Where do new product ideas come from? Wouldn’t you like to spend your resources improving relationships with customers and doing effective marketing, rather than putting all your resources into research and development trying to find new product ideas?

You might be surprised to know that many new product ideas come not from firms but customers. In fact, users often invent (and sometimes commercialize) new product ideas. In a study by Eric von Hipple (see the reference below), 82% of all commercialized scientific equipment was developed by users.

The marketing implications of this fact are important. First, firms in high technology or high-science industries can benefit greatly by taking a proactive stance towards developing close ties with end users. And this doesn’t just mean building close relationships that are designed to make users buy from you. Remember that the purpose of these relationships is to learn from the customers.

Second, a firm shouldn’t base their product development efforts on the close relationships with all customers. Instead (and here’s the real insight), you have to look for what Hipple calls "lead users."

Many people confuse the term lead users with those customers who first buy a firm’s product. But that’s not necessarily a lead user. Those customers are certainly early adopters, but lead users are something altogether different.

Lead users are potential customers have essentially been dissatisfied with currently available products, but need a product to solve their problem. Lead users then develop their own solutions (i.e., product).

This is best understood by example. In the early Printed Circuit (PC) CAD market there were users who designed PC boards with a large number of "layers", narrow "line widths", and used the fancy "surface mounted" components. Users were dissatisfied with commercially available PC-CAD equipment, so they developed their own equipment. Can users do this? Of course, because they had the knowledge and the interest. Eventually, companies began commercializing these products.

So what characterizes a lead user? Well, they have needs that mirror the general marketplace needs (and this is important, because early adopters don’t necessarily buy for the same reason as the bulk of the market). They stand to benefit greatly by getting a solution to those needs. And they have the capability of designing a product to fulfill those needs.

Other examples of lead users include the people who designed the Sun Workstation. Again, here were engineers making nerdy but powerful computers because they needed them in their work, but nothing was available. So they designed them and made a business from it.

But I’ve found lead users in other industries as well. Recently I asked managers at Amgen if they’ve seen lead users in their industry. They reported that patients with advanced forms of arthritis need drugs that require injections. However, since current syringes were too hard to handle, patients began to make there own flanges for the syringes to make injection easier. The pharmaceutical companies eventually picked up this concept.

The Point: Look for lead users in your industry and use them to get valuable information on:

• Product features that may matter most in the future
• Tomorrow's market opportunities
• Emerging customer needs

Reference: Von Hippel, Eric (1988), The Sources of Innovation, Oxford University Press, New York.