‘Press any key for creativity’
The contribution of online crowdsourcing platforms to open innovation
Master of Science in Business Administration Strategy & Innovation
Rijksuniversiteit Groningen
ABSTRACT
Studies of innovation have found that consumers frequently develop important product and process innovations. Especially through the Internet, there are many possibilities to integrate consumers in the innovation process of an organization. This study will focus on online open innovation platforms where idea contests are organized to link organizations with their consumers for idea generation for the new product development process (NPD). By gathering organization’s external information from the ‘crowd’, these platforms are also called crowdsourcing platforms. Unfortunately, due to the short existence of these platforms, little research describes how and when these platforms should be implemented and executed. This study aims to generate more underlying insights into how and why organizations can consult crowdsourcing platforms for effective idea generation. The research is conducted with case studies, observation of the platforms and the available literature. The findings point out that organizations consult the platforms for the right reasons: to gain inspiration and (many) creative ideas. However the case study shows that the most requested research statements are incremental product ideas. Thus, the organizations are in search of innovation ideas that provide insight and require deep customer understanding. However, the research shows that the majority of the solvers on the platforms are not users of the organization’s products and cannot provide this deeper customer insight. Due to their lack of experience, many organizations are left unsatisfied because the ideas & solutions do not fulfill expectations and needs of the organizations. This is also caused by the problem of stickiness of information. Implementation of a toolkit, a tool with which the user itself does part of the innovation within a set environment, could solve this problem. However, platforms do not offer toolkits, because it limits solutions space and that is not in line with the purpose of the crowdsourcing platforms, namely providing inspiration and creative ideas in stead of gaining insight in consumer needs. The results from the research show that the implementation of a toolkit could create a business opportunity for crowdsourcing platforms.
TABLE OF CONTENTS
ABSTRACT ... 2
1 INTRODUCTION... 4
2 THEORETICAL BACKGROUND... 7
2.1 THE RISE OF OPEN INNOVATION... 7
2.2 DIFFERENCES BETWEEN OPEN INNOVATION AND CROWDSOURCING... 8
2.3 DEFINITION OF CROWDSOURCING... 11
3 INTRODUCTION TO CROWDSOURCING PLATFORMS ... 12
3.1 OVERVIEW OF CROWDSOURCING PLATFORMS IN THE NETHERLANDS... 12
3.2 SCOPE OF THE CROWDSOURCING PLATFORMS... 12
3.3 THE REVENUE MODEL OF CROWDSOURCING PLATFORMS... 13
3.4 EFFECTIVENESS OF CROWDSOURCING PLATFORMS... 14
3.5 THE ORGANIZATIONS THAT CONSULT CROWDSOURCING PLATFORMS... 15
4 THEORETICAL FRAMEWORK... 18
4.1 INTRODUCTION... 18
4.2 FOCUS OF THIS PAPER... 18
4.3 DEVELOPMENT OF SUB QUESTIONS... 19
5 RESEARCH DESIGN ... 22
5.1 MOTIVATION FOR A CASE STUDY... 22
5.2 CASE DESIGN... 22
5.3 RESEARCH DESIGN... 22
5.4 DATA COLLECTION... 23
5.5 DATA MEASURES... 25
6 PURPOSES OF ORGANIZATIONS FOR CONSULTING CROWDSOURCING PLATFORMS... 26
6.1. CONSULT FOR A SOURCE OF INSPIRATION AND CREATIVE IDEAS... 26
6.2. RECRUITMENT AND MARKETING AS A REASON FOR IDEA CONTESTS... 27
6.3 LEAD USER IDENTIFICATION... 28
7 THE CURRENT USE OF CROWDSOURCING PLATFORMS BY ORGANIZATIONS ... 31
7.1 THE RESEARCH STATEMENTS POSTED ON CROWDSOURCING PLATFORMS... 31
8 THE CONTRIBUTION OF CROWDSOURCING PLATFORMS TO EFFECTIVE IDEA GENERATION FOR ORGANIZATIONS ... 33
8.1 EFFECTIVENESS OF IDEA GENERATION... 33
8.2 REASONS FOR DIFFICULTIES WITH DEFINING BOUNDARIES FOR RESEARCH STATEMENTS... 35
9 HOW COULD CROWDSOURCING PLATFORMS BE IMPROVED IN ORDER TO EFFECTIVELY GENERATE IDEAS FOR THE NPD PROCESS? ... 37
9.1. STARTING AN OWN CROWDSOURCING PLATFORM... 37
9.2 THE SEARCH AND USE OF INNOVATION COMMUNITIES... 38
9.3 THE USAGE OF TOOLKITS ON CROWDSOURCING PLATFORMS... 40
9.3.1. THE CURRENT OFFERING OF TOOLKITS... 41
9.3.2. DIFFICULTIES IMPLEMENTING DESIGN TOOLS... 42
10 CONCLUSION & DISCUSSION ... 45
10.1 CONCLUSION & DISCUSSION... 45
10.2 LIMITATIONS OF THIS RESEARCH... 48
10.3 FUTURE RESEARCH... 48
REFERENCES... 49
APPENDIX I COLLABORATION AMONG CREATIVE CONTRIBUTORS... 52
APPENDIX II MOTIVES FOR PEOPLE TO CONTRIBUTE AND POST SUBMISSIONS... 53
1 INTRODUCTION
The first signs of open innovation were in 1714, when the British government established the Longitude prize. This prize offered a cash prize for anyone who could come up with a simple and practical way to determine the position of ships at sea. This first open innovation initiative might be one of the first open innovation activities, but it is a fact that since then few concepts in business have been as popular and appealing in recent years as the emerging discipline of open innovation.
Industrial innovation is thus becoming more open, requiring changes in how organizations manage innovation (Chesbrough, 2004). External sources of knowledge become more prominent. Open innovation brings a reflection on experiences of some organizations in testing new approaches to achieve greater agility in the generation of technological innovation. These reflections of experiences can lead to a new strategy for generation of innovation, the open innovation strategy. Modern interaction mechanisms such as the Internet can be a proper tool for better and effectively identifying implicit and individual customers’ needs by integrating the consumers actively in the new product development (NPD) process.
