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Knowledge for Free? Distributed Innovation as a Source of Learning Alistair Bowden Public Policy and Administration 2005; 20; 56 DOI: 10.1177/095207670502000306 The online version of this article can be found at: http://ppa.sagepub.com/cgi/content/abstract/20/3/56

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Knowledge for Free? Distributed Innovation as a Source of Learning Alistair Bowden Durham County Council and Durham Business School

Abstract Distributed Innovation is an emerging framework for a novel method of new product/service development, where knowledge from within and outside the organisation is shared in an evolutionary dialogue, which consistently produces high quality results. Literature on open source software development and new product development involving 'lead users', are the main contributors to the discussion about the creative potential locked within service users. There is a growing thread of literature which seems to apply the underlying principles of Distributed Innovation in the public sector; this article looks at the process of learning from users in this paradigm. It aims to critically evaluate the advantages and disadvantages of Distributed Innovation within the public sector generally and local government specifically. When considering the great innovative potential held by service users, the ultimate goal of thisarticle is to answer two questions: can Distributed Innovation provide a source of learning: if so, is this knowledge forfree? Introduction In a world of increased pluralism, individualism and diversity of needs, it is increasingly difficult to know what users of services want. What is required above all is the active involvement of individuals in the determination of their own needs. ... When users are empowered, services become more responsive to rising expectations and demands. (National Consumer Council, 2004b, p.7)

Distributed Innovation (DI) is used here as a generic term for a suite of related innovation processes. These different models of innovation share one key characteristic: knowledge from within and outside the organisation is shared in an evolutionary dialogue (i.e. people inside and outside the organisation are both involved in an iterative process of creating possible novel ideas (mutation) and filtering out poor options (selection), until a high quality solution emerges).

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DI is an emerging process of new product/service development. Its origin lies in Open Source Software Development where large numbers of unpaid and uncoordinated users spread across the globe have produced very high quality outputs (e.g. Raymond, 2001; Lee and Cole, 2003). Additionally, the Lead User Innovation model has highlighted the gains that can be made from involving early adopters in the process of developing new products (e.g. Thomke, 2003). Critically this novel process of innovation relies on cocreation (Sawnhey and Prandelli, 2000), whereby the production organisation works intimately with the consumers to develop new goods and services. This highly successful method raises an important question - can this sort of methodology be introduced in other sectors? The public sector has undergone significant change since the New Labour government was first elected in 1997. The Modernisation Agenda has put the end-user of public services centre stage (e.g. Bennington, 2000). In local government specifically, the aim was "to shift the centre of gravity beyond the state and towards civil society, including active participation and engagement of users, citizens and communities" (Hartley et al., 2002, p.389). However, this has yet to make an impact on the attitudes of the public: a poll in July 2004 showed that 80% of the sample did not feel that they had been involved in the debate about public services (NCC, 2004a). In spring 2004, DEMOS published a pamphlet entitled "Personalisation though Participation" (Leadbeater, 2004). This contained a persuasive and stimulating argument about the future of public services: painting a picture of services developed as a dialogue between the delivery organisation and the end users. By late 2004, a number of organisations were publishing rhetorical documents that emphasised the importance of engaging users in the development and delivery of public services (e.g. NCC 2004b; NLGN, 2004; LGA, 2004). By early 2005, the ODPM produced a raft of documents under the banner Local Vision, all of which emphasised the role of local public services in re-engaging with local people (ODPM, 2005a, b, c, d). All of this literature contains a simple and powerful message - public services should open a genuine dialogue with service users. The problem with this literature is that it does not seem to be based on research or experience within the public sector. The aim of this study was to critically explore the application of these new models of innovation to the public sector, in particular to local government where they superficially appear to apply well. Specifically the study aimed to list the advantages and disadvantages of applying these techniques, and to gauge to what extent they can be applied.

Literature Review Distributed Innovation Two main sets of literature focus upon the phenomenon of DI. First, the Open Source Software Development literature (e.g. Raymond, 2001; Lerner and Tirole, 2002; Lee and Cole, 2003; Weber, 2004) concentrates on the emergent nature of the projects, as well as the self-selected and self-organised nature of Public Policy and Administration Volume 20 No. 3 Autumn 2005 Downloaded from http://ppa.sagepub.com at PENNSYLVANIA STATE UNIV on April 11, 2008 © 2005 SAGE Publications and PAC. All rights reserved. Not for commercial use or unauthorized distribution.

