MAY 2013 Eftersprgselsdrevet innovation og entrepreneurskab Hvad skal

MAY 2013 Efterspørgselsdrevet innovation og entrepreneurskab Hvad skal Danmark leve af? Prof. Lars Frederiksen, Ph. d. Institut for Marketing og Organisation, BSS, AU

MAY 2013 Formål og struktur › Inspiration – ingen direkte industrinære anvisninger › Ny åbenhed i innovationsprocesser? › Bruger-innovation og –entrepreneurskab

MAY 2013 Hvem er jeg › Professor, Institut for Marketing og Organisation, forskningsleder af Innovation Management Group › Tidligere 5 år på Imperial College Business School, London › Ph. D fra Copenhagen Business School (INO) (2006): “Open Innovation Business Models” › Research fokus: hvordan nye ideer og viden skabes og deles for innovation i projekter, fællesskaber og organisationer › Brugere som innovatorer: Individuelle karakteristika, sociale netværk og entrepreneurskab i fællesskaber (Jeppesen & Frederiksen, 2006; Dahlander & Frederiksen, 2012; Dahlander, Frederiksen & Rullani, 2008; Foss, Frederiksen & Rullani, 2012) › Two-sided markets › Software/OSS › ‘Capability renewal/replication/reinforcement’, vidensskabelse og -deling under forskellige styringssystemer (Frederiksen & Davies, 2008; Cattani, Ferriani, Frederiksen & Täube, 2011; Hartmann, Davies & Frederiksen, 2010) › Bæredygtigt urbant design, energi, vand, og veje › Entrepreneurskab (opstart, overlevelse og vækst), arbejdsmarkedsmobilitet og ansættelsesstrategi (Frederiksen & Wennberg, 2012; Frederiksen & Frederiksen, 2012) › Sverige og Danmark

MAY 2013 Innovationsledelse og -strategi › Innovation: Succesfuld kommercialisering af nye og brugbare ideer og opfindelser › Multidisciplinær: Social psykologi, sociologi, organisationsøkonomi, ingeniørvidenskab, ledelse og marketing › Kernespørgsmål: › Hvordan søges bedst efter information, ideer og talent? › Hvordan udvælges og organiseres processen fra idegenerering til kommercialisering og videre mod spredning af nye produkter, services og teknologier? › Innovationsledelse handler således om værdiskabelse gennem videngenerering og –deling.

MAY 2013 Innovation som kilde til vækst Schumpeter (1942): “The competition from the new commodity, the new technology, the new source of supply, the new type of organization … competition which commands a decisive cost or quality advantage and which strikes not at the margins of the profits and the outputs of the existing firms but at their foundations and their very lives”.

MAY 2013 Innovation som kilde til vækst William Baumol (2002): “…. virtually all of the economic growth that has occurred since the eighteenth century is ultimately attributable to innovation…under capitalism, innovative activity…becomes mandatory, a life-and-death matter for the firm and innovation has replaced price as the name of the game in a number of important industries”

MAY 2013 Fordele ved innovation for virksomheder › Højere profit over længere perioder samt i økonomisk recession (Geroski et al. , 1993) › Større overlevelseschancer i forskellige markeder (Cefis and Marsili, 2004) › Højere produktivitet (Criscuolo and Haskel, 2003) › Bedre kreditvurderinger (Czarnitzki and Kraft, 2004) › Højere export rate (Bleaney and Wakelin, 2002) › Højere markedsværdi (Hall, 2000)

MAY 2013 Industrien får sig en religion (The Economist, Feb 18 th 1999) “Innovation has become the industrial religion of the late 20 th century. Business sees it as the key to increasing profits and market share. Governments automatically reach for it when trying to fix the economy. …But what precisely constitutes innovation is hard to say, let alone measure”

MAY 2013 Forandringer i jagten på innovation › Den første æra – 1880 s - 1930 s › Den gyldne tid for den uafhængige opfinder › ‘Do it yourself’ innovation › Udbredt samarbejde mellem industri og universitet › Opblomstringen af ‘the corporate R&D lab’ – 1940 s – 1980 s › Øget national sponsorering af R&D › Intern opdagelse af nye produkter/technologier – the search for ‘new nylons’ › Aftagende virksomheds R&D og åben innovation – 1990 s – i dag › Vertikal specialisering af mange industrier – øget arbejdsdeling af innovativt arbejde › Vækst af mindre R&D virksomheder - outsourcing af R&D › ‘Distributed knowledge - distributed innovation’ Source: Mowery 2009