Out of this movement come forward the idea that individuals are no longer passive but actively browsers of the Web (Whitla, 2009). The most famous of the Web 2.0 organizations is probably You Tube, which uses the crowd to provide it with its own content; the online community My Space is another well-recognized user-driven web business. These Internet technologies and especially Web 2.0 technologies accelerated the shift towards collective and distributed intelligence dissemination in the ‘crowd’. This phenomenon emerged recently and has given birth to a new concept: ‘crowdsourcing’, defined by Jeff Howe in 2006.
There are several different forms of this crowdsourcing. One of these methods is the online crowdsourcing platform. In the last couple of years, multiple online platforms emerged, where organizations could post research statements to gather ideas for new product development of creative consumers. The idea of crowdsourcing platforms with idea and design contests is to ask a group of (competing) users, also called solvers, to submit solutions to a given task of an organization (seekers) within a given timeframe. Submissions are evaluated by a panel of members from the solution seeking organization and are ranked accordingly to a set of evaluation criteria. Contributors whose submissions score highest receive an award from the seeker, which is often granted in exchange for the right to exploit the solution in the domain of the seeker. Often these statements occur in the format of an idea or design contest, but there are also platforms where consumers can collaboratively work on innovative solutions to the organizations’ problems.
In the Netherlands, the first online platforms specialized in innovative solutions for organizations by consumers have only risen since 2006. With a Talent Pool of more than 4,000 members, Battle of Concepts is currently the biggest ‘Denktank’ (think-tank) in the Netherlands. This is rather small in comparing with other countries like the USA where websites like Innocentive have reached over 180,000 members. The huge differences of members might be explained by the fact that these platforms were already established in 2001.1 For organizations this is an easy way to engage creative consumers in their
innovation process; the platform organizes the contest and has often many members. This enhances the chance for many submissions by the creative consumers. However, the platform offers a standard format to which the organizations must adapt which could deter effective results.
This method is relatively new and is stated to be one of the most promising concepts for the future (Ebner et al, 2009), which makes it interesting to research. However, due to its short appearance, there is little scientific research on this open innovation method. The studies that are available provide mostly examples of organizations that successfully
implemented this method. The nature of idea competitions is to encourage more or better users to participate, inspire their creativity and increase the quality of the submissions (Toubia, 2006). Consulting a crowdsourcing platform can thus be viewed as a key to success for organizations that seek innovative ideas & solutions for (non) technical innovation. However, there are also organizations to which crowdsourcing was not a guarantee for success. Hempel (2006) gives the example of the crowdsourcing project of Kraft Inc. which failed. The application for customer integration did not get much collaboration of creative consumers when they used their own crowdsourcing platform on its website. According to Kleemann (2008), organizations in these cases rely on consumers to carry out the idea generation and solving. This creates a risk for both these organizations as the consumers because organizations now depend on the consumers to ‘carry out their ‘jobs’ reliably and in accordance with the plans and needs of the organization’ (Kleemann, 2008). Therefore, organizations must gain knowledge of the applicability of these platforms before risking their organizations innovation processes (interview RV).
The idea of the ideas & design competitions on crowdsourcing platforms (in this paper the abbreviation is
also
crowdsourcing platforms) is by integrating a larger variety of ideas and knowledge in NPD, the performance of the innovation process will be enhanced which results in better meeting customer products (Piller & Walcher, 2006). Due to the short existence of this method of the crowdsourcing platform for NPD, there is little research done on crowdsourcing platforms, which makes it hard for organizations to gain knowledge about when crowdsourcing platforms can be used and how they could be executed (Ernst & Gulati, 2003; Toubia, 2005). This thesis would like to provide an analysis of in what way this new method enhances effectively idea generation for the innovation process. The term idea generation for the innovation process will be further explained in paragraph 3.1. The little available literature makes this subject a broadly unexplored study with unfortunately too many factors to discuss in this paper.The existent literature on idea & design competitions discussed that consulting a crowdsourcing platform is often less expensive than other customer integration methods; it also saves time due to the fact that management of the community is outsourced to the crowdsourcing platform (Piller & Walcher, 2006). This study also expelled that the customers that are operating on these platforms are highly willing to collaborate. Therefore, this study will not include motivation factors for consumer contribution. This paper will neither research the characteristics of the creative persons that come up with innovative ideas, such as earlier studies have shown (Piller & Walcher, 2006).
The focus of this study is to explore the idea & design competitions platforms as an idea generation method for input of the NPD process. This research question is relevant, because literature showed that little research discussed specifically in what way idea & design competitions can contribute to idea generation for NPD (Ernst and Gulati, 2003; Franke & Piller, 2004). Therefore the main research question contains:
Main research question:
Why do organizations make use of crowdsourcing platforms? How can organizations make use of crowdsourcing platforms in order to effectively generate ideas in terms of the NPD process?
Sub questions:
Sub question 1: With what purposes do organizations consult crowdsourcing platforms? Sub question 2: In what way are organizations currently making use of crowdsourcing platforms?
Sub question 4: How could crowdsourcing platforms be improved in order to effectively generate ideas for the NPD process? What are possible alternatives for crowdsourcing platforms?
This research discusses how organizations can make use of crowdsourcing platforms in order to effectively generate ideas in terms of the NPD process. Effectively idea generation can de defined in terms of if the set purposes of the organizations for consulting the platforms are met. These sub questions will be further explained in paragraph 4.3.
This paper contributes to the literature by addressing the novel and relevant question how an organization can make use of crowdsourcing platforms in order to effectively gain ideas for NPD. This question is relevant for many organizations operating in volatile markets where organization’s success is very much depended from managing NPD efficiently and effectively.
2 THEORETICAL BACKGROUND
In order to make a decent study on open innovation in general and crowdsourcing platforms particularly, it is important to define these terms. In this chapter, a short overview will be given of the rise and definition of open innovation & crowdsourcing and what the differences are between these two strategies.
2.1 The rise of open innovation
Chesbrough (2006) defines open innovation as a paradigm, which assumes that organizations can and should use both external and internal ideas for introducing new products in the market. This results in organizations shifting business from a closed towards a more open innovation model. Teresko (2004) defines open innovation more as a strategy for the appropriation of new ideas to complement the NPD process. In this way, components of the innovation process are shared with a specific group of external sources of knowledge.
