Book Preview: Crowdsourced Innovation – Quo Vadis?

The following text is an excerpt chapter from innosabis upcoming book “Crowdsourced Innovation – Revolutionizing Open Innovation with Crowdsourcing“, which will be published by the end of November.

Companies are no longer limited to advertisement and market research in their interaction with consumers. It is no longer a privilege for small businesses to be the only companies that can have a daily exchange of ideas with their customers. The reality today reflects what the writers of the visionary and iconoclastic Cluetrain Manifesto envisioned fifteen years ago: the marketplace has become a worldwide conversation. The Cluetrain Manifesto in 1999 put forward ideas about the revolutionizing impact the internet would have on both markets and organizations. Its single most important statement reads as follows:

“A powerful global conversation has begun. Through the Internet, people are discovering and inventing new ways to share relevant knowledge with blinding speed. As a direct result, markets are getting smarter —and getting smarter faster than most companies.” (1)

The Cluetrain Manifesto gave business leaders the notion of the internet as a marketplace and helped them to rethink the way they traditionally marketed their products and services. We embed our vision of Crowdsourced Innovation in this context, turning the intangible “target groups” and “demographics” into living, breathing human beings, whose voices need to be heard and whose ideas need to be taken seriously. Companies now realize that they receive major competitive advantages when they reach out to customers, discussing prospects and future offerings with them. We witnessed how companies earn the trust of consumers and yield commercially more successful products and services by opening up their innovation and development processes. The internet enables them to have “human-to-human” conversations, which have the potential to radically transform traditional business practices.

Unfortunately, many companies still fail to tap into the full power of the internet when they use it with a mass-media mind set. Advertising over the web is often seen as the holy grail of online marketing. But this approach does not take into account the true nature of online conversations and customer expectations. Even when companies do decide to open up, many expect the consumer to come to them and are then disappointed by low rates of interaction. What these companies do not yet understand is that they have to work to earn the trust of their customers before any real dialogue can take place.

Earning trust does not happen overnight, once achieved it is not granted forever and can be lost overnight. We see Crowdsourced Innovation as an important building block for constant feedback from customers and other interested stakeholders. But companies must adopt long-term, sustainable Crowdsourcing strategies to accelerate innovation and insight generation if they are to keep up with the changing behaviors and needs of consumers. The biggest appeal of Crowdsourcing is its ability to engage consumers and advocates – existing and future customers – in a company’s creative process, thereby turning passive advocates and fans into (inter)active communities. Companies should also integrate Crowdsourced Innovation internally to tap into latent innovation potential and foster innovation through bottom-up contributions from their own employees resulting in increased motivation, engagement and loyalty. Engaging internal and external stakeholders in a fair and transparent way will create a new business culture, ultimately allowing true collaboration.

Fueling Crowdsourced Innovation with Big Data

The questions we are asking ourselves are “Where are we going next?” and “What will be the next big development in Crowdsourced Innovation?”. The answers to both of these questions lie in the evolving ways society interacts with and responds to technology. Tools embedded in software and technical devices detect information and collect data, analyzing where we are, what we want and who we are; data is generated every time we use the devices. Technology tracks our every move, web searches, health data such as blood pressure, and where we travel. Sometimes it follows us conspicuously in order to provide certain services like GPS navigation or optimized internet searches, and sometimes it tracks our movements inconspicuously to analyze our behavior to improve the business of others – all the loyalty programs in supermarkets are a prime example. We expect that the next big wave of crowd innovation will stem from these large amounts of data – so called “Big Data” – and the intelligent analysis thereof. But in order to truly understand the potential of Big Data, the Cluetrain Manifesto again provides us with valuable insights. When David “Doc” Searls, one of the manifesto’s authors, discussed the impact of Big Data with Forbes Magazine, he used the principles from 1999 to highlight the influence of the people who generate the data: “All the talk about ‘Big Data’ and ‘the cloud’ is in the B2B space: companies selling services to companies. Individual people are nowhere to be found, except as a source of data, and then mostly through surveillance rather than through conscious and voluntary sharing. At the end of the day, which I think will be a year or two from now, asking what people can do with data will be like asking what people can do with computers or what they can do with networks.” (2) We share his vision that data needs to be put in the hands of the people and this is where the innovative power will be in the future.

Data that is from users and for users will help them to understand themselves better than ever before, and we foresee that this increased knowledge will eventually inspire never-before-seen user innovation. By connecting self-generated data with our personal feelings, experiences, and needs, we will be able to solve our problems in unique ways. In essence, we will utilize Big Data by individualizing it.

An obvious application will be in the health care sector; often times even unintentionally, users will track exercise and nutritional data and learn how certain lifestyle and habits affect their overall health. The individualization of Big Data will also lead to more user entrepreneurs, since the internet has decreased the start-up barriers for new companies. Some established companies might interpret this development as a threat: new and agile competitors that have very customer-centric views will enter their markets. But this development will also provide new opportunities for companies to build platforms and APIs to which users can connect personally developed devices, solutions, and services. The companies who recognize user innovators as a source for corporate innovation will quickly and successfully gain a competitive advantage as long as they offer fair partnerships and fair conditions for collaboration. Therefore, it is vital that protecting and accessing personal data becomes as simple as collecting it, so that it can be available for user innovation and become a source for Crowdsourced Innovation in companies.

