In the last ten years the innovation landscape has been deeply transformed through the emergence of several new innovation patterns and trends, and the entry of new technologies and ways of understanding collaboration. The open innovation paradigm is a natural evolution of an ongoing social change: in order to be successful, companies need to exploit both their internal ideas and technology bases, and also to draw on any other resources available. In a globally connected world, knowledge is globally distributed, requiring the involvement of new external actors in the innovation processes of companies.
However, all this is easier said than done: in addition to the cultural and organizational barriers to collaboration, there is the complexity inherent in integrating new technological actors into the innovation process.
Several authors are suggesting that it is imperative that we centre our innovation efforts on the key piece in the business chain, the one that controls the buying process: the customer/user (Von Hippel’s user-centred innovation or Stephen Shapiro’s customer-focused innovation). However, what would happen if we adopt a very broad definition of ‘user’ and address almost everyone?
The term crowdsourcing was coined by the editor of Wired magazine, Jeff Howe, and combines “outsourcing” and “crowd”. The concept of crowdsourcing is based on the cocreation principle, meaning that both customer and enterprise can create value together. In a typical crowdsourcing scenario, value is created when an organization presents a problem to a large base of users, usually with the promise of a reward for a solution.
The success of this concept is based on the application of the ‘long tail’ principle to knowledge: inside the organization we would hope to have several experts with a good knowledge of a limited set of topics (the more frequent and important ones for the enterprise). But what about the rest of the world? Externally, there are many knowledgeable people, whose knowledge may not be so intimately linked to the technical topics of interest to our company, but with interesting and original ideas. So why not exploit this knowledge?
The best known approach to crowdsourcing is in the context of ‘ideagoras’ or marketplaces, where companies advertise challenges with the promise of monetary rewards for their solution. Ideagoras are companies whose business model is two sided. The subsidized side (the crowd) is used to entice companies to pay to use the platform (the monetizing side). Some of the most renowned players include Innocentive, WorthIdea, Yet2Com o Ninesigma.
Crowdsourcing can be applied not only to make use of established markets to involve the internet ‘crowd’, but also to more tightly target the customer/user base. For example:
Crowdsourcing may be an interesting and profitable approach to innovation, but before applying this concept in the organization, it is necessary to ensure that it makes sense for the market and for potential users. It is necessary also to be fully aware of its limitations:
We should clarify also that:
Once crowdsourcing is characterized and understood a typical practical question that arises is how can I use it? It seems quite difficult to manage’. The answer is to use social media. Social media refer to the technology, tools and interactions designed to share content and engage users in conversations, focusing on relations as well as content. Social media includes also the philosophical aspects of collaboration.
To cope with the need to involve the user in the innovation process and to reach valuable knowledge outside the organization, the binomial crowdsourcing + social media is exploited to democratize innovation. What would happen if users took on some control of a crowdsourcing? Social media allows the more tedious tasks to be delegated to the crowd, by applying the principle of auto-organization:
It can be seen, therefore, that there are many innovative ways to crowdsource company initiatives, ranging from logo design contests or startup project funding to selling t-shirts. The possibilities are limited only by the limits to the imagination and willingness to try a different approach to innovation. So companies should experiment. The prizes might be big and the risk quite small.
By Javier Megias, Branch Director at GMV
Javier teaches Innovation and Strategy on several master programmes, and has published a number of papers and articles in various Journals and magazines. Javier has also coauthored two books and is a frequent speaker in conferences on social media, innovation and start-up strategy (given he is also a private investor or “Business Angel”).
More information about Javier can be found at his blog, www.javiermegias.com