Open innovation is a broad term and can be subdivided in several variations of open innovation. Open innovation can be subdivided into outside-in and inside-out innovation (Enkel et al, 2005). The inside-out process includes licensing ideas that have been developed inside the organization. Outside-in innovation attracts sources external of the organizations to broaden the scope for screening ideas. This study focuses on outside-in innovation, where ideas are thus not only developed generated by the employees of the organization as seen in the inside-out organization. The more ideas gathered, the higher the chance for better selection of ideas and better development of innovations (Chesbrough, 2003). Of course, also quality of ideas plays a role; this will be further elaborated in paragraph 8.2.
But what were reasons for organizations to change of strategies from a closed to open innovation? Fact is that traditional innovation often fails. The literature of Booz et al (1982) showed that between thirty and forty percent of introduction of new products to the market lead to failure. In the model of closed innovation, organizations have the philosophy that successful innovations require control (Chesbrough, 2003). The traditional business management theories therefore focused on the competences, knowledge sharing and learning within or between organizations (Jeppesen & Molin, 2006). Although these topics are very important in successful business management, this approach lacks knowledge and understanding of user needs. Customer needs are continuously changing (Arakji & Lang, 2007). This leads to shortening product life cycles and thus the need for organizations to speed up product development phases. However, organizations are often static and find it difficult to understand their customers and lack time and money to interact with the changing conditions (Leminen & Westerlund, 2009). This might result in bad decision-making regarding NPD with the effect of products lacking sales potential due to poor fit with customer needs. In fact, in the article of Leminen & Westerlund (2009) they state that at least 80% of the new product and services fail when launching them into market, even if customer analysis is conducted. This failure is caused by the fact that it is difficult for organizations to extract the details of consumer needs from analysis. They state that integrating consumers in the innovation process enables organizations to understand the actual behavior and needs better.
Studies have shown that products created with high customer interaction create higher benefits than standard products (Prahalad, & Ramaswamy, 2004). The reason behind this is that these customized products deliver a closer fit with customer needs (Franke et al, 2009). Thus, reliable information about user needs can be considered to be the most critical information for successful new product development.
Figure 2.1 Learning points of the move from closed to open innovation.
This reduces market risk in the launch of new products and improves return on investments (Leminen & Westerlund 2009). Furthermore, it also shortens the product development cycles due to task division between the customer and the organization. Today, the idea of an internally oriented, approach to innovation has been replaced for the new logic of open innovation that embraces external ideas and knowledge. This change has offered new ways to create and capture value (Chesbrough, 2003). In figure 2.2 (page 9) an overview is given of open innovation with the possible subdivisions as found from the literature. The arrows direct these subdivisions. The boxes with the black lines contain the subjects, which are of focus in this paper and will be further elaborated in the next paragraphs. The boxes with the dotted lines are relevant to distinguish in order to provide a total view of the taxonomy of open innovation. Of course, there can be found many more subdivisions, but then the model would be too extensive to keep it comprehensive. Therefore, only the relevant divisions for this study are shown.
Now, organizations invite customers more and more to actively participate in their idea generation and creative problem solving process. Voß & Rieder (2005) interpret this development as the emergence of a new consumer type: the ‘working consumer’. This means that customers are nowadays regarded as active contributors in the innovation process (Bettencourt 1997; Prahalad & Ramaswamy, 2000). In figure 2.1 a summary is given of the main reasons for the move towards open innovation.
2.2 Differences between open innovation and crowdsourcing
In open innovation the organization can on the one hand search for existing ideas or solutions to prevent inventing something what already exists. On the other hand, organizations can also share their findings with others. For example, when their idea does not fit within their own industry. Open innovation does not per se have to carry the definition that consumers are integrated in the innovation process. It could likewise be that other users participate in the process: organizations can also collaborate with universities, science institutes like TNO. Or, organizations from different industries work together, like the Philips Technology Campus in Eindhoven2. These parties are not per se
customers of the organization in terms of being the client. Thus, customer integration can be categorized as a specific part of open innovation, in which consumer actively interact in the innovation process. Cooper & Kleinschmidt (1995) found that when organizations integrate customers in the innovation process, this could increase the chance for success. However, there must be made a distinction between several forms of customers. These customers can be users, people who will actually use the product. Or they can be end-users or client of an organization but not per se be an actual user. Lastly, there must be made a difference between the ‘customers’ and ‘experts’. The crowdsourcing platform Innocentive.com for example, attracts only scientists with specialized skills to provide knowledge to the organizations. These people have an expertise on this subject and are therefore ‘experts’.
For the relevance of the focus of this paper, there is made a distinction between business to business (B2B) and business to consumer (B2C), because customer integration is not
2 Website Technology Center Eindhoven. Retreived: September 21, 2009. From: http://www.hightechcampus.nl/
1 Open innovation is a broad definition for several approaches of gaining external knowledge sources for innovation.
2 Traditional market research methods cannot meet requirements in accurately identifying customer needs.
new in B2B organizations (Chou et al, 2002). B2B organizations sell to intermediaries in the consumer distribution chain rather than directly to an end-user. Then, customers are often in small numbers with a smaller product line and larger transactions in value than B2C organizations (Angel, 2003). In B2C however, customers are demanding a different relationship with the suppliers because the customers are large in number with similar wants and value is often determined by customer perceptions. New customer integration technologies enable understanding and managing a close relationship with the customer, which results in organizations starting more and more integrating customer also in the B2C setting. Therefore, this study focuses on B2C where many end-users can influence the innovation process (see figure 2.2).
Figure 2.2 Taxonomy of open innovation.
Open innovation: organizations are cooperating in the innovation process more often and
more intensively with resources located outside the company.
Outside-in Archetype:
Use external source of knowledge in the innovation process
Inside-Out Archetype:
License internally developed ideas and innovations to other companies that can commercialize them
Universities, research institutes (e.g. TNO) Other companies e.g.
strategic alliances
(Senseo coffee: cooperation between Philips and DE, Philips Technology Campus in Eindhoven)
Customers: both B2B and
B2C
Users: both B2B and B2C Knowledgeable / creative individuals: not
per se a customer or user of the seeker
Crowdsourcing:
The act of a company or institution taking a function once performed by employees and outsourcing it to an undefined - and generally large – network of people in the form of an open call (Howe, 2006)
In the literature there are many success stories of customer integration. These contain various methods on how to integrate with the customers. A critical question about incorporating customers in the innovation process is if customers are able to specify their preferences in exact words.
