Lead user is a term developed by American economist Eric von Hippel. His definition for lead user is:
Lead users face needs that will be general in a marketplace – but face them months or years before the bulk of that marketplace encounters them, and Lead users are positioned to benefit significantly by obtaining a solution to their needs and so may innovate. Lead users are a very important source of innovative progress because they often pioneer - acting earlier than producers to develop important new types of products and applications. Spearheading innovation benefits lead users because they innovate to serve their own needs. For this reason, they need not concern themselves with whether others will also want what they are developing for themselves. In contrast, producers tend to wait for evidence that there is a broad, profitable market to be served before they can justify investing in a new type of innovation. For example, mountain bikes were developed by individuals who simply wanted to bike down mountains for fun, and so invented the sport of mountain biking for themselves. Bike producers stood by, simply watching and waiting for years until the extent of the market became clear. Finally, after the new sport had spread to hundreds of enthusiasts who participated by building their own "clunker" mountain bikes, producers finally entered the new market with the first commercial mountain bike products. Because lead users develop new products and services and also modify existing ones, they are related to the creative consumer phenomenon, that is, those "customers who adapt, modify, or transform a proprietary offering".
Lead User method The Lead User method is a market research tool that has been developed to assist producers in identifying lead users' innovations, and analyzing the commercial potential of those innovations. The methodology is based upon the idea that breakthrough products can be developed by identifying leading trends and needs that already exist in marketplaces, and then developing the product specifically to cater to those trends and needs. This method was originally developed by Dr. Eric von Hippel, and first described in the July 1986 issue of Management Science. In contrast to traditional market research techniques, which collect information from the users at the center of the already-established target market, the Lead User method instead collects information about needs and solutions from the leading edges of the target market and from "analogue markets", made up of people who face similar problems in a more extreme form. The Lead User methodology involves four major steps:
Start of the Lead User process Identification of Needs and Trends Identification of Lead Users and interviews Concept Design (Workshop). Once the trend or need has been identified, the developers seek out lead users: people or organizations that are attempting to solve a particularly extreme or demanding version of the stated problem. For example, a company seeking to create a breakthrough in flashlight design may seek out groups of people who require bright, efficient, and portable lights as part of their day-to-day business. The company may identify policemen and home inspectors as lead users. Once the lead users have been identified, networking is employed and the lead users are interviewed in order to gain insight into how these users solve the problem for themselves. The interview also includes questions that are designed to determine whether the lead users know of any individuals or organizations who are considered to be “outside the market” and have even more extreme needs. In the flashlight example, these users might be photographers, divers, or movie lighting designers. By learning from both the lead users and the outside-the-market users, companies may identify new methods or approaches towards creating genuinely innovative products that may not have surfaced if the company had employed traditional marketing techniques.
Review of existing literature Research on lead users emerged from studies on sources of innovation. It was first found that users (as opposed to manufacturers) are often the first to develop new products that are commercially successful. Additionally, it was found that innovation by users tended to be concentrated among the “lead users” of those products and processes. These lead users were individuals or organizations who had experienced needs for a given innovation earlier than the majority of the target market. Recent research highlights the fact that lead users exist for services as well. Various studies have explored the effectiveness of this theory in terms of identifying any user innovations. The effect found in these studies tends to be very large; for example, Urban and Von Hippel found that 82 percent of a given lead-user cluster had developed their own version of, or had modified a specific type of, the industrial product under study… whereas only 1 percent of the non-lead users had done this. Empirical studies have also found that many of the innovations developed by users have commercial attractiveness. For example, in 1988 Urban and Von Hippel found that lead user theory can be effectively utilized in industrial software product development; in 2000 Morrison, Roberts, and Von Hippel found that many IT innovations developed by libraries had broader potential value; and in 2003 Luthje found that 48 percent of surgical innovations developed by surgeons in university clinics in Germany could be produced as commercial products. Based on its widespread success, it has been suggested that the lead user methodology should be integrated into corporate new product development efforts. Companies may benefit (to a large extent) as they try to learn from lead users about the needs and solutions encountered at the leading edge of the market. Increasingly, this type of customer integration is being discussed among innovation management scholars. The idea is also spreading rapidly in the business world; for example, lead-user concepts developed and used at 3M showed product sales potential that was an average of eight times higher than for sales of products using more traditional development concepts / processes.
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