FLIRTing with the Crowds

Expanding on the listing on differences between closed and open innovation in Henry Chesborough’s great book, Open Innovation, I have listed below what I perceive to be the respective principles in innovation through crowdsourcing / collective customer collaboration.

The rightmost column in the listing below describes pure collective collaboration principles in relation to different aspects. In real life, of course, a company might choose to use crowdsourced innovation principles for some areas, while applying even closed innovation for others.

Talent distribution

Crowdsourcing companies need to work not only with the smart people, but an open and diverse community, including experienced connoisseurs as well as less skilled members to best utilize the possibilities of rich idea generation, community-engaging iteration processes and ultimately collective evaluation and commitment to new products.

Internal vs. external R&D

In fully utilizing communities, internal product-related R&D is not needed to create value. Relying on customers to provide creative input as well as up-to-date information on their shifting tastes and preferences and focusing instead on other core competencies, such as marketing or customer management, can bring decisive advantage.

It is however important to remember that while internal R&D efforts regarding product offerings can be significantly reduced by crowdsourcing R&D, the freed resources should be invested on nurturing the community and creating and continuously improving a compelling experience that keeps them engaged in the midst of ever intensifying competition for customer interest and input.

Research and profitability

Direct market sensing using present technology and channels can make much research redundant. Direct market sensing is more effective than traditionally researching the customer base, and enhances profitability by bringing customer input in real-time to company’s use. Much consideration should be put to developing tools for converting customer input into company action as well as making the process transparent and easily accessible.

Pace vs. consideration

For recognizing and exploiting opportunities in the market, substantial effort, time and conisderation needs to be placed to building as well as maintaining a community that keeps its members interested and involved over time. With customer communities it is not about who builds it first, but who has the most compelling set of value offerings. An active and committed customer base is key in spotting arising trends in the market place.

Idea creation and utilization prospects

All the best ideas do not come from your company - they might not even come from the industry. A diverse community with multiple talents and viewpoints to a problem will under certain conditions outperform a small team of elites. Furthermore, the iteration, evaluation, and selection of the outcomes of the ideation process are most effectively conducted by a broad, committed community. However, the company should retain ultimate decisive power and also use its internal knowledge of the market to make the final decisions.

Intellectual property (IP)

If obtaining intellectual property rights is key to deriving value from the developed offering, the company should devise lucrative but cost-effective processes for transferring rights from the creators to the company. Customers as individuals have limited value for their inventions, since they often do not have access to the right resources and channels to make use of them effectively, and are thus willing to trade their input for the right reward. In many occasions, something that the company can readily and with minimal added cost offer to the customer can be very valuable to her.