Democratizing Innovation – A conversation between OpenBusiness and Eric von Hippel

Eric von Hippel, a professor at the Massachusetts Institute of Technology (MIT), focuses his research on developing strategies to identify new ideas and innovations systematically and quickly. His book Democratizing Innovation has documented how the internet and improvements in computing have changed the innovation process. Now users have much more power. To understand the effects of his ideas OpenBusiness has spoken to von Hippel.

OB: What do you mean by Democratizing Innovation?

Eric von Hippel: I mean that users of products and services—both firms and individual consumers—are increasingly able to innovate for themselves. It gives more power to users and these user-centered innovation processes offer great advantages over the manufacturer-centric innovation development systems. Those have been the norm for hundreds of years. Now innovation can happen in a much more decentralized way from the bottom up.

OB: This sounds great for consumers and small time entrepreneurs, but what makes it possible?

Eric von Hippel: Sophisticated design tools are far more widespread, less costly and easier to use. By and large the vast improvements in computation has been the driving force. And most importantly the increasing communication between users, because of the internet, has made it much easier to share knowledge and drive innovation.

OB: Do you think Intellectual Property laws as they are block innovation?

Eric von Hippel: Certainly. Property owners will try to control the process and block everything that threatens their business models. But free materials will increasingly become an effective competitor for non-free materials and content.

OB: How does this change businesses and business models?

Eric von Hippel: Well, users have a natural advantage in the innovation process. They know what they need and can distribute their ideas much more effectively than large corporations. You know there is a general rule – markets start small – therefore corporations tend not innovate at the cutting edge of social and commercial demands. Manufacturers tend to concentrate on markets they like and understand. And they had no real access to users and their demands. Innovations therefore were quite often not need-oriented. Now users can connect, debate their needs and create solutions in a much more seamless way. Businesses in this environment need to be far more connected to their users and integrate them directly in the innovation process.

OB: In your book you highlight that the modus operandi of businesses is changing and give as an example Open Source development. And even though it seems a great example of democratized innovation the question remains how business models work, if the core product – software – is distributed for free. What will drive innovation in this space?

Eric von Hippel: I think in the first place motivations are non-commercial. Users who innovate do so basically because they have a need that they cannot fill with available commercial products. Their major reward is the in-house use of what they have developed and recognition by their peers. Innovators in the open-source field gain reputation by publicly reporting their innovations. Its true the core product is free, but its wrong to assume that this means there is no economic activity. Just look at the case of the Apache server, which is used by major corporations. They pay developers to participate in the process, because they benefit from the product. To put it differently: economic activity moves from the Microsoft layer – controlling every step in the development and distribution process in a closed way – to the Open Source or Linux layer. It is still economic activity, just the business models are different.

OB: This is why we started OpenBusiness – to collect and analyze these business models, which span far beyond software production. At the same time we believe that documenting key features of open business models for, lets say, recording labels, will foster innovation in this space.

Eric von Hippel: Good luck with that…..

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