User-driven innovation – part 2

To follow on yesterday’s posting, there was another interesting point in Fitzgerald’s Sunday New York Times piece (How to Improve It? Ask Those Who Use It) on user-driven innovation:

One problem with the user-innovation model is that it can run into intellectual property rights protections. But the potential for creating new companies has led the government of Denmark to establish user-driven innovation as a policy. It found that Danish companies tended not to push for technological innovation, so user innovation may be the way to help them compete more effectively in a global economy.

The Danish government’s October 2005 report – User-Driven Innovation – Results and Recommendations highlights not just technology innovation — but product design. They specifically look at three industries in the US: electronics, medical devices and fashion. The results were seven recommendations:

1. Establishing an interdisciplinary education in user-driven innovation.
It is recommended that an interdisciplinary education be established, uniting academic disciplines necessary to analyse and assess customer needs and customer experiences.
Academic disciplines include psychology, sociology, ethnography and anthropology; disciplines that all relate to people, communities and society. A common deniminator for the disciplines could be human factors. The education may be designed as a superimposed course and could be offered as a graduate or master degree. The programme should be tied to a faculty, whose academic record creates a platform for research and education in human factors and related tool subjects.
2. Research. It is recommended that a university research institute supported by significant government funds that could spear-head research in the areas of human factors and consumer behaviour be established. High-quality research could also support a human resource master degree.
In the academic disciplines that constitute human factors, research constantly gains new insights. It must be expected that research in factors that motivate human behaviour may provide valuable insights. Often research is carried out in the cross section between the various disciplines.
The research institute should be established in a university with a strong record in human factor research.
3. Educational programmes in existing education. It is recommended that a short, yet comprehensive, educational programmes in the area of human factors be established. Innovation is more and more becoming a team-discipline, which necessitates the involvement of various professional skills and cultures. If user-driven innovation is to make a significant impact it is vital that different academic groups have a profound knowledge of human factor disciplines.
4. Life-long training. It is recommended that an extensive life-long learning programme in the area of human factors be established. Public co-financing of new courses in human factors could be tied to the supply of such programmes.
The organisation of life-long learning in human factors should be carried out in close cooperation with regional companies. The regional companies should also co-finance the strengthening of their employees’ skills.
5. Knowledge- and innovation centres. It is recommended that universities and other knowledge institutions in close cooperation with private companies establish knowledge and innovation centres, where interdisciplinary research teams can work with user-driven innovation and new technology in areas of interest to the Danish business community.
Basic research provides the core foundation for the research efforts, but should be supplemented by applied research when fulfilling the full potential of the basic research.
As new technology became a key competitive element, new institues emerged whose core purpose were to make proper use of basic research in natural science. The Academy for Technical Science is one such institute.
The increased focus on customer understanding will be an important source of competitiveness in the future. This is supported by recent developments in leading business clusters around the world. The practical use of human factor knowledge will be a key competitive factor in the future.
This may be approached in a variety of ways. The latest initatives coming out of Stanford are inspiring. Stanford University has set up 3 knowledge and innovation centres; Bio-X, Media-X and The centres are built on an interdisciplinary approach and aim to strengthen co-operation with the business community with regards to specific innovation projects. Bio-X focuses on biotechnology; however, the research efforts are combined with other research areas. Media-X is primarily focused on media research, but will also involve other research areas. is a design centre which aims to combine design knowledge with customer understanding.
The university provides access to the necessary facilities but leaves it to interdisciplinary teams to compete for research facilities. The university then selects the most promising research projects. The three centers place emphasis on co-operation with private companies on specific innovation projects.
Other US universities have applied a similar approach. CITRIS at Berkeley is currently planning a research- and innovation project with the Alexandra Institute at Aarhus University, which in time will involve the participation of Danish and US companies.
The creation of interdisciplinary knowledge and innovation centres should take into account unique Danish skills and the structure of the Danish business community.
We recommend that a number of knowledge- and innovation centres that combine research on human factors with natural science, technical and commercial disciplines be established. The centres could potentially cover areas such as foods, health, medicine and medical devices, electronics, IT, energy and environmental technologies, fashion and housing. It should be made a condition that research and knowledge building is interdisciplinary and that the centres cover concrete innovation projects with the participation of private companies. To secure a coupling a knowledge building and business demands, the establishment of knowledge and innovation centres requires co-financing from the business community as well as from local authorities.
6. Networking. It is recommended that autonomous network organisations that may promote a networking culture within Danish business clusters be established. This will necessitate a public-private partnership, as public institutions often assume important roles in knowledge networks.
The networks are increasingly important to a company’s knowledge and competence building. Strong networks are thus important factors in economies, where innovation has become the key competitive element.
The analysis confirms that large companies and companies in strong business clusters have a proven track record in the area of user-driven innovation.
The analysis confirms that the Danish networking culture is underdeveloped as compared to the world’s leading business clusters. While this is hardly surprising, it underlines the need for a stronger Danish networking culture. A stronger Danish cluster creation will increase the proliferation of user-driven innovation.
The report highlights specific examples of autonomous international networking organisations. This is in line with several business analyses which shows that the presence of autonomous networking organisations is a precondition for the creation of strong networks.
Companies and knowledge institutions with a commercial interest in network knowledge sharing are not capable of running the network. The risk of a conflict of interest is too large. This also applies to traditional industry organisations, since they are supposed to manage their members’ interests. In Denmark and abroad we find examples of independent network organisations that have been established as public-private partnerships, but there appears to be a demand for additional networks.
7. Networking architects. It is recommended that courses in regional development and cluster creation be offered.
It requires a specific set of skills to successfully run a network. Among other things networks require interpersonal skills, as well as more down-to-earth tools. The increased focus on networks and the emergence of networking organisations underline the need for developing and communicating tools for network facilitators.
The seven recommendations presented above will strengthen the innovation efforts of Danish companies. User-driven innovation is merely one element in the renewal process that companies will have to address across the entire value chain. However, when looking at the markets where Danish companies compete, user-driven innovation remains one of the key factors in increasing competitive powers. A dedicated effort may propel Denmark to become one of the world’s most advanced countries in the area of user-driven innovation.

