Innovation moves from the laboratory to the bike trail and the kitchen.

The New York Times, "Economic Scene" , April 21, 2005

WHEN most people think about where new or improved products come from, they imagine two kinds of innovators: either engineers and marketers in big companies trying to "find a need and fill it" or garage entrepreneurs hoping to strike it rich by inventing the next big thing.

But a lot of significant innovations do not come from people trying to figure out what customers may want. They come from the users themselves, who know exactly what they want but cannot get it in existing products.

"A growing body of empirical work shows that users are the first to develop many, and perhaps most, new industrial and consumer products," Eric von Hippel, head of the Innovation and Entrepreneurship Group at the Sloan School of Management at the Massachusetts Institute of Technology, wrote in "Democratizing Innovation," recently published by MIT Press. (The book can be downloaded at Professor von Hippel's Web site, http://web.mit.edu/evhippel/www/.)

Innovation by users is not new, but it is growing. Thanks to low-cost computer-based design products, innovators do not have to work in a professional organization to have access to high-quality tools. Even home sewing machines have all sorts of computerized abilities. And once a new design is in digital form, the Internet allows users to share their ideas easily.

Because users are often quite different from each other, their innovation, by definition, accommodates variety. A survey of users of Apache Web server software found that different sites had different security needs: one size definitely did not fit all. Nineteen percent of the users surveyed had written new code to tailor the software to their specific purposes.

"Users are designing exactly what they want for themselves; they have only a market of one to serve," Professor von Hippel said in an interview. "Manufacturers are trying to fit their existing investments and existing solution types to the largest market possible."

Open-source software like Apache or Linux is an obvious example of users developing and sharing innovations, but it is not the only one. Many of the book's examples come from extreme sports like kite surfing and snowboarding, where enthusiasts often invent their own equipment. Mountain biking, Professor von Hippel noted, grew to about half a million participants before manufacturers started to make bicycles suited for wild rides on rough terrain.

Mountain bikers ride on different terrains and in different weather conditions, and they do different sorts of tricks. They also come from varied professional backgrounds, from orthopedic surgery to aerospace engineering, giving them different skills to draw on.

Not surprisingly, bikers have come up with a wide range of innovations. One biker developed his own armor and protective clothing. Another invented a way to carry his bike on steep mountains and dangle it over cliffs. Yet another added metal studs to his tires for biking on ice.

In order for companies to generate new ideas, Professor von Hippel urges them to pay more attention to "lead users" like these biking enthusiasts: people who stretch the limits of a technology and create their own innovative prototypes.

In a study at 3M, he and several colleagues found that product ideas from lead users generated eight times the sales of ideas generated internally -- $146 million versus $18 million a year -- in part because lead users were more likely to come up with ideas for entire new product lines rather than minor improvements.

The definition of "lead users" can become a bit circular, identifying anyone who innovates as a "lead user." But in some fields, it is not hard to spot the people whose need to lower costs or enhance performance is particularly great.

"The Disney animators or Pixar animators are ahead on video editing tools from the ordinary consumer," Professor von Hippel said. "Yet we know the stuff that these guys develop now ends up migrating downstream to the general people over time."

To get people exactly what they want, user innovation suggests an alternative to mass customization, the manufacturing process that seeks to tailor products to specific users while maintaining the economies of large-scale production. Mass customization generally entails mixing and matching pre-specified components, which significantly limits its flexibility.

When you order a Dell computer, for instance, "you can slot in any disk drive you want, but it's still a disk drive," Professor von Hippel said. Truly flexible manufacturing technologies, he suggested, would work more like photocopiers, which do not limit what sort of images they can reproduce.

The model is custom semiconductor design and manufacturing.

"For digital components, you can design anything you want, whether it's artificial life or a dishwasher controller, and just like you print characters on a piece of paper, you can print your design," he said. Users can design and test whatever they need and turn the design over to the chip maker's flexible manufacturing technology.

Custom chips are possible because chip makers, beginning with LSI in the early 1980's, developed "tool kits" that let customers design their own solutions without mastering the manufacturer's technical knowledge. That is a model other industries could follow, Professor von Hippel suggested.

In the book, for instance, he discusses the problems of creating recipes for restaurant chains. Traditionally, the restaurant chefs use regular kitchen ingredients to develop new recipes. For mass production, those recipes have to be translated into factory ingredients and processes, which do not have the same tastes and textures. To reproduce a new dish, then, food processors have to work from a chef's sample but reinvent the recipe. Getting the right formula often requires many iterations.

To help chefs create the final recipes themselves, Ernie Gum, director of food product development for the Nestle FoodServices division of Nestle USA, developed what Professor von Hippel called a "tool kit" of preprocessed food ingredients identical to those actually used in the factory -- for example, a chili puree processed on industrial equipment. In field testing, Professor von Hippel found, the tool kit cut the time to develop new foods from 26 weeks to only 3.

Tool kits speed innovation by letting users and manufacturers apply their own specific knowledge. With a tool kit, the customer can turn a poorly articulated wish into a well-specified plan. "I can say," Professor von Hippel said, "I'll design my wish and then you make it."