Chapter 6 part 2

Users as Innovators
Histories of innovation invariably focus on the race to invent something and end when the invention goes into production, as if the interesting part of the story is complete. Yet what makes an economy more productive is the rate at which a technology spreads and how cleverly it is used. Invention is just the starting point for a much longer process, in which most of the value is created by people applying technology. Obsessed by when and where technologies were first invented, we pay too little attention to how technologies are adapted, extended, remodelled and re-used. Periods of rapid invention, when lots of technology is being created, rarely correspond with periods of rapid productivity growth. That usually comes much later – often thirty or forty years later - and because consumers in their millions have helped one another to work out what a technology is for. They incorporate the technology into their lives, itself a vital part of the innovation process.

Today, more people that ever can be involved in that wider process of innovation in use. Thanks to the falling costs of technology, cheaper communications, rising educational attainments and longer life spans, more people have more time and capacity to be creative, if only in small ways, than ever before. Ideas do not just flow down the pipeline from the back room boys to consumers. Increasingly ideas are flowing the other way: the consumers are increasingly a source of creativity. In the process they stop being mere consumers and become participants and contributors. The idea of the consumer and indeed mass consumption as the basis for economic activity might have to be thought. Instead we should start to think of ourselves as contributors and participants.

Just as we thought we knew what organisations were for, we thought we knew what consumers were for. They were the end of the line, the consummation of the production process, the final link in the value chain. In traditional organisations value is created through a series of transfers and transactions. The consumer looks for the good they want – a fridge in the white goods section of a department store – they choose one, hand over their money and take away the item in question. The act of transferring the good from the producer to the consumer confirms its value in the eyes of the consumer. The more choice consumers have, to find the product that best meets their need, the more likely they are to be satisfied. Consumers choose the good they want, pay for it and then take it away and use it. Of course latterly companies have devised all sorts of ways to get consumers to do more of the labour themselves, through self-service; tracking your own package; assigning your own seat; putting together your own furniture. Some companies have even started to listen to users earlier in the design process. Yet these are just modifications to the basic “value chain” view of the world: consumers are transactions to be managed.

Yet the language of supply and demand, consumer and producer does not make sense for a world in which Wikipedia and Linux are built by the people who use them. These collaboratives are not just the by-product of cheaper technology and easier communications. They have responded to a yearning people have to become contributors, participants and players. They do not want to be well-served but dependent and passive. They want a voice and some tools to allow them to self- provide. The more participants can do this together, peer-to-peer, drawing on one another’s expertise and ideas, the more shared ideas and innovation there will be. The transfer and transact model of value creation makes little sense in a world where most of what we consume are services, information and entertainment, cultural goods and brands. These often depend on the consumer investing in the process themselves: their identity, hopes, skills, know-how. More of the time we create value together through our interactions, dialogue and sharing. When organisations start to engage people in this way, people who used to be just the users quickly become contributors and that unlocks a vast new source of innovation. But they key is not to just increase the menu of choice but to deepen opportunities for participation.

This is a tremendous potential competitive advantage. Organisations built on high levels of member participation tend to have very low costs: Wikipedia has just one employee, Craigslist just 16 yet they both support communities with millions of participants. More important community-based companies can become instruments of mass innovation. The consensus amongst academic studies on innovation is that only about 25% of new product introductions are a success. The overwhelming majority of product innovations fail. That is because innovation is beset by uncertainty, mainly over whether consumers will take up a new offering. Innovation is so risky because it is so hard to get inside the heads of the potential consumers, to know how far and how fast they will take up a new product. Companies are constantly seeking ways to close this gap, through better market research. But as long as the gap remains the risks of innovation will be dauntingly high for most companies. Organisations built on a strong member community, eBay for example, often find good ideas coming up from the member base. The link between the company and the community, producer and user is much tighter. That makes innovation a lot less fraught. One of the most powerful examples of this approach to innovation is the rise of the computer games industry.

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