product R&D expenditures of all firms in the UK combined.”

Study author Eric A. Von Hippell, of the MIT Sloan School of Management, said, “We’ve been missing the dark matter of innovation. This is a new pattern for how innovations come about.”

Well, maybe not so new. The NYT journalist, Patricia Cohen, goes on to point out that “The very study of collaborative user innovation is a relatively new phenomenon that began only in the mid-1990s when advocates for open-source software began to argue that computer code should be freely available for thousands of independent minds to play with and improve.” “They overturned the widely held model,” Ms. Cohen quoted Carliss Y. Baldwin, a business administration professor at the Harvard Business School, adding: “What makes Eric’s work so significant is that it is unprecedented to try to measure the extent of user innovation. He shows that we’ve had on a set of mental blinders.”

So now for the first time we have data showing how significant this phenomenon has become in the consumer space, in this era of empowered customers, social co-creation, Empowered HEROes, and the like. But for me, there’s still no space like software to see this phenomenon fully in gear and delivering proven business value:

·         Open source software provides many opportunities for developers to extend or create frameworks that amplify the power of the stack.

·         App stores empower each device customer to “create” their own device capabilities, extending them well beyond anything the original creator of the device could possibly have imagined.

·         Open Web APIs empower web developers with a more flexible and standards-based programming model designed with customer extensibility in mind.

For years Forrester has been following this phenomenon of Innovation Networks: networks that deliver innovation not from a centralized, controlled corporate lab environment but through collaboration on a global scale that brings multiple players together, each playing specific roles. But we are now living in an exciting new phase, in which everyone who delivers business value through software should take a fresh look at this question:

What role can your customers play in innovation in your software value chain?

Do you have any good stories to tell about new ways customers have driven innovation for you?