Parables: Sampsa Hyysalo on the karakat

Two distinct analyst firm business models have arisen: one which only works with scale, and the other which is immune to competition from the large firms. That is an explicit finding of this year’s Analyst Value Survey, but it only became apparent to me after hearing Sampsa Hyysalo explain the history of the karakat.

Sampsa Hyysalo, Aalto University, Finland
Sampsa Hyysalo, Aalto University, Finland

Hyysalo is a professor of co-design at Finland’s most prestigious university, Aalto. He’s part of a team looking at karakats. Around 500,000 or so of these robust all-terrain carts have been made. Despite this enormous volume, there’s no market-leading producer. I think there’s a lot that small or nimble analysts firms can learn from the karakat. In particular, that is because peer communities created by analyst firms have expanded and transformed the way in which people access independent insight through analyst firms.

What’s surprising about the karakat isn’t that experts contribute to innovation. People often develop products and services as they learn how to use them. But the mainstream view is clearly that technological advances don’t come solely from use: To be embedded in society, a company, or some other “essential actor”, is needed to move forward. The karakat shows one way in which that common sense may be changing because the market for these peer-designed all-terrain vehicles (ATVs) show no essential actor.

It’s not a total surprise that the innovation itself appears. Something like four-fifths of scientific instruments and a huge part of extreme sports gear and techniques come from individuals who are creating or innovating products. Many new technology types come from users. Innovation is everywhere. However, the common sense is that for a market to develop manufacturers must enter and dominate. The rather rarer scenario is collective change: that is when users pool their competencies and keep manufacturers at bay.

These ATV appeared in the 1960s in Russia. Unlike other vehicles, the karakat uses buoyant, low-pressure balloon tires. These vehicles produce very little ground pressure. They travel down streams and over bogs. They allow a host of practical applications. They are tailored to specific uses (fishing, hunting, polar travel). Using a DIY approach people borrow from, and add to, a pool of spare parts and knowledge both locally and spread over the former USSR. They are remarkably dependable: people like reindeer herders can use them by themselves, maintaining them with simple tools like rubber patches and glue craft knives. Some of them are used for poaching because they cannot be easily tracked.

Why did no manufacturer appear in this space?

There were a series of factors that aided user innovation and made profitable market entry impossible. The chassis is light and the tires and light: the rest is open. The change involves low costs, scavenged parts (a decommissioned aircraft tire costs three bottles of vodka) fluid technologies and often unique designs that meet a single need. Innovation blends into diffusion: some academics call that innofusion. Innovation has been appropriated and re-innovated. “Interaction arenas” are important here: these are spaces where different populations are allowed an information exchange. Few of these are available in the former USSR. There is, however, a lot of ‘sticky practice’ which is asymmetrical: easier to learn this in the Urals than in Moscow because of the grassroots access to insight. User maintenance is also very possible, while users have limited budgets.

In the 1980s, there was a growth of state-wide and local karakat events and more media coverage, including the appearance of national journals that published correspondence. Now there are over 14,000 web pages with information. Dozens of forums exist. While the need for colocation limited co-creation, it allowed users to display their work even if peers were distant, and ask for help on specific problems.

In the 1990s, the initiative shifted in some ways from user-collectives to manufacturers. One manufacturer was assembled from some user collectives. TRECOL was a firm with state support. Artiktrans now focusses on larger and heavier tools. Today users remain the innovator for the classic karakat, although manufacturers have growing leadership in the development and commercialization stages. Users continue to lead in the adaptation of resources and undoubtedly play a huge role in identifying needs.

What the karakat shows is that ongoing peer innovation can achieve a thriving class of complex modern physical technology. Digital technologies allow the pooling of resources and competencies. Tight co-ordination isn’t necessary if examples can be picked up.

Alongside all of this, it’s also the case that peer innovation hampers manufacturers. Design costs are low. There are few opportunities for economies of scale. The high need for solution variation means that capital-intensive, economy-of-scale paradigms are at a disadvantage when customisation of a core kit is not enough. Maintenance and warranty are tricky too. Expensive engineers would have to travel for days to fix the machine, into the wilderness. Often buyers feel forced to fix things themselves rather than wait for aid, which might take days or weeks. Furthermore, modest amounts of wealth in these rural markets also restrains larger entrants.

There are certainly alternative ways to look at this technology, but the karakat shows that strikingly intricate designs can be achieved without tight coordination. Piecemeal and adapted diffusion can be beneficial, without compromising on the effectiveness of the solution. Manufacturers could only partly relate to the DIY appetite by providing kits and components. Newer platforms could help sharing among dispersed people to share physical design ideas.

Standardisation of the karakats is limited only to the four by six-meter size of a garage. Few of them are registered; many vehicle owners are harassed if the karakats are driven on the road. Unlike manufacturers, users are also free to introduce unreliable vehicles and that also drives down their costs.

What does all of this mean for industry analysis?

First, interaction arenas are more available than they were. Once the Corporate Executive Board and services like the Gartner EXP program were the only cross-technology areas for IT specialists to interact outside of professional bodies like the ACM and BCS. The internet has clearly produced a wide range of resources, but few of them are like analysts or substitute for them.

Any attempts to create innovation in the analyst industry are both challenging and relevant. Of course, it’s easy for two or more analysts to create a shared virtual brand and share their overheads. That’s not innovation. Will they invest the time to develop common research methods, learn from each other and create more valuable insight than they could have by themselves?

That said, there are some attempts to co-create analyst insight: Wikibon and GigaOM are both ways that analyst-like experts not only have gone to market as a single brand but can also pool knowledge and cooperate. Bloor Research created the Bullseye Foundation, “a new initiative to create a global, independent open approach to the evaluation of ICT products and services”: we are not sure it led to anything public.

The processes of peer review and open source development are well suited to the development of co-produced analytical insight. Bullseye was very exciting: it is not evident that methods of industry analysis can be specified with enough detail to share easily and produce independently replicable results.

But the karakat shows that a simple solution can be created that’s good enough to solve complex problems for millions of people. Is there a way that our understanding of how to analyze IT and telecoms markets could be pooled and consolidated robustly enough to be used by others?

Duncan Chapple

Duncan Chapple is the preeminent consultant on optimising international analyst relations and the value created by analyst firms. As SageCircle research director, Chapple directs programs that assess and increase the business value of relationships with industry analysts and sourcing advisors.