I was especially pleased to see the attention given to “knowledge centers” such as the Stanford University Too bad it doesn’t get the same attention from policymakers here in the US.
It should be noted that the Danish strategy is not just based on user-driven innovation, but on entrepreneurship (see the July 2005 presentation)
One other organizational part of the Danish strategy is the
Danish User-centered Innovation Lab (DUCI lab)
— a collaboration between faculty at Copenhagen Business School, Aarhus School of Business and Massachusetts Institute of Technology, based at Copenhagen Business School. Supported by both companies and the government, the lab works directly on best practices in user-driven innovation (Erik von Hippel is on the lab’s staff).
It remains to be seen whether Denmark will be successful. Fitzgerald notes:

Skeptics argue that Denmark is both small — population, 5.4 million — and a backwater of innovation, and thus has little to lose in trying something new. They might also point out that even in Denmark, Mr. von Hippel’s ideas are up against more conventional forms of user-aided design, such as sending anthropologists to study how people use products in their daily lives. Companies then translate their research into new designs.

I have to say that, however, that those “skeptics” may not know what they are talking about, especially if they describe Denmark as an innovation backwater. Not only is that incorrect, but the latest EU Innovation Scorecard listed Denmark as an innovative leader, while the US was ranked as an innovation follower.
Maybe Denmark is an innovation leader because of its innovation strategy that embraces bottom-up innovation? Maybe the US should think about that? Just maybe . . .


Update – anti-trust v. IPR

Update —
Ruling May Be End for Vonage –

A federal judge yesterday [Friday] dealt a potentially fatal blow to Vonage Holdings, the Internet-phone service that offers one of the few alternatives to traditional carriers, by ordering it to stop using a technology that connects its network to the public telephone system.

