Judgment bias has long been recognized and studied, particularly in the context of decision-making about hiring. Whether it's a one-time decision or something that recurs, limiting decision-making bias is a clear benefit to the outcome. The authors suggest a practical, broadly applicable approach to reducing errors in strategic decision-making: the Mediating Assessments Protocol (MAP).

New research is upending the long-held belief that the desire for profit is what inspires innovation. Recent studies show that innovations by consumers who give their ideas away are outpacing innovations by companies that hope to sell them. And that throws the need for intellectual property protection into a whole new light.

This is an MIT Sloan Management Review article. It has long been assumed that companies develop new products for consumers, while consumers are passive recipients -buying and consuming what producers create. However, this paradigm is fundamentally flawed, because consumers themselves are a major source of product innovations. The authors have framed a new innovation paradigm, in which consumers and users play a central and active role in developing products on their own. In this article, they summarize key findings from studies on consumer product innovation conducted in the United States, the United Kingdom and Japan. The authors describe three phases in the new innovation paradigm. Initially, markets for products and services with novel functionality are both small and uncertain, with consumers pioneering really new products (for example, the skateboard) for themselves. In the second phase, other consumers become interested in the new products. In the third phase, producer companies decide if the information on the design and function of the new product, and the projected market, are consistent with their risk profiles. The implications are significant for both consumers and producers, the authors note. Consumer innovators should realize that they play important roles in developing novel products and services. Businesses, for their part, need to think about how they can reorganize their product development systems to take advantage of prototypes developed by users. By focusing on product concepts that consumers have already prototyped and tested, companies can save money and improve their success ratios.

Our annual survey of ideas and trends that will make an impact on business: Duncan J. Watts contends that ordinary people, not "influentials," drive social epidemics. Yoshito Hori predicts that Japan's young entrepreneurs could outshine those in China and India. Frederic Dalsace, Coralie Damay, and David Dubois propose brands that--like Harry Potter--mature with their customers. Michael Schrage reveals the hidden value in long-forgotten equations. Harry Hutson and Barbara Perry put hope back in the executive repertoire. Eric von Hippel spotlights Denmark, where "user-centered innovation" is a national priority. Linda Stone detects a backlash against cell-phone and BlackBerry addiction. Michael C. Mankins suggests where to put all that excess cash. Ap Dijksterhuis reaffirms the value of sleeping on a decision. Robert G. Eccles, Liv Watson, and Mike Willis report on a new software standard that will make business and financial information dramatically easier to generate, aggregate, and analyze. Geoffrey B. West challenges the conventional wisdom that smaller innovation functions are more inventive. Karen Fraser warns of apparently loyal customers who are poised to bolt for ethical reasons. Phillip Longman predicts the return of large patriarchal families and their effects on marketing strategy. Rashi Glazer illustrates the sociocultural and business implications of nanotechnology. Yoko Ishikura urges global firms to "think locally." Klaus Kleinfeld and Erich Reinhardt explore the convergence of imaging technology and biotech and its enormous benefits for medical care. Christopher Meyer advises focusing on what you want from your network before you build the platform. Charles R. Morris asserts that health care costs are falling; it's spending that's on the rise. Clay Shirky shows why open source projects succeed by failing. David Weinberger claims that accountability has morphed into superstitious "accountabalism."

Product R&D at many companies is a major bottleneck. The difficulty is that fully understanding the needs of just a single customer can be an inexact and costly process--to say nothing of the needs of all customers or even groups of them. In the course of studying product innovation across many industries, authors Stefan Thomke and Eric von Hippel found several companies that have adopted a completely new, seemingly counterintuitive, approach to product R&D: they have abandoned their efforts to understand exactly what products their customers want; instead, they equip customers with tool kits to design and develop their own products. Doing so can create tremendous value, but capturing that value is hardly a simple or straightforward process. Not only must a company develop the right tool kit, but it must also revamp its business models and management mind-set. When companies relinquish a fundamental task--such as designing a new product--to customers, the two parties must redefine their relationship, and this change can be risky. With customers taking over more of the design, companies must now focus more on providing the best custom manufacturing. In other words, the location where value is created and is captured changes, and companies must reconfigure their business models accordingly. This article offers basic principles and lessons for industries undergoing such transformations.

Most senior managers want their product development teams to create breakthroughs--new products that will allow their companies to grow rapidly and maintain high margins. But more often they get incremental improvements to existing products. That's partly because companies must compete in the short term. Searching for breakthroughs is expensive and time consuming; line extensions can help the bottom line immediately. In addition, developers simply don't know how to achieve breakthroughs, and there is usually no system in place to guide them. By the mid-1990s, the lack of such a system was a problem even for an innovative company like 3M. Then a project team in 3M's Medical-Surgical Markets Division became acquainted with a method for developing breakthrough products: the lead user process. The process is based on the fact that many commercially important products are initially thought of and even prototyped by "lead users"--companies, organizations, or individuals that are well ahead of market trends. Their needs are so far beyond those of the average user that lead users create innovations on their own that may later contribute to commercially attractive breakthroughs. The lead user process transforms the job of inventing breakthroughs into a systematic task of identifying lead users and learning from them. The authors explain the process and how the 3M project team successfully navigated through it. In the end, the team proposed three major new product lines and a change in the division's strategy that has led to the development of breakthrough products. And now several more divisions are using the process to break away from incrementalism.