The market inside

Here is a new solution to all of these questions that most managers overlook: “the market inside.” If you think about it, many employees at BMW love to use cars (in fact, that may be why they choose to work for BMW). Many cereal eaters work for Nestlé. Many sports afficionados work for Patagonia or Nike. Many techies work for Apple or Google. In the B2B sector, many former doctors work for pharmaceutical companies. Generally, many experts working in corporate functions such as, say, marketing or logistics, move on to work for upstream partners, say marketing agencies or freight forwarders.

In our research, we have coined the term “internal lead users.” They are employees who have a lot of personal, first-hand experience in using the product that their employing company sells. Thus, they are both users and producers of the product in question. They have a lot of user knowledge and user networks, tend to identify with users and understand their needs. At the same time, they are right inside the walls of the producer company – schooled in the corporate mindset, bound by non-disclosure agreements, well positioned to connect to business and technical experts.

Research shows that internal lead users excel in innovative work behavior. Their ideas for product innovation score higher on originality, use value and market potential than the ideas of both regular employees and regular outside users. So, when managers are looking for ideas for the next big thing in their market, why not ask their internal lead users?

Managers should bear in mind though that internal lead users cannot fully replace external users as innovation partners. Research shows that external lead users still outperform internal lead users in terms of idea originality and use value. Moreover, internal lead users may feel dual allegiance – to their company and to the user community out there. When their dual identities are in conflict, e.g. over a new product that does not meet their performance expectations, internal lead users can be dissatisfied.

Nevertheless, managers who wish to be one big step ahead in the innovation game are well advised to recognize and leverage “the market inside.” Who are the internal lead users in your company? What are their ideas for product innovation? What use knowledge, social ties, and trust position in the user community can they bring to bear on their work? Can you hire more internal lead users from the user community?

In his famous book “Let my people go surfing”, Yvon Chouinard, the founder of Patagonia, shares his” first principle of hiring” whereby “as many Patagonia employees as possible also be true Patagonia customers.” Based on our research, this principle makes a lot of good business sense.