Franke et al (2009) explain that customization can be a powerful tool, only if certain conditions are met: customers must have ability to get insight into their own preferences, ability to express their preferences, and product involvement. Two important distinct methods are the lead user method and crowdsourcing.
The lead user method is built around the idea that just a few lead users hold the richest understanding of new product and service needs. Lead users experience needs still unknown to the public and have the ability to come up with solutions to these needs. Research of Lilien et al. (2002) has shown that this approach proves to fit best for organizations that are searching for breakthrough (radical) innovations. They come up with radical ideas because they fulfill two requirements:
1. Lead users have needs and insight in (future) needs before the mass will have these needs
2. Lead users have the ability to come up with to come up with solutions to these needs
Usually though, the marketing research methods used by organizations depend on the users' previous experience, not on enhancing the innovation concept (von Hippel, 1986). This means that consumer insight is needed to answer the more incremental ideas. The transfer of information from consumers to the organization is complicated due to stickiness of information and hence it is difficult to use in customizing the product (Piller et al, 2004; von Hippel and Katz, 2002). Lead users are often only small groups of users. The challenge of lead users is identifying them and differentiating them from traditional consumers. Lead users can be identified through screening methods (screening a group of people by looking for specific characteristics), pyramiding methods (acquisition through peer recommendation), and self-selection (offering lead users a measure so that they can identify themselves to the organizations) (Von Hippel et al., 2005).
So, the lead user method explained the idea and effect of using a few customers with specific ascending needs as knowledge source. The method of crowdsourcing mainly focuses on outsourcing to an undefined public or consumers in order to gain as much consumer ideas as possible. To make this level of involvement and integration possible, various methods are used to do so: mass collaboration; wisdom of crowds; the use of toolkits, the lead user method, innovation tools and idea & design contests.
To illustrate:
1. Mass collaboration is a form of collaborative action that occurs when large numbers of people work independently on a single project. Some of these organizations are now reaping the benefits of customer interaction in the form of user-generated content websites, using social media tools such as wiki's for collaboration and knowledge sharing and commercial social networking tools (Girard, 2009). Open source software (OSS) is a well-known innovative way of collaboration with others in communities (peer production). Examples of OSS community are Linux software and Wikipedia. Raymond (1999) developed his 'Linus’s Law' in software debugging. Raymond argued that although software development and repairing bugs can be very costly, open source software is effective since a larger number of people are more likely to detect and solve problems (Dahlander, 2005).
2. Wisdom of crowds concerns collecting diverse opinions of individual consumers to answer questions. The most common application is the prediction market where questions are asked like for example ‘Who do you think will win the election?’ and predicts outcomes rather well (see an example on Intrade)3. When the group of people
that express their opinion is large enough, an accurate prediction can be elicited.
3. A toolkit is a design interface that enables trial-and-error experimentation in which users are enabled to learn their preferences iteratively until the optimum product design is achieved (Von Hippel & Katz, 2002). This means that the manufacturer outsources tasks for product development to the customer: the customer should come with a design to the manufacturer. Depending on the type of toolkit, the outcome of the customer integration can even be an innovation. One of the main advantages of the toolkit approach is that it minimizes the sticky information transfer costs, since consumers participate directly in most stages of the product development process (Von Hippel & Katz, 2002). Information is considered sticky when information is costly to acquire, transfer, and to use (Von Hippel, 1994).
4. In line with the philosophy of crowdsourcing, multiple idea and design contests came in existence. These crowdsourcing platforms are already explained in the introduction. Some platforms however, are different in terms of who are allowed to contribute. Some platforms (Battle of Concept & Outfox) are closed to non-members deterring that similar ideas might cause conflicts of initial ownership of the idea. The ideas are kept secret for members and visitors, to avoid that others will steal or slightly change ideas and claim the idea to be theirs (questionnaire NG). Most of the platforms prevent copying or ‘stealing’ other ideas by making sure those participants attest to ownership of the IP. At most platforms, the ownership of the idea transfers to the seeking organizations, after the contributor has won with his/her submitted idea. Intuitively, the winning contributors should show lead user characteristics, making such a toolkit also a measure for self-selection of lead users (Piller & Walcher, 2006).
It is interesting to study crowdsourcing, because it has grown tremendously in short time and the current internet technologies allow for a broad and continuous application of this method (Piller & Walcher, 2006). In the next paragraph the term crowdsourcing will be further explained.
2.3 Definition of crowdsourcing
‘Large groups of people are smarter than an elite few, no matter how brilliant – better at solving problems, fostering innovation, coming to wise decisions, even predicting the
future (Surowiecki, 2004)
Crowdsourcing assumes that the more ideas, the higher chance for good ideas. This form of open innovation diversifies from traditional open innovation by not choosing specific collaborating partners to get access to shared assets etc. Crowdsourcing rather focuses on collaboration with as much external sources as possible. Howe (2006) defines the term as: ‘Crowdsourcing represents the act of a company or institution taking a function once performed by employees and outsourcing it to an undefined - and generally large – network of people in the form of an open call’.
The previous described idea contests are not radically new; popular for some longer time is the trend to organize contests in which customers can contribute ideas for advertisements or contribute in the development of the content of these commercials. The winning advertisement is usually broadcasted by the organizing organization, for example at the advertiser Boomerang4. Companies such as MTV, Virgin Atlantic and
DaimlerChrysler have generated advertising ideas from its network of more than 11,500 creative consumers from more than 125 countries (Schmitt, 2009). However, the crowdsourcing platforms in the current format serve as a medium for these contests in a more structured way.
The study of Piller & Walcher (2006) concluded that idea competitions are often faster and less expensive compared with screening lead users from a large sample. While most of the existing research focused on screening and pyramiding, this study discusses a new method for self-selection (a measure for lead users to identify themselves to the organizations).
3 INTRODUCTION TO CROWDSOURCING PLATFORMS
3.1 Overview of crowdsourcing platforms in the Netherlands
In the book of Toffler (1980) it was predicted that ‘the most creative thing a person will do twenty years from now is to be a very creative consumer’. However, now almost thirty years later, we are far from being ‘very creative’ in the way Toffler described. This is surprising, as there has been an intensive discussion on open innovation for more than a decade (Piller et al, 2005). Thus, it seems that the potential of creative consumers is not fully executed.