The injunction does not take effect immediately. The judge ordered a hearing in two week’s on Vonage’s request for a stay. And Vonage says it is proceeding with a work-around. I also think it is possible that this will go to at least one level of appeals to see if the ruling conforms to Supreme Court decision in the eBay case on requirements for an injunction.
So, there is still a long way to go on in this case. As I mentioned earlier, this case highlights the tension between anti-trust/competition policy and IPR. Round one goes to IPR.

User-driven innovation – part 1

Sunday’s New York Times had an interesting piece by Michael Fitzgerald on user-driven innovation and the work of Erik von Hippel at MIT – How to Improve It? Ask Those Who Use It:

Mr. von Hippel is the leading advocate of the value of letting users of products modify them or improve them, because they may come up with changes that manufacturers never considered. He thinks that this could help companies develop products more quickly and inexpensively than with their internal design teams.
“It could drive manufacturers out of the design space,” Mr. von Hippel says.
It is a difficult idea for research and development departments to accept, but one of his studies found that 82 percent of new capabilities for scientific instruments like electron microscopes were developed by users.

As I have written earlier about bottom up innovation and Von Hippel’s work, it raises some important ideas about our innovation system. Most of his ideas I agree with. However, I have to disagree with the though that user-driven innovation will “drive manufacturers out of the design space.” If anything, it will do the opposite – as those companies without extensive design will be forced to seek out user-driven innovation and incorporate it into their products. A story in the Washington Post from a couple of years ago (Tapping Into Tinkering) pointed out how user modification of products is an established part of the US innovation system:

Fans of the TiVo digital video recorder have discovered how to break it open and install a larger hard drive. Early users of the Roomba, a robot vacuum cleaner, are rewiring it to serve as a “mobile security robot.” Owners of the new Sony PlayStation Portable have figured out how to use the game machine to surf the Internet and exchange instant messages.
. . .
Sometimes, tinkerers become a consumer electronics maker’s unofficial research-and-development team, with innovations winding up as built-in features down the line.
TiVo’s most ardent fans came up with a way to record TV shows by sending commands via the Internet long before the company got around to officially offering that feature.
And before the iPod was the ubiquitous gadget it is today, early users of Apple’s digital music player enabled it to store addresses and text files — a feature the company now promotes.
Customers also came up with the idea of recording their own talk and music shows and making them downloadable for the iPod — a phenomenon called “podcasting” that has become so popular that Apple recently rolled out software to streamline the process.
Americans have always liked to fiddle with things, from building better ham radios to juicing up car engines in the driveway. The urge fuels a multibillion-dollar industry in after-market auto parts, and automakers keep a close eye on how enthusiasts find new ways to use their products. Mitsubishi Motors, for example, sponsors teams that modify its Lancer Evolution performance car for auto shows.

Companies that let others seize that innovation are not going to survive. Or they will become simply contract manufacturers surviving in low wage locations. So the net effect will be an increase in design intensity of US firms.
And that would be a good thing.
(More tomorrow on a country that has embraced user-oriented innovation as a national policy).

Defending financial innovation

David Leonhardt defends financial innovation (Once Again, Debt Is Miscast as the Villain – New York Times):

But whatever happens, it’s important to remember that the mortgage market is following a classic cycle that nearly every other form of consumer credit has also followed. When somebody comes up with an innovation, be it consumer loans, credit cards or creative mortgages, it inevitably leads to an explosion of borrowing that includes a good amount of excess and downright abuse. After the abuse is cleaned up, though, most families end up better off.

I hope we will keep that thought in mind as we go through the normal orgy of outrage and blame-finding — which has already started (see Senate Questioning on Mortgages Puts Regulators on the Defensive – New York Times and Fed Faulted For Inaction On Mortgages –

China and technology

The Wall Street Journal has discovered an interesting idea — Soon Made in China: High-Tech Products:

China is demonstrating a surprising ability to parlay its dominance in low-end manufacturing into a new strength in producing sophisticated high-tech goods.
Already the place where many of the world’s computers and mobile phones are put together, it is expected to become home to a multibillion-dollar integrated-circuit plant run by Intel Corp., the world’s biggest maker of computer chips.
The speed at which China is moving into more-complex manufacturing is a sign that its transition from a low-wage economy making cheap goods to a high-wage economy producing valuable ones may not be as difficult as once thought.
. . .
The electronics business is one of the main areas in which the transformation of Chinese manufacturing is taking place, and foreign investment is crucial for those changes. This deal also illustrates the force behind that transformation: The critical mass that China has built up in the labor-intensive, but relatively simple, assembly and manufacturing of many products is now allowing it to attract higher-value parts of those businesses.
. . .
The pattern in electronics is also seen in other industries. Chinese steelmakers have recently begun producing types of high-end processed steel that previously had to be imported. The car business has gone from near-total reliance on imported parts to heavy use of components made and designed at home.

So — tell us something new. Many of us have been talking about the Chinese technological evolution for years. I am constantly surprised that people are surprised. There are many challenges facing the Chinese economy. But there is little reason to believe that they don’t have the ability to transform from a low cost to a high-value added producer.

Thoughts on copyright

From James Boyle — / Comment & analysis / Comment – Rocks in the web’s safe harbours:

When we are dealing with intellectual property, how do we know who is a trespasser and who is a greedy landowner trying to enclose the public right of way? First lesson, analogies to physical property – like the one I just used – are dangerous. Most of these disputes are about whether a new market, enabled by technology, should lie inside or outside the scope of the artificial monopoly conferred by the intellectual property right. Because these rights are created for a purpose – to foster and disseminate science, innovation and culture – there are inevitable “should” questions involved.

From Walt Mossberg — Personal Technology –

I am not a lawyer, and I have no idea how this lawsuit will wind up. I suspect it is mainly a bargaining tactic by Viacom. But I know one thing: This fight isn’t primarily about consumers and their rights, and its outcome won’t necessarily make things better for Internet users.
. . .
Most honest people wouldn’t consider it piracy to buy a CD, copy it to a computer and email one of the song files to a spouse or friend. But the record industry, backed by the laws it essentially wrote, does. Most honest people wouldn’t think that uploading to YouTube a two-minute TV clip, which they paid their cable company to receive, is piracy. But Viacom, backed by the laws its industry essentially wrote, is demanding that Google remove all such clips.
. . .
As a nonlawyer, I think these clips seem like “fair use,” an old copyright concept that seems to have weakened under the advent of the new laws. Under fair use, as most nonlawyers have understood it, you could quote this sentence in another publication without permission, though you’d need the permission of the newspaper to reprint the entire column or a large part of it. A two-minute portion of a 30-minute TV show seems like the same thing to me.
But why should I have to guess about that? What consumers need is real clarity on the whole issue of what is or isn’t permissible use of the digital content they have legally obtained. And that can come only from Congress. Congress is the real villain here, for having failed to pass a modern copyright law that protects average consumers, not just big content companies.
We need a new digital copyright law that would draw a line between modest sharing of a few songs or video clips and the real piracy of mass distribution. We need a new law that would define fair use for the digital era and lay out clearly the rights of consumers who pay for digital content, as well as the rights and responsibilities of Internet companies.

Add copyright to the growing list of things Congress needs to act on in order to catch up to the I-Cubed Economy — right after they finally deal with patents.

Financial competitiveness – part 5

From the New York Times’ financial industry blog DealBook Big Ben Versus the Big Apple: Another Take come this insight on our financial competitiveness:

In comparing Wall Street now to the Wall Street of the dotcom boom, people often forget one issue: The wealth then grew largely from a slew of stock offerings that should never have happened. What happened then in New York is taking place now in the foreign exchanges, according to Jeffrey Garten, a professor of international economics at Yale:
“When you analyze why London is getting more than its share of IPOs, you realize that a lot of them really should not be listed in the U.S., given our tradition of investor protection. Many come from emerging markets, particularly Russia and China. By any standards, they lack accounting rigor and transparency.”

This reminds me of the classical study of industrial policy using the case of the NE fishing industry. The industry set its benchmark as the high point during WWII when meat was scarce and the demand for fish artificially high. Sometimes the industry just doesn’t understand the situation.
By the way, the DealBook has published a number of items on the health of the financial markets.