MAY 2013 Et nyt innovationsparadigme? “Open innovation is a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external pathways to market, as they look advance their technology…. The open innovation paradigm treats research and development as an open system…” Chesbrough, 2006 “We conclude by observing again that we believe we are in the midst of a major paradigm shift: technological trends are causing a change in the way innovation gets done in advanced market economies. As design and communication costs exogenously decline, single user and open collaborative innovation models will be viable for a steadily wider range of design. ” Baldwin and von Hippel, 2011

MAY 2013 Source: H. Chesbrough, 2005

MAY 2013 Det trad. økonomiske perspektiv på innovation – Firms and entrepreneurs as product developers, manufactures and distributors are generally recognized as the primary agents of product change and economic progress (Schumpeter 1934) – The consumer (user) merely chooses to make or not make a purchase based on price and comparison with other products and services (Ibid. ) – The firm needs to control crucial assets and resources such as competences and decision rights for undertaking innovation (RBV, Barney 1991)

MAY 2013 Men verden fortæller en anden historie › “Many enhancements of our current products are a direct result of end-user feedback and prototypes…” (www. propellerheads. se) › "…. the ongoing daily communication in our online community is as important to us as the many mods and add-ons created and shared by our users ” (CEO, Propellerheads, 2006).

MAY 2013 Hvad har disse produkter tilfældes?

MAY 2013

MAY 2013 Eric von Hippels bruger-innovation model Manufacturer-based view: We innovate and users consume what we make. We profit from selling and protecting what we produce. We need to understand what users tell us and make products/service that fit their needs User-Centered view: Users make “their own” proto-types or modify manufacturers products to fit their own needs. And sometimes reveal freely. We need to capture users’ proto-types and the value of their activities # of users perceiving needs Users innovate here First manufacturer product appears here Target market Time

MAY 2013 Innovation skaber værdi Brugsværdi Nytte/udvekslingsværdi: Innovation for salg

MAY 2013 Voice of the customer ≠ user innovation Information ≠ prototypes, designs, etc.

MAY 2013 Why is user innovation not easily observed? – Users benefit from using, and so, do not claim IPRs and seldom commercialize products - thus are seldom credited for their innovations – Manufacturers launch new products and are associated with product brands – they take out patents, etc. – Innovation researchers survey firms seldom - if even – users – Have we been missing parts of the important early process of how innovations are created? – Recent research: – 8 percent of UK consumers create or modify one or more of the consumer products they use in order to better address their needs. Almost half of these innovators, almost 4 percent, report that their new or modified products are, as far as they are aware, original innovations (von Hippel et al. 2011). – Yet only 2 percent of the user innovators mention profiting as their driver for innovation

MAY 2013 Research shows that users innovate Industrial products n % innovating Printed Circuit CAD Urban & Ev. H Pipe Hanger Hardware Herstatt & Ev. H Library IT Systems Morrison, Roberts, Ev. H Software security features Franke & Ev. H 136 24. 3% 74 36% 102 26% 131 19. 1% Surgical Equipment Luthje 262 22% Consumer products n % innovating 153 9. 8% 197 37. 8% 291 19. 2% Outdoor Products Luthje “Extreme” sports equipment Franke & Shah Mountain biking equipment Luthje, Herstatt, & Ev. H

MAY 2013 User and manufacturer innovation differs › Users typically develop functionally novel innovations: › The first sports-nutrition bar/drink › The first scientific instrument of a new type › Manufacturers tend to develop improvements: › A better-tasting sports-nutrition bar › Improvements to an existing type of scientific instrument Dev. by users Dev. by Mfrs. 1. New functional capability 2. Convenience or reliability improvement (Total sample size of innovations studied: n=64) 82% 13% 18% 87%

MAY 2013 Users in communities › Individual users rarely innovate in vacuum › They cluster together in various organizational forms: communities in Open Source Software, firm-hosted, online/off-line, etc. › Firms increasingly show interest in tapping into and cocreating with users in communities 22

MAY 2013 Examples of user communities › Online and off line communities for innovation › Computer games design – new maps, tools and weapons for strategy games › Open source software – Apache, Linux › Spine surgeons – medical instrument › Nestlé pre-mixed ingredients › Harley Davidson – motorbikes › Threadless – T-shirts › Lego – toys

MAY 2013 Innovation communities: What do they do: › Mediate the performance and growth of firms through development of new products and services (Propellerheads, Eclipse open source community/IBM), › Support generating new firms /markets (Micro breweries in the US/the Home Brew Computer Club) › Posing competitive treats to firms - sometimes (, Open source software, Wikipedia/ vs. Encyclopedia Britannica/Microsoft Encarta)

MAY 2013 The impact of ICT › Low cost search for more and heterogeneous information › Low cost and accessible prototyping (e. g. software, 3 D printers) and designing (e. g. CAD/CAM) › Opportunities for sharing and co-creating information, products and service across time and space › Storage of information › And much more…