The study of Berger et al in 2005 showed that the introduction of the crowdsourcing platforms did not occur easily. Four of the twenty cases identified in their preliminary screening were no longer in business when they started the research (USA). In the Netherlands, Qineboko5 started as early adopter already in 2000 with an online
crowdsourcing platform where advertising agencies’ could post an assignment for advertising. In 2001 the platform shut down their activities. The CEO declared that it was too hard finding advertising that were willing to post a problem statement due to the amount of needed experimentation. Rob Veldt of Cash4idea argued that Qineboko was too early and that current platforms are still too early (interview RV). For organizations, the step towards crowdsourcing platforms is too far reached. Not all platforms are too fast-forwarded: Veldt noticed that platforms like Redesignme.com do work because this platform is focused on incremental innovation, which cases focus on specific research statements. This makes that people understand the case better, can recognize the problem and identify with the problem more easily.
3.2 Scope of the crowdsourcing platforms
As mentioned in the introduction, the performance of an idea competition may be significantly influenced by the design of the platform’s user interface, the procedure of idea formulation, features for collaborative idea creation etc (Piller & Walcher, 2006). It is therefore important to compare the several approaches that the crowdsourcing platforms of this study use. In figure 3.1 the ideas behind the foundation of the analyzed crowdsourcing platforms are described.
Battle of Concepts came in existence after the founder noticed that organizations found it hard to come up with new ideas for their marketing campaigns. They needed fresh ideas. They concluded that many other organizations faced the same problems. They decided to capture the creativity and the open-mindness of students and young professionals for ‘out of the box’ thinking. In every ‘battle’ the 20 best performing contributors win a monetary reward and can be discovered by participating organizations.
Stimulating idea generation for organizations is not the only purpose of BoC. BoC receives a match fee whenever a match is come into existence between talented members and organizations. So, this platform serves as a combination of a recruiting agency and an idea generation contest organizer. BoC claims to be the most interesting for larger organizations, because of their recruiting efforts. Redesignme started as a website where users could deliver comments and critique on products. Schram: ‘Next, I got more often requests from engaged producers to contact them with the users’ (Volkskrant, 2009). Govers (Outfox) says that the people don’t have to be consumers of the organizations’ products, but the fact that they can deliver creative solutions gives a different perspective with new information (questionnaire NG).
It becomes clear from the collected data that the crowdsourcing platforms of this study operate in convergence with the actual idea behind crowdsourcing, namely the idea of gathering a large amount of ideas, with the underlying idea that among these ideas there must be a usable idea for the organizations that implement crowdsourcing. As the table shows, most of the platforms do not have any restrictions on organizations concerning their branches or research question.
Figure 3.1 Exploratory case studies used in this research
They al declare that this strategy fits every organization, because when highly diverse branches are interconnected, the more diversity of knowledge and experience can be shared (interview CV; CL; NG). It offers the opportunity to benchmark and see developments in other industries. In this way, contributors with knowledge of other industries where a certain development is yet further than the industry of the organization that is searching for a solution, could provide relevant insights. Also at Outfox the purpose for contributors is to develop concepts created by out the box thinking. So, contributors do not need to have specific knowledge to contribute (interview NG). Veldt: ‘When different branches are brought together, it is by definition value creation’ (interview RV). Outfox adds that you cannot designate differences between organizations that are opening up for ideas external of the organization. This platform does however set restrictions on the contributors: they allow only students on their platform. They think that students can think out of the box and are not influenced by a certain business or organizations’ culture (interview NG). At BoC there are also only students and Young Professionals (YP) who participate. However, study backgrounds do not play a role. It’s more the other way around; BoC noticed that more often students with a deviating study are more successful due to their new approach for addressing battles.6
3.3 The revenue model of crowdsourcing platforms
As said in the introduction, literature found that consulting platforms is often less
6 Interview Battle of Concepts. Retreived: November 2007. From: http://www.openinnovatie.nl/interviews.php
Founder Nr of
members Selection criteria for members (solvers)
Idea behind foundation
of the platform Focal organization Battle of
Concepts (2006)
Joost
Dekkers 2020 Only students & Young Professionals
1. To capture the creativity and the open-mindness of students and young professionals for ‘out of the box’ thinking for organizations.
2. Functioning as a recruiter between solvers and the organizations
Organizations in areas of marketing, IT, technique and logistics Cash4idea
(2006) Rob Veldt 400 Open to everyone. From customers to people who have a great idea or solution to a case
Anyone can come up with creative ideas for organizations. This platforms links the creative people with the organizations
Any
organization
Redesign
Me (2007) Maxim Schram 4200 Open to everyone To get in contact with consumers varying from marketing students till creative do-it-yourselfer’s to make user needs tangible by facilitating online co-creation communities Any organization Outfox
(2008) Nick Govers 540 Only students. Dutch To gather innovative ideas from a group smart creative people
Any
organization Atizo
(2008) Christian Hirsig ? Open to everyone who is full of ideas, creativity & team-spirit (no selection)
Integration of diverse
knowledge and
perspectives in organization’s innovation and idea processes
Any
Table 3.2 Revenue model of the crowdsourcing platforms
expensive than other customer integration methods (Piller & Walcher, 2006). In an interview with BoC it was also said that costs for this strategy are low which makes it more interesting especially for the SME’s who do not have their own marketing departments.7 Although the organizations that consulted the platforms did not mention that saving costs was a reason, it does seem that the low costs and the easy access to consumers plays a role in the persuasion to consult these platforms. In this research the possible cost advantages of these platforms will not be further researched, because of the existent literature on this topic.
However, it is interesting to discuss how the platforms make revenues from their platforms. Especially since it is said that this method has low costs for the organizations. In table 3.2 the revenue model of crowdsourcing platforms is provided. The most important revenue for crowdsourcing platforms is the revenue of functioning as a broker. Organizations that consult the platforms must pay for these broker costs. The organizations also have to pay for the monetary rewards of the winning solvers.
3.4 Effectiveness of crowdsourcing platforms
The 1% rule for use-generated content
In a group of 100 wired people…one will create content…10 will interact online… 89 will view the content and interactions
(McConnon, 2006)
So, how effective are these platforms currently? Carl Lens, expert on crowdsourcing and co-founder of CreativeCrowds said: ‘I feel that crowdsourcing is not yet productively put to action by organizations. Apart from some American successes, and some local cases, I must say I am disappointed. If you’d ask me two years ago, I thought we would be much further’ (Lens, 2009).
