In today\u2019s economy, particularly in the high-tech sector, companies must innovate or die. It\u2019s simple: Time is short, and a once brilliant idea can be copied too easily, too quickly if the idea doesn\u2019t evolve. Eric von Hippel, a professor at the Massachusetts Institute of Technology (MIT), and Karim Lakhani, a former MIT student, have been studying the process of how innovation works in the development of open-source software, with particular consideration to the Apache HTTP server. Their research, which they have presented at conferences and which appears on MIT\u2019s website (www.mit.edu), has important implications for any company interested in developing functionally novel breakthroughs.As professor of innovation management at MIT\u2019s Sloan School of Management, von Hippel focuses his research on developing strategies to identify new ideas and innovations systematically and quickly. Lakhani, who has a master\u2019s degree in technology and policy from the MIT School of Engineering, is a consultant with The Boston Consulting Group. He specializes in strategy issues in high-tech and e-commerce companies.In addition to the Apache server, other prominent examples of open source, or freeware, are the Linux operating system, Perl programming language and the e-mail program Sendmail. Open source grew out of the free software movement started by Richard Stallman, founder of the Free Software Foundation, in the mid-1980s. Members of the self-described open-source "tribe" advocate the unrestricted and free release of software\u2014including the underlying code\u2014liberating users from slavish dependence on proprietary software, as well as enabling users to make modifications to meet their own needs and to contribute to the development of the software. (For more on this, see "Free Radicals," CIO, March 15, 1999, or visit the CIO archives on CIO.com.)\n\nFreelance writer James Barron recently talked with the two researchers at von Hippel\u2019s MIT office about their research and how open-source software can help organizations discover hidden ideas and concepts.\n\n\n\n \n\n\n\n\n\n\n\n\n\nCIO: Eric, your work challenges prevailing wisdom regarding innovation. That model assumes that the product manufacturer almost always drives innovation. Your research asserts that functionally novel products and services tend to be developed by "lead users." Would you explain what you mean?\n\n \n\n\n\nvon Hippel: First let me describe what I mean by the term "users." Users may or may not be direct customers of the manufacturer. They may be in different industries or segments of the marketplace, but they are out in the field trying to do something, grappling with real-world needs and concerns. Lead users are an innovative subset of the user community displaying two characteristics with respect to a product, process or service. They face general needs in a marketplace but face them months or years before the rest of the marketplace encounters them. Since existing companies can\u2019t customize solutions good enough for them, lead users go out there, patch things together and develop their own solutions. They expect to benefit significantly by obtaining solutions to their needs. When those needs are evolving rapidly, as is the case in many high-technology product categories, only users at the front of the trend will have experience today with tomorrow\u2019s needs and solutions.\n\nCompanies interested in developing functionally novel breakthroughs\u2014as opposed to improvements along known dimensions of merit such as speed and capacity\u2014will want to find out how to track lead users down and learn from what they have developed. We have developed systematic ways to do this via lead-user research. Studies of project outcomes to date at 3M, which has been a pioneer in applying lead-user methods, show more than $100 million in new, projected sales per project. \n\n\n\n \n\n\n\n\n\n\n\n\n\nKey developers of open-source software programs like Apache are lead users ahead of the curve. They are also innovators who spend a tremendous amount of intellectual capital to develop their innovations. What motivates them?\n\n \n\n\n\nvon Hippel: Users who innovate do so basically because they have a need that they cannot fill with available commercial products. Their major reward is the in-house use of what they have developed. In addition, of course, they may enjoy the work of innovation itself as the creativity researcher Mihaly Csikszentmihalyi has shown. Innovators in the open-source field also gain a reputation by publicly reporting their innovations. Eric Raymond has written a very insightful book called The Cathedral and the Bazaar: Musings on Linux and Open Source by an Accidental Revolutionary, which discusses motivations of open-source participants in detail.\n\n\n\n \n\n\n\n\n\n\n\n\n\nWhat other important lessons have you learned from studying the open-source movement?\n\n \n\n\n\nvon Hippel: It\u2019s clear that users of various products, processes and services are simultaneously developers of important innovations in many fields. We have also shown that the locus of innovation is increasingly shifting toward users. Apache and other open-source software programs provide compelling examples of a possible future for large segments of the economy consisting of complete user-to-user innovation systems\u2014and that is why we are studying them now.\n\nComplete user-to-user innovation systems involve not only the development of improvements for products or services, but also distribution of those innovations, updating, field support and other tasks, all of which must somehow be carried out by users. In our research on open-source software, we are looking at how all of these tasks are being carried out\u2014even the relatively mundane ones like field support. \n\n\n\n \n\n\n\n\n\n\n\n\n\nWhat is the place of open-source software in the corporate community?