Lead Users

Fundamentals

In a number of studies from the late 1970s and 1980s onward, Eric von Hippel of MIT and several of his colleagues have observed that in very different industries—ranging from high-tech areas such as scientific instruments or thermoplastics to consumer markets such as outdoor equipment or skateboards—a huge percentage of the most important innovations were originally developed by the product users, not by the producing firms. In this context, the term user refers to the functional role of the institution and means that with respect to the product or service in question, the institution expects to derive benefits from its own use, not from selling the artifact. Therefore, “users” may be individual end users such as consumers in the beverages market or firms such as a high-tech manufacturer that uses a specific machine in its internal production process.

The finding that users can be very active in innovation seemed to contradict canonical market research experience from “voice of the customer” techniques, which holds that customers are at best capable of articulating unsatisfied present needs but are hardly able to provide information about future needs or even to provide ideas, concepts, and solutions to match those needs. This puzzle was resolved by the introduction of the lead user concept. Although it may be true that many customers are unable to provide active input in new product development tasks, there is a specific subgroup of users—the lead users—who are indeed creative and innovative. Lead users are able to provide direct input in new product development tasks and have often prototyped new product solutions for themselves (personally or for the company they work in) or for their communities.

The original theoretical thinking that led to the definition of “lead users” as having (a) high expected benefits from an innovation and (b) a position ahead of an important market trend was built on findings from two different streams of literature.

The “high expected benefits” component of the lead user definition was derived from research on the economics of innovation. Studies of industrial product and process innovations have shown that the greater the benefit an entity expects to obtain from a required innovation, the greater that entity’s investment in obtaining a solution will be. The benefits a user expects can be higher than those expected by a producer—for example, if the market is new and uncertain, if customer preferences are heterogeneous and change quickly in the market, or if the costs of innovation are lower for users than for manufacturers because of the “stickiness” of preference information. Component 1 of the lead user definition was therefore intended to serve as an indicator of innovation likelihood.

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