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According to innovation expert Eric von Hippel, users are often the first source of new products — and that has important implications for businesses.
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Companies such as Procter & Gamble, Cisco Systems, Genzyme, General Electric and Intel are often credited with having attained market leadership through open innovation strategies. By tapping into and exploiting the technological knowledge residing beyond their own R&D structures, these companies outmaneuvered rivals. But while other organizations try to follow their example, many are failing because they neglect to ensure that the outside ideas reach the people best equipped to exploit them.
Services comprise more than 70% of aggregate gross domestic product and employment in the Organization for Economic Cooperation and Development countries. As a result, both individual companies and entire economies face the challenge of how to innovate in services. One suggestion: Companies should both organize their innovation processes to be more open to external knowledge and ideas and also let more of their ideas and knowledge flow to the outside when not being used internally.
This article explores the process of innovation in 13 global companies. Many of the standard arguments for how to encourage innovation were confirmed, but some surprises were uncovered as well. The article organizes its key insights around five persistent “myths” that continue to haunt the innovation efforts of many companies. The five myths are: (1) The Eureka Moment; (2) Built It and They Will Come; (3) Open Innovation Is the Future; (4) Pay Is Paramount; and, (5) Bottom Up Innovation Is Best.
The use of external sources for help with innovation is becoming increasingly prevalent. Rather than take an ad hoc approach, companies should develop a sourcing blueprint to obtain the consistent results they need.
Manufacturers, not users, traditionally have been considered the most logical developers of innovative products. But user innovation communities present a great advantage over the manufacturer-centered development systems that have been the mainstay of commerce. When products that user communities 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.
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