\n\n \n\n\n\nLakhani: At the broad corporate level, there has been resistance about using open-source software as part of the corporate infrastructure. That is changing, and people are realizing that there is a trade-off between using open source and buying something off the shelf packaged by Microsoft, Sun Microsystems or someone else. Open-source software allows you to control your own destiny. If there are things you need that aren\u2019t being done by vendors, you always have the capacity to make the changes yourself and to adapt the system to your particular requirements. If you\u2019re a CIO or IT decision maker, you should at least be thinking about how to deploy open-source solutions within your environment. \n\nCompanies like Akamai Technologies, the BBC and Boeing are using Linux and Apache as part of their basic infrastructures. Computer vendors such as Dell, Compaq and IBM are now selling native open-source solutions along with traditional commercial software. Linux has yet to migrate to the desktop of ordinary users doing their jobs, but that is starting to happen with more sophisticated windowing environments like Gnome and KDE and the introduction of office productivity software like Sun\u2019s StarOffice.\n\nPeople often get caught up with the cost savings of open source. It\u2019s free. But the bigger issues are around its robustness, its meeting your current needs and its ability to evolve to meet your future needs. With open source, to some extent, you can drive the development yourself and contribute features that change the functionality to meet your requirement so that perhaps you have a competitive advantage.\n\n\n\n \n\n\n\n\n\n\n\n\n\nOpen and free are terms that might make people nervous when it comes to technology. What about the security of open-source software?\n\n \n\n\n\nLakhani: We don\u2019t have hard empirical evidence yet, but we have a strong hypothesis that open-source solutions are more secure than proprietary software because there are no backdoors or traps built into them. You have many different eyes looking over the source code again and again. It\u2019s like a peer review process, so security holes are found very quickly. And you\u2019re not waiting for a company to give you the solution. If you find a security hole, you have the power to go in and fix it. So from a security perspective, there is an argument to be made that the open-source methodology and process are superior to what the closed model is providing.\n\n\n\n \n\n\n\n\n\n\n\n\n\nDoes open source have any effect on knowledge transfer and community building among employees and users?\n\n \n\n\n\nLakhani: Apache, as an example of open source, shows that there might be alternatives to providing user support. The help desk won\u2019t go away, but you can augment it. You can provide an environment where users interact in technical matters, and you can capture that information and make it publicly available. You need to look closely at ways of rewarding people who can and do provide help.\n\nThere is another way in which open source impacts the sense of community within an organization. There\u2019s a war for talent out there in terms of getting the best people to work for you. And open-source software is considered sexy to some extent. If you can find ways for your IT people to do not just the necessary technical stuff but also to expand your offerings, expand your technology and infrastructure by using open-source software, you might have a competitive edge, especially in the technical and hacker communities. von Hippel: Open-source software demonstrates that there are new ways for users to come together. Apache is an example of a completely user-driven innovation system. Its success raises important questions: How do companies tap into their user and customer bases and leverage them to produce better products and solutions? How do companies escape the not-invented-here syndrome and effectively incorporate different people in the development process itself\u2014not simply survey the market and say What are your needs and we\u2019ll find the solutions?Lakhani: If we look at how innovation works, I think people have a real need to contribute. Open-source software is a live example of user innovation moving across the entire spectrum from design and development to execution to support and upgrades. I think the reason Linux succeeded and Apple faltered has really been about providing or not providing a way for people to contribute. If you go back to the days when there were rabid fans of Apple, people who just loved Apple and would die for it, they had no way to demonstrate their affection other than just talking it up and perhaps writing applications around Apple. But they really couldn\u2019t contribute in significant ways to Apple. Now Linux, Apache and the open-source movement have the same kind of rabid fans, people who really love it\u2014it\u2019s a religious conviction for them\u2014and they can contribute to it, can contribute source code, can contribute patches, can help each other out. And it is amazing to think that people can have this strong affection for open source and actually help it evolve. That\u2019s why Linux and Apache have taken off, and Apple reached a plateau and then dropped off the radar.Your research contains powerful lessons about innovation. Should CIOs who are concerned about innovation in their departments and companies be looking into this?von Hippel: We believe Apache and open source are terrific examples of the lead user innovation process that can take teams and companies in directions they wouldn\u2019t have otherwise imagined.