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the highly skilled user-developers involved (i.e. those users that temporarily become developers within the DI process). Second, the Lead User Innovation literature (e.g. von Hippel et al., 1999; Thomnke and von Hippel, 2002; von Hippel and Katz, 2002; Thomke, 2003) focuses on new product/service development initiated by organisations that involve users with the greatest prior knowledge of the innovating company and its systems, and who have the most stretching requirements for innovative new products. Locus of Innovation in DI The essence of DI is that the process of new product/service development is an intimate co-creation between producers and users. It is a process of tapping into knowledge and creativity that lies beyond the boundary of the organisation. As Sawhney and Prandelli (2000, p.25) describe it: "The community of creation is a permeable system, with ever changing boundaries. It lies between the closed hierarchical model of innovation and the open market-based model. The community is governed by a central firm that acts as the sponsor and defines the ground rules for participation". There are three ways of looking at why innovation takes place in communities of creation. The first relates to the concept of 'sticky information' (von Hippel, 1994). In essence this applies to what has been termed tacit knowledge (Nonaka and Takeuchi, 1995), as well as attributes of the information seekers or providers (von Hippel, 1994, pp.430-32). In the real world producers have extensive knowledge of particular goods and services, but limited knowledge of user needs. Therefore there is "an incentive to shift problem-solving activity to the locus of the less frequently called-upon sticky information [that is] to the user" (Franke and von Hippel, 2003, p.1203). Lee and Cole (2003) propose a second more dynamic model of knowledge creation termed the 'Community-Based Model'. As with the 'sticky information' model they argue that great advantage can be found from working closely with end-users, but emphasise the evolutionary nature of this process. Five principles are seen to underpin the Community Based Model (op. cit., p.635): knowledge is public, which promotes trust and knowledge sharing; membership is open so the scale of the community is unconstrained; members of the community are volunteers with related incentives and motivations; knowledge is distributed across organisational and geographic boundaries; knowledge platform of many-to-many communications creates increased freedom. A third reason why innovation takes place in communities of creation has been proposed by Andriani (2001, pp.267-9), who argues that rather than being present in individuals, knowledge actually resides within social systems. Those systems may go beyond the boundary of the organisation thereby giving access to increased knowledge and the potential to innovate. This relates to Sawhney and Prandelli (2000, p.28) who argue: "New knowledge is the output of a synergistic interplay between individual contributions and social interactions".

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Process of DI The defining characteristic of DI is in what von Hippel and Katz (2002, p.826) describe as "trial and error cycles"; ideas are proposed, then evaluated by the other user-developers, refinements are made and this process carries on cyclically. This is what Jeppesen and Molin (2003, p.379) call "lower-level learning - through interaction in the community consumers solve technical problems and learn to master the toolkit and thus create better designs". This is seen by Lee and Cole (2003) as the backbone of knowledge creation in DI; they perceive the fundamental process of DI as the criticism that drives quality improvement. This view of an evolving solution is underpinned by two ideas. First is diversity. DI deliberately embraces diverse people and their diverse ideas as a source of novelty (e.g. Kuwabara, 1999, pp.22-3; Raymond, 2001, pp.30-32; Lee and Cole, 2003, p.645). Second is selection. This is the mechanism that takes the potential ideas or innovations and subjects them to group critique. The criticism then leads to further development or eradication of potential innovations - all the while the mean quality improves (Lee and Cole, 2003, pp.644-6). The real power of DI lies in the long-term use of this process to create profound innovation. Through extended peer-review the actual toolkit is challenged. User-developers demand more skills and knowledge and they also challenge the parameters they have been set; this "higher-level learning ... may give rise to radical innovation" (Jeppesen and Molin, 2003, p.379).

Distributed Innovation in Context Traditional New Product Development and New Service Development have much in common; most importantly the locus of innovation is firmly within the organisational boundaries (Figure 1). However the process of each does differ significantly (Figure 2): the former process is highly linear with relatively long periods of stasis punctuated by irregular periods of rapid change (e.g. Rothwell, 1994); the latter process is characterised by gradual incremental change (e.g. Dolfsma, 2004). Distributed Innovation differs in two significant regards. The source of knowledge and creativity lies outside the boundary of the organisation (Figure 1). More significantly, the process of change is an evolutionary process of knowledge creation (Figure 2). Research Setting The 'Machine Metaphor' has so far dominated New Labour rhetoric - "there is much talk about 'tools', 'policy instruments', 'levers of change', 'drivers of change', 'hitting targets'..." (Hartley et al., 2002, p.391). The underlying philosophy is steeped in scientific management theory and more recent ideas around business process reengineering, and tends to miss the mass of social and contextual factors. This emphasises the imposed nature of the strategy underlying the modernisation programme, and has resulted in relatively superficial participation exercises - "... community participation in policy Public Policy and Administration Volume 20 No. 3 Autumn 2005 Downloaded from http://ppa.sagepub.com at PENNSYLVANIA STATE UNIV on April 11, 2008 © 2005 SAGE Publications and PAC. All rights reserved. Not for commercial use or unauthorized distribution.