In figure 3.3 the crowdsourcing slope of enlightment is shown. According Lens, crowdsourcing is currently in the position of the slope of enlightment. More and more organizations pay attention to engaging people in dialogue and co-creation, not solely the innovators and marketeers. The organizations gained more experience, which had the
7 Interview Battle of Concepts. Retreived: November 2007. From: http://www.openinnovatie.nl/interviews.php
Revenue model Revenues Which platforms?
Brokerage model:
Revenues by the broker for connecting demand & supply by facilitating transactions. Revenues are the costs for this service (such as Marktplaats.nl)
Redesignme:
Depends on the requested number weeks of running time: 139-390 euro
BoC:
Prices from 3000 euro.
Note: award money not included.
All platforms
Advertising model:
Revenues by
advertising/more visibility of organizations
No specific data BoC, Outfox
Infomediary model:
Revenues by providing data about consumers/clients
Figure 3.3 Slope of enlightment. Source: http://www.crowdsourcingdirectory.com
result that halfway 2009 it became more productive, in terms of organizations can use crowdsourcing more effectively.8
The figure shows that if the model proves to be a normal curve, the initial hype undergoes maturity towards productivity. Then, crowdsourcing will soon reach the plateau of productivity as the benefits become widely accepted and the technology becomes increasingly stable (Fenn, 2008).
If we compare the rate of innovativeness of the Netherlands with other European countries, then the Netherlands seem to be ascending (interview RV). Other countries in Europe such as Belgium compare their country with the Netherlands to screen possibilities for their own country. The reason why other countries look at our country is that in the Netherlands the infrastructure of the media is well developed (interview RV). However, Veldt noticed that organizations still lack trust in this method. He refers to his option on his platform where organizations are offered the facilitation of crowdsourcing portals/platforms. This portal makes it able for organization to start their own platform, but without the organizational time consuming activities. At the moment there is no interest for this option. An explanation for this might be that the current credit crisis influences the development of crowdsourcing. Veldt does expect however, that within a couple of years these platforms be more integrated in organizations’ business.
Thus, the adoption of crowdsourcing methods by organizations does not happen as quickly as expected. Crowdsourcing will also not be ideal for every field of business and suitability varies across organizations. As the figure showed, crowdsourcing platforms still are not fully productive. It must be researched how to enhance platforms to become more effective for organizations. But first, what kinds of organizations make use of these crowdsourcing platforms?
3.5 The organizations that consult crowdsourcing platforms
It was researched by observation of the platforms what kind of organizations approach the platforms. The categorization to determine differences between the organizations was made according the literature of Ghobadian & O’Regan (2000). Organizations employing between one and 250 people are usually classified as small and medium sized organizations (SME’s). If the organizations have more than 250 employees it will be considered to be a large organizations. If organizations do have multiple offices in more countries, it is considered to be a multinational. There is also made a category specifically for non-profit & governmental organizations, because the interviews indicated the huge interest of these organizations (interview RV; CL; LD). Therefore it is useful to make a separate category. The categorization was also set up according several assumptions from various sources. For example, an online blogs assumed that the idea competitions not only realized ‘cost reduction for profits, but that is also brings non-profit organizations the power of choice and the ability for its constituents to become involved’.9
8 Carl Lens, ‘My half time pep talk’. May 15th, 2009. Retreived: September 2, 2009. From: http://www.crowdsourcingdirectory.com/
Figure 3.4 an overview of the percentages of research statements posted in 2009 by the different sort of organizations.
Next, ‘there are many other good examples of large corporations gaining competitive advantage through this approach’.10 ‘In SME’s much innovation take place; the potential
for SME's and the benefits of platforms are huge’.11 However, SME’s are traditionally
closer to their customers, so there is also the question as to whether anything additional can be gained through a more formalized approach. A survey in the UK in March 2009 of 500 SME’s showed that only 17% are actively using these channels.
It also showed that this method is being used for cost-effective marketing, customer service and recruitment.12 In this study the number of consulting organizations were
counted regarding the set categories in order to check the above assumptions of various sources. Figure 3.4 gives an overview of the percentages of research statements posted in 2009 by the different sort of organizations.
As the figure shows, much variety can be observed between the several platforms. From the figure it appears that the multinationals consult more likely the larger platforms. This can be explained by that large organizations have to deal with image, loyalty and recruiting and must keep up their innovation reputation (interview RV). Probably, they consult the larger platforms to express and maintain their reputation by integrating with platforms with the largest groups of members. Surprisingly, the SME’s present a large substance in most of the platforms. This in contradiction with the assumptions and the statements of BoC and Redesignme who represent on their website to help the larger, commercial organizations.13 Veldt argued that SME’s grab this professional opportunity
because they have been open innovating for years to collaborate to survive the competition (interview RV).
An explanation of the large presence of SME’s might be that organizations such as Syntens (consultancy agency for entrepreneurs) and the Dutch Chamber of Commerce have informed these organizations about this option (questionnaire Phoenix; Xaurum; Schiebroek; Van Gastel). Only Phoenix had experience with consulting platforms.
10 Article Is Crowdsourcing for SME’s?. Retreived: 20 February 2010. From: http://webkit.o2online.ie/ideasroom/?p=1483
11 Blog Creative SME 2009. Retreived: 6 Octover 2009. From: http://ifipwg82.org/node/593 12 Article Is Crowdsourcing for SME’s?. Retreived: 20 February 2010. From:
http://webkit.o2online.ie/ideasroom/?p=1483
4 THEORETICAL FRAMEWORK
In this chapter, an explanation is given of the different theories that are of importance in answering the research question. The chapter starts with explaining which theories are of importance and how they are connected.
4.1 Introduction
For most commercial organizations the ultimate goal is gaining competitive advantage over their rivals. When an organization sustains profits that exceed the average for its industry, the organization is said to have competitive advantage over its rivals. The purpose of many business strategies is to achieve sustainable competitive advantage. This advantage is accomplished when an organization is able to ‘acquire or develop an attribute or series/combinations of attributes that allows it to outperform its competitors’ (Porter, 1998).
Porter identified two basic types of competitive advantage:
- Cost advantage: delivering the same benefits as competitors but a lower price. - Differentiation advantage: deliver benefits that exceed those of competing
products.
