Pedro Oliveira's Paper Receives 2nd Best Paper Award Innovation Management 2011
The paper "Users as Service Innovators: The Case of Banking Services", Research Policy, 40 (6), 806-818) written by Pedro Oliveira, professor at the Católica – Lisbon School of Business and Economics and coordinator of the the Doctoral Program in Technological Change and Entrepreneurship (TCE), and Eric von Hippel, from Sloan School of Management (MIT), has won the 2nd Best Paper Award Innovation Management 2011. The paper was selected out of over 40 recently published papers and the final round was held at the EBS Business School in Germany on July 26th, where the three finalists of this challenge presented their papers.
“To the best of our knowledge this was the first study that focused on user innovation in services,” said Pedro Oliveira adding that “our findings contradict the producer-centered views of innovation management.” The authors speculate that the patterns observed in banking with respect to the major role of users in service development will prove to be quite general, and if so, “this will be an important matter: on the order of 75% of GDP in advanced economies today is derived from services.”
In the study Oliveira and von Hippel found that users (both retail and corporate users) often develop and self-provide important services before banks begin to offer them. “In 55% of commercial banking services in our sample, user firms developed and self-provided computerized versions of the services earlier than banks offered them.” The authors gave the example of the computerized payroll processing that was first developed and used in the early 1950’s as a self-service by J. Lyons and Co, a major baking and catering firm in the UK. “In 44% of retail banking services in our sample, we found that individual users of retail bank services had developed and self-provided computerized versions of these services before banks or other types of service providers offered them.” Oliveira and von Hippel gave the example of the computerized aggregation of account information across multiple institutions which was first implemented by individual “hackers” for their own use in the 1980’s. “In the case of manual versions of banking services: 92% of corporate banking services and 80% of retail services were developed and self-provided by users before being offered by banks,” said Pedro Oliveira.
The authors analyzed the period from 1975 to 2010 in the US commercial banks ”for two reasons: by looking at more recent service innovations we expect to find better data on the sources of innovation. Also, during this period banks and banking users were engaged in heavy investments in computerization of their processes,” therefore Pedro Oliveira and von Hippel expected to find a large number of software-based financial services introduced in this period. Pedro Oliveira continues: “most of the services are also available in Portugal and other countries and the results hold across borders.” In fact the authors have had the support of a major Portuguese bank for their research.
“The award was based not just on scientific merit but mainly on ‘managerial relevance’ and half of the members of the jury were from representatives from industry,” said Pedro Oliveira adding he was pleased with this award “due to the very high quality of the other finalists in this competition.”
For Pedro Oliveira and Eric von Hippel “there are clear practical implications of our findings for service producers seeking to innovate," like “it is useful to recognize that service innovations, just as is the case for product innovations, are often first developed by lead users.”
“User Innovators” in the Development of Telecom Products and Services
This study about users as service innovations of banking services “motivated us to look at the role of users in developing new products and services for telecom and Information and Communication Technologies (ICT).” The truth is that when the authors talk about innovation in banking services, they are aware that many of these new services are built upon other ICT and telecom products and services. Therefore, Pedro Oliveira and Francisco Veloso, from Carnegie Mellon University, decided to carry out a new research project entitled “The Role of ‘User Innovators’ in the Development of Telecom Products and Services”, which has this issue as a major focus. The project is funded by the Carnegie Mellon Portugal Program, through the Fundação para a Ciência e a Tecnologia.
It involves the Universidade Católica Portuguesa (UNICEE/FCEE/UCP), Faculdade de Economia da Universidade Nova de Lisboa (FE/UNL), ISR Lisboa, Carnegie Mellon University (CMU), and the companies Ericsson Nikola Tesla and Nokia Siemens Networks. A study that it “is only possible due to the support of the Carnegie Mellon Portugal program,” said Oliveira. Pedro Oliveira and Francisco Veloso are the principal investigators of this project which involves several dual degree Ph.D. students namely Paul van der Boor (Technological Change and Entrepreneurship), Leid Zejnilovic (Technological Change and Entrepreneurship), Miguel Godinho (Engineering and Public Policy), Moinul Zaber (Engineering and Public Policy), Rodrigo Belo (Technological Change and Entrepreneurship).