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Figure 1: Relationships between product focus and locus of innovation for new product development, new service development and distributed innovation

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tereareiniaonsid thetthrgansatieOutsgideteogansto years The initial changes in New Labour rhetoric seemed to coincide with the DEMOS publication "Personalisation through Participation" (Leadbeater, 2004). This builds on established public sector ideas of consultation, but it also draws on a broader range of innovation literature. Furthermore, it has many parallels with the Open Source Software Development (it is clear that people at DEMOS have read about Open Source - e.g. Leadbeater, 2003; Rushkoff, 2003; Mulgan et al., 2005). In the introduction, Leadbeater talks of "more pervasive and powerful bottom-up innovation", "users as co-producers" and states that "the key is to build up the knowledge and confidence of users to take action themselves" (op. cit., pp.1 7-18). Leadbeater proposes 5 levels of personalisation (op. cit., p.21-24); Distributed Innovation conforms to level 4 (co-design and co-production) and level 5 (self-organisation). As attention shifted towards the May 2005 general election, there was a distinct blossoming of rhetoric about the importance of deep and genuine participation, from think tanks, lobbyists and politicians. The New Local Government Network (2004) looked in detail at 'choice'; who delivers services and also how they are delivered. This was expanded by the National Consumer Council (2004b), who go beyond the consumerist option of 'choice', looking at 'voice' as a means of empowering users to enter into a dialogue from commissioning, to supply, and beyond to monitoring, as an aid to professionals balancing the conflict of resources allocations. All of this was

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Figure 2: Visualisation of the different processes of innovation (the horizontal axis represents relative innovation)

Time

Innovation a. New Product Development; b. New Service Development; c. Distributed Innovation. [Note: Di is shown as a 3D spiral (the illustration is meant to give the image of upwardly spiralling process of change, not a 2D flat image of a process that can move backwards in time). This demonstrates that the process is iterative and spirals through a much more varied 3D potential innovation space searching for best fit between user needs and organisational capabilities. The overall slightly steeper angle is suggestive that the process results in greater innovation.] included within the Local Government Association (2004) Manifesto for Local Communities, which puts forward a rounded case of devolving power to local government and then to communities, as a mechanism for improving public service quality and responsiveness. By September 2004, Tony Blair outlined seven key policy challenges at the centre of Labour's strategy for winning a third term; the second of these was "personalised public services" (Guardian, 2004). This was followed in spring 2005 by a raft of publications from the ODPM (2005a, b, c, d). It is within this climate of interest in participation, co-creation and self-organising change that this study is set.


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Methodology This study is based on a qualitative research strategy, which follows a grounded theory research design. "The purpose ... is to build theory that is faithful to and which illuminates the area under investigation. The intention is to arrive at prescriptions and policy recommendations with the theory which are likely to be intelligible to, and usable by those in the situation being studied" (Collis and Hussey, 2003, p.73). Data Collection Methods Semi-structured interviews were selected as the primary method of data collection; these broadly followed an interview guide (available on request). Open questions explored interviewee's thoughts on the advantages/ disadvantages and applicability of DI. Thirty-two people were interviewed between 26 November 2004 and 1 September 2005. Interviewees were informed, senior members of staff, controlling individual business units or holding a strategic regional position in a local government context. Each interview lasted one hour and was carried out face-to-face in the office of the interviewee where possible, but three had to be carried out by telephone. Copious notes were taken during the interviews as the basis of later analysis. Data Analysis Methods This study followed a grounded theory data analysis method (e.g. Bryman, 2001, pp.390-97; Collis and Hussey, 2003, pp.272-6). Open coding was used to identify the key recurring concepts raised by interviewees; there was a long and evolving iteration of these concepts as the interviews progressed. Broader categories were then set up that grouped the related concepts. Perhaps due to the semi-structured nature of the interviews, it was difficult to impose a detailed taxonomy of categories and subcategories, so the concepts were simply grouped into two broad categories: advantages and disadvantages.