MAY 2013 Types of online user communities Degree of revealing Open source community: Linux Firm hosted community: Propellerhead User initiated and high degree of user authority Firm initiated and high degree of firm authority

MAY 2013 Fundamentet › Jeppesen & Frederiksen, 2006, Why do users contribute to firm-hosted user communities? The case of computer-controlled music instruments, Organization Science. Vol. 17(1): 45 -63 › Dahlander & Frederiksen, 2012, The core and cosmopolitans: A relational view on innovation in user communities, Organization Science. Vol. 23 (4): 988 -1007 › Autio, Dahlander & Frederiksen, 2013, Information exposure, opportunity evaluation and entrepreneurial action: An empirical investigation of an online community (Forthcoming; Academy of Management Journal)

MAY 2013 My research › Actors: › Individuals in a community › The intersection of a community and a community hosting firm › Three parts: Same case › Particular personal characteristics motivating users to innovate in online communities › Specific relational positions engaging users in innovation › Personal characteristics and relational position to understand opportunity evaluation and entrepreneurial action by users in communities

MAY 2013 Research setting: • Develops computer-controlled music instruments for sound production, processing, and recording. • Headquarter in Stockholm, established 1994, 100 fulltime employees (+50 temp. ), organic annual growth (10 Y) • Technologies: Rex-file format, Rewire, and Recycle • Products: Rebirth, Reason and Record • Awarded best music software product(s) by world leading associations and industry specific journals over 10 years • Recently moved into mobile applications • ”Propellerhead could not work today if the community was not there. ” (CEO, Propellerhead, 2010)

MAY 2013 Research setting

MAY 2013 User innovations: Modifications and extras “Mods. A celebration of creativity. Here at Propellerhead we're crazy enough to let users take our precious Re. Birth [a Propellerhead product] and redesign it any way they like. If you're skilled in graphic design and you have a bunch of cool drum samples you've always wanted to share - make a mod, mail it to us and maybe, just maybe, we will make sure it reaches every corner of the world” (www. propellerheads. s e).

MAY 2013 › Community users create developments (i. e. mods and extras) that take an experienced in-house product developer at least 200 hours to create. › Approximately 250 mods and extras created by users and shared in the community › The firms frequently picks up prototypes and ideas from users and integrate them into new product versions › Recently the firm started to sell both own and third party developed new products prop shop – think Google app store

MAY 2013 Problem-solving: Gated filter sweeps Posted by nujazz on 2008 -02 -13 20: 46 Hey all. . . What is the best way to create a gated filter sweep that comes in and out of focus (velocity)? ? (Let me know if this doesn't make any sense). Thanks, -J Re: gated filter sweeps Posted by Oggy on 2008 -02 -15 04: 29 wt? I think you mean a "schutuuk schutiik schikk stikk schwee tik schewee schikk scutick scutuck" thingee. hmmm. . . interesting question. First response old modular style. . . program the filter sweep, the pass that through a gated Voltage Controlled Amplifier. So, in Reason. . . do the filter sweep however, then a Matrix full off/on curve plugged into an amp somewhere. I think you could do this in a single Sub, or another unit (Mal/Thor) to use as external filters. Did it work? Re: gated filter sweeps Posted by Edit. Ed 4 TV on 2008 -02 -15 21: 34 Well, if I understand correctly. . . The filter sweep is just part of the patch, but as far as triggering it so it gates open/closed, there's a couple ways (actually, a LOT of ways) you can do it. I made a file many years ago which shows you a few ways. You can get it at the link below, it's called Demo. Triggers 1. You should place the L/R markers around each section to listen to it over and over again while you flip the rack around and look at the CV wiring. Each section is different. Hope that helps. . .

Pink. Noise Studio Inc. educational, multimedia & soundware developing company. Users entrepreneurship MAY 2013

MAY 2013 Data captured and methods applied › Case study (9 Y): A firm and its community › Unit of analysis: Individuals in the community › Primary and secondary data sources › Mixed methods: › Netnographic study (Kozinets 1998) - field notes obtained during a three-month period: one hour per day › Online surveys (3) › Social network (Ucinet) of web –log interactions (approx. 9000 individuals, and 151. 000 messages over 8 years) › Content coding of web –log (5000 messages, 3 independent coders) › Interviews – users and the firm (45) › Ranking of user innovations: quality and novelty (i. e. survey to product developers of the firm and experienced users in the community)