This competitive advantage enables the organization to create long-term success when the organization can provide the same value as competitors but at lower price (cost leadership) or can charge higher prices by providing greater value. There are several ways how a competitive advantage can be achieved. The latter matter is to innovate and create new products or services for a differentiation advantage (creating greater value). Innovation is a new product or service of a new way of doing something, which must be substantially different to be defined innovative. It requires incremental or radical changes in thinking, products, processes, or organizations (Schumpeter, 1934). In this paper focus is on creating ideas for innovative ideas to create competitive advantage trough differentiation.
In the article of Amabile et al. (1996) innovation is explained as ‘the successful implementation of creative ideas for new products/processes within an organization’. This successful implementation can depend on many factors, but all innovations start with developing creative ideas. These ideas come from creative persons, whose characteristics can also be influenced by the social environment of this person. So, the initial point is creativity by individuals.
However, creativity does not per se lead to innovation. In the literature, innovation is often focused on the process of innovation itself, from head (idea generation) to tail (output of the process, the innovation). So for innovation to occur, not only idea generation is required: the insight must be put into action to make a genuine difference. In this paper however, focus does not lie on the output of innovation in the innovation process, but rather on the input side of innovation. This paper will not try to explain the direct effect of idea generation on competitive advantage. Reason for this is that there are many other aspects that influence the innovation process, with the creation of innovative ideas being just one of the many.
4.2 Focus of this paper
From chapter 2.2 it becomes clear that organizations that integrate end consumers in their innovation process can use many methods to do so. However, according the literature, transferring the idea generation for the innovation process to crowdsourcing platforms is stated to be one of the most promising concepts for the future (Ebner et al, 2009). Some of these platforms are partly closed, which means that they require subscription and it only gives access to certain groups of consumers.
integrating several features/options on their platform. The platform are obviously experimenting what features work, because during this study some platforms such as Redesignme changed some of their features. This will be explained in chapter 8.
Next to the idea and design contests on crowdsourcing platforms, some varieties of this method are also emerging which might be interesting to integrate in this research. Some organizations are starting their own corporate platform instead of consulting existent platforms. Literature stated that organizations that start these platforms prefer to have more control over the dynamics of ideas sourcing and the relationship with the innovation partners (Chesbrough & Sandulli, 2009). Examples of organizations that utilize crowdsourcing by publishing available tasks on their own corporate websites are Sara Lee14, Procter & Gamble15, AH16 and Kraft17 (as discussed in the introduction. A few
other organizations consult independent innovation communities launched by consumers to integrate these consumers in the innovation process rather than consulting a platform. These innovation communities are often created by (fanatic) customers as seen in the iPod lounge community.18 It can be said that these other two approaches have
similarities with the idea and design contests, which make it interesting to integrate these strategies in the research.
This study explores how and why crowdsourcing platforms can function as an effective idea generation method for input of the NPD process. This research question is relevant, because literature shows that only little research discusses the design and implementation of idea & design competitions (Ernst and Gulati, 2003; Franke & Piller, 2004).
Figure 4.1 shows the theoretical framework. The area inside the box will be studied. It contains the factors that might influence this method of idea generation. As the figure shows, the organization that seeks a innovative solution (seeker), the research problem and the people who are able to come up with an innovative solution (solver) come together at the crowdsourcing platform, as indicated with the arrows pointing at the box with ‘crowdsourcing platform’.
4.3 Development of sub questions
In order to answer the main research question- why do organizations make use of crowdsourcing platforms? How can organizations make use of crowdsourcing platforms in order to effectively generate ideas in terms of the NPD process? – sub questions were formulated.
Sub question 1: With what purposes do organizations consult crowdsourcing platforms?
The purposes of organizations to consult crowdsourcing platforms must be researched in order to find out why organizations consult these platforms.
As indicated in the literature review in paragraph 2.3, crowdsourcing concerns: the more ideas, the higher chance for good ideas (Surowiecki, 2004). This indicates that the purpose of crowdsourcing is to gathering a large amount of ideas, with the underlying idea that among these ideas there must be a usable idea for the organization that implements crowdsourcing. It is thus expected that the seeker then can consult a crowdsourcing platform in order to gain these ideas.
14 Website Sara Lee. Retreived: September 22, 2009. From:
https://www.openinnovationsaralee.com/Pages/BrandIdeas.aspx?brandid=1&hpid=OpenInnovation 15 Website P&G Connect & Develop. Retreived: September 22 2009. From:
https://www.pgconnectdevelop.com/pg-connection-portal/ctx/noauth/PortalHome.do 16 Website Albert Heijn. Retreived: September 22, 2009. From: http://www.ah.nl/iphone 17 Website Kraft Foods. Retreived: September 23, 2009. From:
http://brands.kraftfoods.com/innovatewithkraft/region.aspx
Figure 4.1 Interrelations between de hypotheses of this research
Next, it is also expected that organizations have the purpose of identification of lead users to consult the platforms. As indicated in paragraph 2.3, the previous study of Piller & Walcher (2006) showed that a purpose is to find lead users, because winning contributors show lead user characteristics, making such a method also a measure for self-selection of lead users. Thus, it must also be researched if organizations are trying to identify lead users on the platforms and also important: it must be determined if there are lead users on the platforms.
Sub question 2: In what way are organizations currently making use of crowdsourcing platforms?
In order to answer the main research question, it is important to research how organizations make use of the platforms. It is therefore needed to research their posted research questions in terms of what kind of research statements are posted and what knowledge is required to answer these research questions. This sub question will be researched by categorization of the innovativeness of the research statements.
In line with the expected purpose of the search for lead users, it is expected that organizations will place research statement that focus on radical product ideas. This because paragraph 2.2 mentioned that lead users deliver radical ideas.
SQ2: interaction between platform & research problem Competitive advantage
Exploitation of the idea generation for the innovation
process
SQ1: interrelation between seeker &
their problem SQ3: interrelation between research problem & possibility of
solver to come up with solutions & ideas
Idea generation on crowdsourcing platforms
Solver
Seeker Research
The idea of crowdsourcing platforms is that they attract many different organizations that are in search of ideas for their NPD process. Therefore the seeking organizations continuously change on platforms (some organizations post research statements more than ones). The solvers on the platforms however, are a steady group of members and do not change per posted research statements on the platform. It is therefore assumed that the research statements posted on the platforms should not require deeper customer understanding because it is not likely that the solvers are all customers of the organization’s products.
