Transforming Banks for a Digital Future: The Winners, The Losers, and the Strategies to Beat the Odds
By Eric von Hippel
The MIT Press, April 2005
208 pages, $29.95
Here's a simple example of what MIT professor von Hippel is talking about in this short but dense book: Windows has a perfectly fineslow, but finestartup process that takes you to a home screen prepopulated with options Microsoft thinks you might want.
Odds are you also have added your own "shortcut" iconsMicrosoft Word, perhaps, spreadsheets, PowerPoint, whateverto that same home page. You may even have added a specific program to the startup menu so you are automatically taken to your Internet browser, for example, once you log on.
What you have done with Windowscustomized it so it works the way you want it tois becoming increasingly commonplace, especially in technology. (Think free and open-source software and wiki Web sites.) Users are tailoring existing products so they better suit their needs.
While people have always tried to customize products, a "user's ability to innovate is improving radically and rapidly as a result of the steadily improving quality of computer software and hardware, improved access to easy-to-use tools and components for innovation," writes von Hippel, who is head of the Innovation and Entrepreneurship Group at the MIT Sloan School of Management.
What does all this mean for you? Potentially, a great deal, he contends. Von Hippel offers two ideas worth paying attention to.
First, you should seek out and identify what he calls "lead users"customers who discover your product early and who spend the most time customizing it to meet their needs. Once you have found them, you not only want to learn what they did, but also determine a way you could benefit from it.
How? Von Hippel suggests three ways:
Take users' ideas and produce them for sale;
Sell kits so others can make changes to your product, just like the lead users have; and
Sell products or services that complement what these lead users have come up with.
The overarching theme behind all three moves is simple: If a few customers find benefit in tweaking your product to fit their needs, then the odds are other customers could benefitand be willing to pay forthose same improvements.
Von Hippel's second big point isn't new, but it is important. He urges you to bring potential users into the development process early on. If you let them actually help design the prototypesinstead of waiting for their reactions in beta versionsit is easier and less expensive to incorporate their ideas.
This is not beach reading. Footnotes, academic-ese and passive sentences abound: "This approach involves portioning product-development and service-development projects into solution-information intensive subtasks." And his suggestion that the government make it easier for users to modify existing products raises troubling intellectual property and copyright issues.
Still, von Hippel has brought an important issue to the fore. Users of your products are going to make modifications to them to suit their needs. Shouldn't there be a way for you to benefit from that?
Paul B. Brown is the author of numerous business books, including Publishing Confidential: The Insider's Guide to What It Really Takes to Land a Nonfiction Book Deal, published by Amacom. Please send comments on this review to
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