Which Way to Unleash The Power of The People?
Everybody knows by now that innovation is an essential part of any organization’s success. Success? it is rather “survival”! Finally, more and more organizations understand now that solely depending on your internal resources is an unnecessary limitation in a world filled with accessible borderless opportunities.
Terminologies like Open Innovation, Crowdsourcing, and Co-Creation can be overwhelming and confusing because they are all innovation techniques that can invite external people into a process or a project. But without proper understanding and execution, results will be far from expectations.
By tapping into the collective knowledge and expertise of a larger group of people, organizations can benefit from improved efficiency, cost savings, and higher-quality results. But there is no one-size-fits-all innovation technique.
In this article, we dive into the definitions of each and clarify the differences between them to help you find the most suitable innovation approach for your organization.
1. What is Open Innovation?
Open innovation is a term coined by Henry Chesbrough in 2003 to describe a process in which organizations collaborate with external stakeholders to create new ideas, products, or services. Based on the notion that “most of the smart people don’t work for you”, Chesbrough believed that interacting with external talents can enhance an organization’s innovative capability.
Encouraging businesses to break through the traditional mentality of secrecy and silo, open innovation provides companies with a wide range of perspectives when looking for solutions.
Open Innovation Best Practices
Open innovation can take on many different forms and can be used for various purposes. Common successful practices of open innovation include:
- Open source software: Software with an accessible source code, so anyone can view, modify, and use it.
- Open innovation networks: When groups of individuals, organizations, and companies come together to share ideas and resources in a collaborative setting.
- Open research and development (R&D): When organizations share their R&D efforts with external partners to accelerate the development process.
- Open innovation platforms: Online communities that bring innovators together with companies looking for solutions.
- Open innovation challenges: Competitions in which organizations invite external contributors to offer solutions to specific problems or challenges.
Who Uses Open Innovation?
Open innovation is widely used among organizations in different industries, here are some examples to help you visualize open innovation in action:
- The Ford Motor Company used open innovation to create a new line of electric cars.
- PepsiCo used open innovation to develop a new product, the “Pepsi Pulse”. It was designed to provide real-time feedback from customers.
- The space agency, NASA, used open innovation to develop new technologies and launch systems for space exploration.
2. What is Crowdsourcing?
It all started when Jeff Howe coined the term “Crowdsourcing” in 2006 in an article for Wired Magazine. Since then, it has become increasingly popular for organizations to utilize the collective knowledge and skills of a large crowd to innovate, solve problems and create new products or services. In simple words, the compound word of crowd and outsourcing refers to the practice of outsourcing certain tasks or activities, traditionally performed by an employee or contractor, to large groups of people (a crowd). It’s a method that helps businesses reduce costs, increase efficiency, and gain insights.
What Makes Crowdsourcing Different From Open Innovation?
Open innovation is the mindset of combining internal and external resources to produce ideas. Inbound open innovation is an outside-in process in which external knowledge is used internally, like that from partners, customers, universities, and research organizations. Outbound open innovation, however, is an inside-out process in which internal knowledge is used externally, for example, through selling patents or direct licensing. Crowdsourcing can be considered an inbound OI tool that is effective when it comes to utilizing knowledge and skillsets from external resources. It is a practice that involves outsourcing tasks to the public.
Even though it provides access to a wide and diverse pool of talents, it is important to note that crowdsourcing always carries the risk of getting ideas that don’t fit well with your business model and/or culture. The level of engagement in crowdsourcing is much lower than that in open innovation. It doesn’t represent genuine collaboration, which is fine in many cases (e.g. writing a script for an advertisement or getting ideas for new product flavors).
Crowdsourcing Best Practices
Crowdsourcing can help organizations build stronger relationships with their customers, as it encourages feedback and collaboration from the public. It is most effective when the task is defined thoroughly and it requires no in-depth level of understanding of internal knowledge. It is also recommended when the project timeline is not tight. Common practices of crowdsourcing include:
- Idea Generation: Gathering ideas and feedback from the public to produce creative and innovative solutions.
- Crowdfunding: Organizations ask for small donations from a large number of people in order to raise money for projects and initiatives.
- Online Surveys: Surveys help organizations gain insight from a wide variety of perspectives.