Sub question 3: In what way do the crowdsourcing platforms contribute to effectively idea generation in terms of the NPD process?
The organizations consult the platforms with a given purpose. It must be researched in what way the crowdsourcing platforms contribute to meeting these purposes effectively. If not, what are reasons for this?
It is expected that organizations have difficulties with defining the research statements, which will result in that the idea generation will not be effective because the outcome is not in line with the purposes of the organizations. This problem with defining the research question can be explained by the stickiness of information.
The literature showed that the main problem of co-creation is the stickiness of information (Von Hippel & Katz, 2002). It is expected that crowdsourcing platforms currently cannot solve the stickiness of information (Von Hippel & Katz, 2002), which indicates that the crowdsourcing platforms currently cannot contribute to effectively idea generation in terms of the NPD process. Thus, in order to effectively generate ideas for organizations, the stickiness must be solved.
Sub question 4: How could crowdsourcing platforms be improved in order to effectively generate ideas for the NPD process? What are possible alternatives for crowdsourcing platforms?
The expectations of sub question 3 assume that currently the crowdsourcing platforms do not contribute effectively to idea generation. It must be researched if there are opportunities to improve the usage of crowdsourcing platforms.
As mentioned in paragraph 2.2, the use of toolkits might be the solution to solve this stickiness.
As indicated in paragraph 4.2 also varieties of crowdsourcing platforms came into existence. In what way can these contribute to effective idea generation?
It is expected that when organizations start their own platform, that the organizations will face few responses due to the fact that it is difficult to attract and integrate people to this platform. It thus could benefit to not trying to attract these people, but rather seek where these people operate currently and integrate on the spot.
5 RESEARCH DESIGN
The aim of this chapter is to describe the design of the research and to explain decisions that were made during the writing of this paper. This research design will provide a structure for linking the generated empirical data to the research questions to ultimately define conclusions. First, an explanation is given for choosing a case study method. Then, the design of research and data collection is explained.
5.1 Motivation for a case study
The aim of this paper is to gain insight in what way the idea & design competitions platforms can effectively contribute as a method for input of the NPD process. Because of the scarce availability of scientific research into this topic, it is wise to take an exploratory approach (Yin, 2003). The behavior and taken actions of the crowdsourcing platforms cannot be controlled in this study and therefore a case study fits best in these circumstances (Yin, 2003).
5.2 Case design
While much case study research focuses on a single case, the multiple-case studies design allows the researcher to explore and understand the dynamics of the study through the use of a replication strategy. This means that if most of the cases provide similar results, substantial support for the given propositions can be described (Eisenhardt, 1989).
At the beginning of this study only a few crowdsourcing platforms could be appointed in the Netherlands. The total number of crowdsourcing platforms that could possibly be investigated was therefore very limited. This naturally favors a case study approach. Therefore in this paper, the focal organizations are the Dutch platforms Battle of Concepts (BoC), Outfox, Cash4idea, CreativeCrowds, Innovatie 2.0 and Redesignme. In paragraph 3.4 it was described that the rate of innovativeness concerning these crowdsourcing platforms of the Netherlands compared to other European countries is much higher. Therefore, also a foreign platform Atizo.com was chosen, to compare the format and features for (possible) significant differences. These crowdsourcing platforms are the same type of methods and provide mainly the same services. These platforms are at the same time unique through their specific features and target groups. These platforms are the largest platforms in the Dutch market and make it therefore able to give a sufficient view of the market. Therefore, they make up the sample throughout this research.
In the multiple-case studies design, there are no hard-and-fast rules about how many cases are required to satisfy the requirements of the replication strategy. However, Yin (2003) does recommend between 6 and 10 cases. However, this study contains fewer cases. Reason for this is that there are not many crowdsourcing platforms in the Netherlands. Next, some of these platforms decided not to participate in this research, which explains the fewer amount of participants in the study.
5.3 Research design
According Yin (2003) case studies are suitable for research-seeking answers to ‘how’ or ‘why’ questions. These studies often have qualitative research design. An advantage of case studies is that a broader range of data collection instruments can be applied, such as observation or interviews with people currently involved in the event. A limited number of cases, in this case crowdsourcing platforms, is investigated in depth by means of observation and interviews, in order to draw a detailed picture of qualitative particularities.
5.4 Data collection
Because there is not much scientific information available on this subject, most of the data is collected through interviews with several crowdsourcing platforms. The field of crowdsourcing and customer integration is evolving so rapidly that it is important to include the knowledge from the participants of this industry. Therefore, this study collected data through a common accepted approach, namely a series of structured interviews (Lisl, 2006).
Interviews with the crowdsourcing platforms were conducted to gain insight in the motives and purpose of these platforms. Next, to get insight in their experiences with organizations that consult them and for what reasons they have chosen the specific features of their platform.
The best way to get answers to these questions is to ask them directly to the core members responsible for the platforms, but it is hard to get in touch with them without contacts. Potential candidates for interviewing were identified through searching for idea & design platforms on the Internet, the websites LinkedIn and the use of personal connections of the candidates who were already interviewed. At first, the larger idea & design platforms were contacted for interviews. However, the largest two BoC and Redesignme did not have to time for cooperation.
Outfox and Cash4idea did want to cooperate. Because of the focus of this paper, the first interviews were conducted to understand the current practices of this method for customer integration in the innovation process. Main questions asked in these interviews with the platform owners were: What is their core business? What kinds of organizations consult their platforms? What kind of research statements do these organizations post? In these interviews it became clear that especially governmental organizations and SME’s consulted these platforms. Therefore, the next interview was with a governmental department of the Ministry of Economics that started their own platform after multiple consultations of crowdsourcing platforms. This interview was to find out what the purpose were for their organizations to consult a platform and subsequently start their own platform in order to distinguish the differences between these two options. It became clear that their main purpose was to become closer to their customers and gaining inspiration and creative ideas (interview LD).
Through personal connections of the founder of Cash4idea, the next interview was with CreativeCrowds, a consultancy agency that connects organizations with online communities where already customers were talking about their products. The purpose of this interview was to define the (possible) benefits of this method over the method of crowdsourcing platforms and to get to know what kind of people operate in these communities. From this interview I gained the knowledge that the people that operate in these innovation communities, contribute for different reasons than the contributors on the crowdsourcing platforms. This will be explained in paragraph 9.2.