Personal Fabrication and User Innovation

But we do not see Big Data as the only fuel for Crowdsourced Innovation approaches. The personal fabrication trend will take this method to yet another level: when anyone of us, every household, could become a producer or manufacturer; the potential for collaborative innovation becomes infinite.

Personal fabrication breaks through the boundaries between the digital and physical world. Often, it is enabled by 3D printing techniques. This process is able to produce every item in a different manner with no additional cost in production; only the command code has to be changed. This corresponds to the reality of the market: consumers want products that are tailored to their individual needs. Competitive advantage for companies lies in the ability to produce goods for a market that is as small as one single person. Thanks to 3D printing, we have the ability to customize objects that are more creative than the ones found in the mainstream market.

The impact on Crowdsourced Innovation is obvious: users will increasingly be able to innovate on their own, relying on factory produced items mainly for standardized products –as those are cheaper to produce in large quantities (as opposed to 3D printing approaches, where each production unit costs the same). We as consumers will not only print company-designed objects and items, but we will be designing new ones, adapting existing concepts to our personal needs. We will be able to quickly prototype our ideas and build our own products and solutions.

We are urging companies to think about the impact of these developments for their own innovation efforts and how they can engage in these creative environments instead of considering them a threat for their own business model. Companies have to think of personalized fabrication as an innovation technology, that enables the collective development of intangible specifications for tangible products, services, and solutions. Utilizing the potential of personal fabrication is not only limited to engaging external stakeholders; also internal processes can be successfully reshaped.

Fusing Crowdsourced Innovation and Crowdfunding

Lastly, the development of new products and services needs to be financed – in corporate environments as well as in start-up companies. Companies need to allocate resources to those ideas in their innovation funnel that promise most success at market entry. Traditionally this is determined by market research. However, the concept of Crowdfunding has opened up completely new ways of funding. An innovative project no longer needs to find a single investor for its realization, but can start convincing future customers to get involved already at the early stages of its development.

This principle is also relevant for corporate innovation processes since it will enable companies to develop products and solutions, which they might have neglected before. Combining Crowdsourced Innovation with Crowdfunding leads to a externally dominated innovation process: companies contribute their development resources, their market power, IP and know-how as well as funding – but all of these elements are shared with external stakeholders, who in turn bring the same to the table. In collaboration, these efforts will be able to bring new products and services to market much quicker and with a higher probability for success. Of course, such a model can only be successful when carefully crafted in a way that is fair towards all parties and pays tribute to the individual’s contribution.

First applications of this approach can be found in many software companies already: clients, who request new features often contribute upfront to the development with a partial payment instead of purchasing a completely individualized programming service. This way, they allow the software company to sell that feature to other interested customers after a time period of exclusivity. In most cases, they are the ones who come up with the idea for the new feature in the first place, based on their needs.

The Vision: Companies as Networks and Enablers of Innovation

The long-term perspective that we are describing aims at a truly networked company: corporations that create value by connecting, not solely by producing. Companies will increasingly consider themselves to be hubs for networks, enabling innovation, rather than being the entities deciding and producing their offerings. Their focus will be on value creation by acting as networks. Impact does not happen in isolation, it requires collective action as well as fair collaboration.

Early signs of this development can be found in the past trend of outsourcing, when companies moved their production, their customer service, or even their marketing efforts to contractors. These outsourcing approaches already turned companies into coordinating entities, juggling the many different stakeholders they are working with instead of owning and completing the tasks themselves in isolation. Crowdsourced Innovation takes this development one step further. What if companies truly started acting as trustful networks, providing access to corporate assents to their network of collaborators? What if they become an ecosystem of resources, inspiration, and collaboration opportunities in order to drive innovation and sustainable value creation?

Start thinking now about what policies and processes need to be in place in order to turn your company into a networked corporation. We see unlimited opportunities for enterprises that are willing to step up. The companies that get it right will find themselves with better insight into their customers, more-innovative products and services, and an increased agility to retool themselves with the skills necessary to respond to the changing technology landscape. We ask you: How are you going to position your enterprise to reap the rewards of Crowdsourced Innovation?

1.) cluetrain
2.) Forbes

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Catharina van Delden is the founder and CEO of innosabi, a software company for Crowdsourced Innovation. As a member of the presidential committee of BITKOM, the German industry association of the ITC industry, Catharina represents the interests of start-ups in the digital sector. In 2014, the German Informatics Society honored Catharina with the “digital mind” award for her role as thought leader in Germany’s digital development. She was also named one of the 50 most influential women in German IT by the magazine Computerwoche. Follow her @CatharinaVD

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