Results and Analysis The following sections are structured around the two broad categories that emerged from the grounded theory coding analysis. Key remarks made by interviewees are used to illustrate the major themes and the results are related to the literature discussed above. Advantages There are nine themes within the advantage category; these themes were made up of 154 remarks (Table 1 shows the most significant themes). By far the most frequently mentioned theme with 57 remarks relating to it, is that DI would lead to products/services being more suited to user need and therefore be more effective and efficient: "we don't recognise our own weaknesses"; "people know what they want"; "arrive at best possible solution, or at least a better one, this is the one really outstanding advantage". This is the very essence of the community of creation literature (e.g. Sawhney and Prandelli, 62


2000), and also underpins the Open Source Software Development literature (e.g. Kuwabara, 1999; Raymond, 2001), the modem extreme marketing literature (e.g. Franke and von Hippel, 2003; von Hippel and Katz, 2002), as well as the static (e.g. von Hippel, 1994) and the dynamic knowledge management literature (e.g. Andriani, 2001; Lee and Cole, 2003). The second most common theme to be raised by interviewees is that DI would offer significant learning opportunities for people within the sponsor organisation as well as the people taking part from the community: "development of professional practice (staff and organisation learning)", whilst providing an "inspiring learning environment" for the "community to learn management and other skills". This resonates well with all the literature on toolkits (e.g. von Hippel and Katz, 2002), the iterative process of knowledge creation (e.g. Lee and Cole, 2003) and also on peer review (e.g. Jeppesen and Molin, 2003). The next set of themes are related. The third theme focuses on the democratic nature of co-creation: "as we are publicly funded, there is a responsibility to engage with all relevant sections of the community [and DI can help]"; "it is more democratic, accountable and transparent"; "delivery of public services is partly the responsibility of local authorities, but is also partly the responsibility of local communities - civic joint responsibility"; "enable people to modify their own social environment". The fourth theme focuses on the resulting ownership of co-created products and services: "people are included therefore it helps towards community sustainability and cohesion"; "ownership (e.g. young people planning their own playground - proud therefore protective therefore less likely to vandalise)"; "everyone is committed to making it work". The fifth theme focuses on the resulting changed perceptions following co-creation: "help to change people's views and perceptions of public services"; "does a lot for local authority's reputation"; "DI could be a help where rhetoric doesn't match reality - it could bring people in touch with reality and allow it to shape future developments (e.g. fear of crime and actual crime)". All three of these themes relate closely with key issues from the New Labour modernisation agenda (e.g. Bennington, 2000, pp.4-5). In particular, they relate well to the emerging issues that were the focus of attention at the start of the third term of government - re-invigorating the democratic process by involving citizens in participatory local decision making (ODPM, 2005a; 2005b). The next theme grouped a series of statements about how DI can be a wideranging creative influence: it could "refresh and invigorate", provide "novel feedback", as well as "stimulate the authority" and ultimately "keep the service youthful". This may relate to learning (as described above), the reintegration of modules and the unpredictable consequences of this process (Ethiraj and Levinthal, 2002, pp.4-5), as well as the increased diversity of agents (Lee and Cole, 2003). A number of remarks were raised about the influence of DI on organisational change: "opportunity to break down silos"; "more crossPublic Policy and Administration Volume 20 No. 3 Autumn 2005 Downloaded from http://ppa.sagepub.com at PENNSYLVANIA STATE UNIV on April 11, 2008 © 2005 SAGE Publications and PAC. All rights reserved. Not for commercial use or unauthorized distribution.

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functional view"; "re-defines purpose of service providers and managers role". These statements echo New Labour's emphasis on a customer orientation rather than a professional or functional focus, and also relate to the ways in which private sector organisations have already been embracing greater outsourcing and increased organisational boundary permeability.

