Products Created Through Lead User Process Generate Sales That Are Eight Times Higher

Companies hoping to increase their rate of breakthrough with new product generation may want to follow 3M's approach. Products created through the corporation's lead user process generate sales that are eight-times higher than those products developed through more traditional methods.

That's according to a recent study co-authored by Gary Lilien, distinguished research professor of management and research director of the Institute for the Study of Business Markets (ISBM) in Penn State's Smeal College of Business Administration. The study, "Performance Assessment of the Lead User Idea Generation Process for New Product Development," was presented at a recent ISBM conference.

"3M is known for its innovation capabilities and we find that the lead user process improves upon those capabilities," says Lilien.

Annual sales of lead user product ideas generated for the average lead user project at 3M are conservatively projected to be $146 million after 5 years--more than eight times higher than sales for the average contemporaneously-conducted "traditional" project. Each funded lead user project created a major product line for a 3M division. As a direct result, divisions funding lead user project ideas experienced their highest rate of major product line generation in the past 50 years.

"Many firms use customer-focused new product development processes to generate new product ideas based on information collected from current or potential users. What distinguishes such processes across companies is the kind of information they collect and the respondents from whom they collect it," explains Lilien. "Most traditional market research techniques collect information from users at the center of the target market."

The "lead user" (LU) process, developed by Prof. Eric von Hippel of MIT, takes a different approach, Lilien notes, collecting information about both needs and solutions from the leading edges of the target market and from markets that face similar problems in a more extreme form. 3M started using this process in 199, and Bill Coyne, 3M Senior VP of R&D says: "This is the best process I have seen for replicating what originally made this company great."

The study found that the lead user idea generation process offers significant value even to an innovative company such as 3M. It also found that funded projects emerging from 3M lead user studies had significantly high novelty (usually being judged "new to the world"), addressed more original newer customer needs, and also had significantly higher market share in year five (on average 68 percent vs. 33 percent for non LU ideas) than did those from more conventional methods.

Lilien offers descriptions of four innovations that LU process teams generated at 3M:

• A new approach to the prevention of infections associated with surgical operations. The new approach replaces the traditional "one size fits all" approach to infection prevention with a portfolio of patient-specific measures based upon each patient's individual biological susceptibilities. This innovation involved new product lines plus related business and strategy innovations made by the team to bring this new approach to market successfully and profitably.

• Electronic test and communication equipment that, for the first time, enables physically isolated workers such as telecommunication equipment repair people to carry out their problem-solving work as a team. Linked workgroup members can contribute to the solution of a problem being worked upon by a single, physically isolated worker in real time.

• A new approach, implemented via novel equipment, to the application of commercial graphics films that cuts the time of application from 48 hours to less than 1 hour. (Commercial graphics films are used, for example, to cover entire truck trailers, buses and other vehicles with advertising or decorative graphics.) The LU team ideas involved needed technical innovations plus related channel and business model changes to help diffuse the innovation rapidly.

• A new approach to packaging fragile items in shipping cartons to replace current packaging materials such as foamed "plastic peanuts." The new product lines implementing the approach are more environmentally friendly and much faster and more convenient for both shippers and package recipients than are present products and methods.

Following their finding that the LU method tends to produce ideas for major product lines, they compared the major product line ideas generated by the LU method with those that had been generated by the 3M divisions in the study via other methods. Examples of historical major product lines in our sample include:

• Scotch tape: A line of transparent mending tapes that was a major success in many household and commercial applications.

• Disposable patient drapes for operating room use: A pioneering line of disposable products for the medical field now sold in many variations.

• Box sealing tapes: The first type of tape strong enough to reliably seal corrugated shipping boxes, it replaced stapling in most "corrugated shipper" applications.

• Commercial graphics films: Plastic films capable of withstanding outdoor environments that could be printed upon and adhered to vehicles. This product line changed the entire approach to outdoor signage.

• Insulation displacement-type connectors: This type of connector makes reliable electrical connections to telecommunication wires by displacing insulation and contacting the metal wire underneath. This technology represents a significant improvement over previous technologies, and has become the standard type of wire connector in the telecommunications field.

During the 1950-2000 period, the 3M divisions studied produced 21 major product lines. During the 1997-2000 period, they produced 5 of those major product lines using LU methods and two using non-LU methods.

"We hope that these results will stimulate other researchers to explore and further develop what we see as a promising new paradigm for the idea generation phase of new product and service development," says Lilien.

The ISBM is a research center in Penn State's Smeal College of Business Administration and is networked with researchers, educators and practitioners in business-to-business marketing in companies and universities throughout the world. Its primary purpose is to assist with business-to-business marketing in the new global economy.

The study was co-authored with Pamela D. Morrison of the University of New South Wales, Eric von Hippel of MIT, Kathleen Searls of ASI Associates, and Mary Sonnack of 3M.