- Content Creation: Organizations can use crowdsourcing to create content such as videos, articles, and images.
- Product Testing: To make sure they meet customer needs and expectations, companies include the public in the process of testing new products and services.
Who Uses Crowdsourcing?
Crowdsourcing can be used to address various challenges and can be customized to fit the needs of any organization. For example:
- The U.S. government used crowdsourcing to gather ideas and feedback from the public on how to reduce the federal budget deficit.
- McDonald’s U.K. asked people to send in recipes and then customers voted for the one they liked the most. The McPizza Pepperoni Burger was the winner.
- Lego used crowdsourcing to develop a new line of products, tapping into the collective knowledge of Lego fans to create innovative and creative ideas.
3. What is Co-Creation?
In the early 2000s, C.K. Prahalad and Venkat Ramaswamy wrote a Harvard Business Review article with the title “Co-Opting Customer Competence”. In this article, they argued that companies should involve customers in the value creation process and it was the same article where they first coined the term “Co-Creation”. Since then, the concept of co-creation has become popular and many businesses adopted it to boost their innovation.
Simply put, co-creation is an innovation technique in which companies partner with customers, suppliers, or other stakeholders to co-develop and co-create value. Co-creation is perfect when it comes to enhancing customer engagement and relationships with stakeholders by directly involving them in the company’s value creation and product development processes.
What Makes Co-Creation Different From Open Innovation and Crowdsourcing?
Open innovation is a broader concept than crowdsourcing and co-creation, in fact, some consider these two as subsets of open innovation. In open innovation, different organizations are actively collaborating and sharing intellectual property. Co-creation, however, suggests a more specific relationship between an organization and a defined group of its stakeholders (usually its customers). Unlike crowdsourcing, co-creation is NOT about people coming up with good ideas for you, it is rather about people working hand in hand with you to develop a good idea into a great one. This means more time, resources, and planning are needed.
While co-creation and crowdsourcing work best when a problem is clearly defined, open innovation gives participants more freedom. It creates an environment that facilitates active collaboration between organizations and people with different perspectives to create mutually beneficial solutions.
Co-creation lets companies work alongside customers and truly learn from their observations, experiences, and creativity to understand how to give them more of what they want.Co-creation lets companies work alongside customers and truly learn from their observations, experiences, and creativity to understand how to give them more of what they want.
Co-Creation Best Practices
Co-creation proved to be effective in several practices such as:
- Co-design: Engaging customers in the design and development of a product or a service.
- Co-development: Engaging suppliers in the development of a product or a service.
- Co-marketing: Engaging other organizations in marketing activities and/or the promotion of a product or service.
- Co-innovation: Engaging customers, suppliers, and other stakeholders in the innovation and creation of new products or services.
Who Uses Co-Creation?
Co-creation is indeed becoming a popular practice, there are many examples of organizations resorting to co-creation. Let’s have a look at some examples:
- DHL’s innovation centers are where experts and hard-core fans are invited by the logistics company to collaborate and solve complicated problems.
- Nike and Apple partnered to develop the Nike+ running app, which allows users to track their running performance and progress.
- To create an innovative and user-friendly device, Amazon collaborated with customers to develop its Kindle Fire tablet.
4. So, Which Way to Unleash The Power of The People?
All three of these techniques are awesome ways to boost your innovation and harness the power of borderless talents, but before choosing which one to go for, you must have a clear understanding of your objectives. You need to determine your project’s main goal.
Is it to solve a challenge? develop a product? explore new ideas and/or technologies? Does it require sharing of internal knowledge? You might need to explore open innovation in that case. Is it to generate a big pool of ideas? or a marketing buzz? outsource simple tasks? engage a community? Crowdsourcing can work best in these cases. Is it a long-term project with a high budget that requires a high level of commitment and engagement with stakeholders? Is it to collaborate and get the perspective of customers as you develop products and/or services for them? Go for co-creation!
The team at Untap has experience in managing a variety of innovation projects and will be more than happy to offer you a free consultation regarding the program that suits you the most. Untap is an innovation and talent discovery program. Our software is easy to use and it offers a seamless experience for all users: program owners, participants, and judges. Book your free demo now and learn more.