Table 1: Themes within the advantage category and the frequency of individual remarks (only themes with more than 5 remarks are shown) Code Freq. More suited to user needs - more effective and efficient 57 22 Learning 15 Democratic Creates user ownership 15 14 Changing perceptions Creates spark 13 Creates organisational change 8 Disadvantages The disadvantages have been grouped into eight themes, made up of 77 remarks (Table 2 shows the most significant themes). The most commonly perceived disadvantage with DI is that it is resource intensive: DI is perceived as "extremely labour intensive", "time consuming"; "resource heavy", with large "initial set up costs". This does not appear to be an issue raised in the Open Source or Lead User literature; there are two possible related explanations for this. First, unlike the private sector, any additional investment in improving the quality of service in the public sector is highly unlikely to produce significant return on investment (commonly there will be no related income at all). Therefore the introduction of DI will result in less expenditure in service delivery elsewhere, with potentially political ramifications. Second, in the service sector generally new service development is constant, ad hoc and unseen (e.g. Dolfsma, 2004). This means that to make an overt and significant commitment to a DI like process (when the 'normal' new service development will continue regardless), will be committing additional resources to innovation. The second most frequent disadvantage raised by interviewees was the lack of control that professionals within the sponsor organisation might feel under a DI regime: one interviewee expressed this theme rather well - "there might be a lack of control - it could get out of hand - like Frankenstein's monster". Again this issue is noticeably lacking from the established literature. This may be related to a caution of working with yet another stakeholder in what is already a complex environment (e.g. Pierre and Stoker, 2000), or it may be a reaction to working with a powerful external partner when this would imply greater reduction of professional power and also when managers are held more accountable for performance (Bennington, 2000). 64


The third significant theme was the potential on both sides for unfulfilled expectations: on the side of users - the "danger of raising expectations that can not be fulfilled"; whilst also from the organisation perspective - "if the project doesn't produce something very special, then there would bad repercussions staff morale, funders, organisation management etc.". On the part of the organisation, if the high expectations are not fulfilled then there could be serious repercussions for future attempts to use DI. In terms of userdevelopers, there has to be a net benefit from taking part (Lerner and Tirole, 2002, pp.212-23). If there are unfulfilled expectations at any stage of the process, user-developer motivation will be adversely affected. The fourth theme was about the challenge that DI presents to the organisation and the individual. At the level of governance, remarks were raised such as "we won't get political support, as it's a challenge to power and authority", whilst at the personal level someone with experience said "the issues raised are often difficult - people raise points that make you squirm in your chair". The first remark is very much the point of discussion in the ODPM document Vibrant Local Leadership (ODPM, 2005d); redefining the roles of local political leadership (the councillors chosen by citizens) and citizens themselves. The impact of DI on relationships with other stakeholders was an issue raised a number of times. Some people emphasised the importance of internal stakeholders, for example "it is important to use internal user developers as well as external", whilst others emphasised the importance of a broader community, for example "users are not our only important stakeholder".

Table 2: Themes within the disadvantage category, the frequency of individual remarks and example statements (only themes with more than 5 remarks are shown) Code Freq. Resource intensive 35 Lack of control 18 Unfulfilled expectations - on both sides 10 Challenge to the organisation and individuals 8 Sideline other stakeholders 5 Conclusion The thirty-two 1 hour semi-structured interviews with senior staff from a local government context, produced over 200 remarks which have been grouped into 17 themes and 2 categories as part of a coding exercise. Based on the data gathered during this study, DI can provide a valuable source of learning. Interviewees overwhelmingly emphasised the potential to gain a greater understanding of current and potential user needs. They felt that this would be an important source of knowledge that would enable public sector organisations to deliver much more effective services that directly Public Policy and Administration Volume 20 No. 3 Autumn 2005 Downloaded from http://ppa.sagepub.com at PENNSYLVANIA STATE UNIV on April 11, 2008 © 2005 SAGE Publications and PAC. All rights reserved. Not for commercial use or unauthorized distribution.

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catered for user needs and thus also make the services more efficient. Interviewees felt that a positive side effect would be that DI also offered an important source of learning for the users who were involved. Whether or not this knowledge is 'free' is less clear-cut. On the one hand this knowledge is truly free, in that there are no traditional contractual arrangements by which cash is exchanged for labour/knowledge. However on the other hand, this knowledge is definitely not for free; interviewees strongly emphasised the resource intensive nature of DI. This was largely due to the significant staff resource that would have to be devoted to the task, but the initial set up costs were also seen as a problem. Ultimately this research suggests that applying DI in the public sector generates significantly more effective services. However careful consideration needs to be given to the trade-off between the cash savings made from the improved efficiencies of the better targeted services provided, and the resource intensive nature of the DI process.

Acknowledgement Much of the work for this article was carried out under the auspices of Durham Business School, initially as part of my MBA and then as a Visiting Fellow. The support of the Business School is gratefully acknowledged.

Note The support and direction of Pierpaolo Andriani and Joyce Liddle during this research is gratefully acknowledged, as is the interest and enthusiasm of attendees of the PAC 2005 conference in Nottingham. The constructive and insightful comments of two anonymous reviewers are greatly appreciated. None of this research would have been possible without the generosity of many people who gave up their time to be interviewed - this is acknowledged with gratitude. Finally I would like to thank Sonia for her clarity and tolerance.

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