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"Pathbreaking research by a group of scholars including Eric A. von Hippel, a professor of technological innovation at M.I.T.'s Sloan School of Management, suggests that the traditional division of labor between innovators and customers is breaking down. Financed by the British government, Mr. von Hippel and his colleagues last year completed the first representative large-scale survey of consumer innovation ever conducted. What the team discovered, described in a paper that is under review for publication, was that the amount of money individual consumers spent making and improving products was more than twice as large as the amount spent by all British firms combined on product research and development over a three-year period. "We've been missing the dark matter of innovation," Mr. von Hippel said from his office in Cambridge, Mass. "This is a new pattern for how innovations come about." "

von Hippel and Baldwin also produced a related, intriguing paper in 2009 that can be found here http://hbswk.hbs.edu/item/6325.html entitled "Modeling a Paradigm Shift: From Producer Innovation to User and Open Collaborative Innovation." The conclusion of the paper reads: "We conclude by observing again that we belive we are in the midst of a major paradigm shift: technological trends are causing a change in the way innovation gets done in advanced market economies. As design and communication costs exogenously decline, single user and open collaborative innovation models will be viable for a steadily wider range of design. They will present an increasing challenge to the traditional paradigm of producer-based design - but, when open, they are good for social welfare and should be encouraged."

Nowadays, goes the theory, innovation is supposed to be constantly improving everything the company is about. Is the theory right, or do the experiences of companies reveal something different?