MAY 2013 Individual characteristics: Abilities and motivation › Some individuals are more important than others in contributing innovations to communities because of particular individual characteristics › What can the firm do to better support healthy innovative community? And how to benefit from single innovative users? › Innovation measured as self-perceived innovative contributions, novelty for the firm vs. to the world (e. g. CIS, EU)

MAY 2013 Individual characteristics for user innovation (I) › Professionals or hobbyists: Motivation › “…people who are working in the music industry are too busy and live a different lifestyle…these people who earn their living from music simply do not have the time or experience to spare to experiment and create mods or other extras” › User innovators are likely to be hobbyists: › Who employ their work related expertise for their hobby. (e. g. skilled IT individuals) - a ‘play- or training ground’ › Exhibit a higher willingness to share innovations in the community than professionals

MAY 2013 Individual characteristics for user innovation (II) › Firm recognition as a motivator for innovation (no effect of peer recognition? ) › “…I can tell you that it was very gratifying to have the company acknowledge my own mod making efforts…an official “Propellerhead approved” mod must meet certain standards, having the firm recognizing it not only means that one’s work meets the company standards to qualify, but there’s a sense that your work is accepted by the music industry” › Innovative users indicate their willingness to innovate “on demand” to serve manufacturers - community as recruitment filter? › Firm recognition is an important motivator among innovative users: competition for recognition etc. This provides the firm some leverage for governance

MAY 2013 Individual characteristics for user innovation (IIV) › Lead users: Ability (self-selected) › Ahead of the market – early and unique needs › Expect benefits from an innovative solution › Often experienced users may serve as opinion leaders in communities predicting technological trends

MAY 2013 Relational factors (I) › There are relational positions in various social networks that motivate innovative performance by individual users › Research tends to look at position within ONE community – we link external community participation to internal community position to explain individual innovativeness › Innovation measured as contributions ranked by firm and users (not in sample) as innovative and degree of innovativeness › Underlying question: How does the firm retain attractiveness of online communities?

MAY 2013 Relational factor (II) Findings: › Do not cheery-pick individuals with specific personal characteristics (e. g. lead users) - focus on the community as a self-enforcing resource and look at the structural position of individuals › Individuals located at the periphery and in the core of communities play different roles for innovation – yet mainly user innovators are ‘optimal marginal’ › Users are part of external communities – spanning across boundaries to technically adjacent communities is important for spurring and supporting user innovation within the focal community › External community participation is particularly important for spurring innovation among users who are peripheral in the focal community

MAY 2013 A wider phenomenon? › Users as innovators › Innovate because they have heterogeneous needs and abilities › Oftentimes these individuals share their ideas and innovations in communities › Such community-based innovation processes provide an environment for users to develop new ideas and learn from each other › Users as entrepreneurs › Cases where firms are spun out of virtual worlds: open source software communities, Second life or firm-hosted communities › Limited understanding of the process by which users become entrepreneurs

MAY 2013 Conceptual model Social domain Technical domain Lead userness Boundary spanning H 1 + H 2 + Opportunity evaluation (Third-person opportunity) Technological probing Technical knowledge (i. e. personal charateristics) enhances perceptions of what is doable, giving rise to latent entrepreneurial agency + Entrepreneurial action (First-person opportunity) + H 4 + H 3 Community attention Social position provides access to information of what is feasible. As social knowledge is transient, opportunistic reaction is required

MAY 2013 Users as entrepreneurs Findings: › Users who are skilful and experienced (i. e. LU) and technological probing have highest probability of opportunity discovery and evaluation (i. e. driven by individual characteristics) › Users who enjoy a high level of attention (social status) within the focal community and extensively span boundaries to other online communities for information search and validation of ideas have high likelihood of entrepreneurial action: founding a firm (i. e. driven by position in social networks) › Individual product users setting up firms around the manufactures key product can establish an ecosystem around a core product (e. g. informal standard setting and network effects) (Garud & Kumaraswamy 1993)

MAY 2013 Summing up › Importance of users in communities on the demand side for innovation › A set of individual characteristics explain users innovative performance in online communities › However this is complemented by a set of relational explanations for individual innovativeness › New platforms for entrepreneurial action around the products/service arising driven by both individual characteristics and relations

MAY 2013 Future research in user innovation and communities › Dynamics of knowledge production in communities: who and how do innovators move over time in social networks – the position vs. performance issue? (work in progress: Frederiksen, Alexy & ter Wal, 2011) › How community issues and firm strategy co-evolve? (work in progress, Antorini, Frederiksen, Nørskov & Scholderer, 2011) › Natural experiments in user communities: How different incentives/circumstances encourage users to innovate and share (i. e. shared micro IPR, tournament rewards, recruitment, recognition, technical structure, etc. )

MAY 2013 Thank you for your attention Comments and questions are welcome