Defining Open Innovation, Crowdsourcing, and Crowdsourced Innovation

Posted by Graham Buchanan on Aug 22, 2017 10:37:40 AM

As an evolving, fashionable and relatively new field, Open Innovation is naturally packed with jargon and disputed definitions. There are different terms with the same meaning, the same terms with different meanings and terms being used entirely incorrectly. In this post I try to bring some clarity, referencing reliable academic and business literature where possible.

Open Innovation (OI) was defined by Henry Chesbrough (2003) as “the use of purposive inflows and outflows of knowledge to accelerate internal innovation, and to expand the markets for external use of innovation, respectively.” These two parts are referred to as inbound or ‘outside-in’ OI and outbound or ‘inside-out’ OI. Inbound OI involves exploring and leveraging external technologies and discoveries (e.g. customer co-creation, crowdsourcing, in-licensing intellectual property etc.) while outbound OI involves developing external relationships to commercialize proprietary technologies (e.g. out-licensing intellectual property). These processes can be combined to create a third type: coupled OI (e.g. strategic alliances, joint ventures etc.) (Bogers, 2014). Philips (2010) argues that different types of Open Innovation are distinguished by where they sit along two axes: Participative (i.e. open to all) versus Invitational (i.e. open to a select few) and Suggestive (i.e. all inputs accepted) versus Directed (i.e. inputs directed by needs specified by sponsor).

Crowdsourcing was defined by Howe (2006) as “a business practice that means to outsource an activity to the crowd”. The crowd is simply a large group of people. Activities can range from basic to complex and be used for many purposes including design (e.g. Threadless), writing (e.g. Quietly), acquiring funding (e.g. Kickstarter) and innovation (e.g. InnoCentive). To be considered crowdsourcing, the activity must have a clear objective. For instance, a user uploading and sharing a video on YouTube would not be considered crowdsourcing but if it was done in order to participate in a competition to have their video shown at the Superbowl, it could be. Another key feature of crowdsourcing is that the contributor will “obtain satisfaction of a given necessity, whether it be economic, social recognition, self-esteem, or the development of individual skills” (Estelles-Arolas & Gonzalez-Ladron-de-Guevara, 2012).

Crowdsourced Innovation is using crowdsourcing for the purposes of Open Innovation. Majchrzak and Malhotra (2013) define it as “the public generation of innovative solutions to a complex problem posed by the company sponsoring the challenge call”. Howe (2011) refers to it instead as “Crowdcasting” while Deloitte (2016) split it into “Crowd competition” and “Crowd collaboration”. Crowdsourced Innovation/Crowdcasting/Crowd competition is where we at InnoCentive fit in. However, I might rephrase and extend Maichrzak and Malhotra’s definition to: the generation of innovative inputs from the crowd in order to tackle an unresolved problem or unmet need posed by the organization sponsoring the challenge call.  Crowd collaboration is similar to Crowd competition, in that it is still looking to address an unresolved problem or unmet need, but it instead involves respondents collaborating rather than competing to provide a solution (e.g. Quirky)

To summarize: Open Innovation is an innovation process that encourages and embraces third-party participation whereas crowdsourcing is a multi-purpose tool that involves outsourcing an activity to a large group of people. Crowdsourced Innovation combines the two.

Further reading

Bogers, M. (2014). A Beginners Guide to Open Innovation. Global Innovation Magazine, 1 (2), pp. 4-8.

Chesbrough, H. (2003). Open innovation: The new imperative for creating and profiting from technology. Boston: Harvard Business Press.

Chesbrough, H. and Bogers, M. (2014). Explicating open innovation: Clarifying an emerging paradigm for understanding innovation. In: H. Chesbrough, W. Vanhaverbeke, & J. West, eds., Open Innovation: New Frontiers and Applications. Oxford: Oxford University Press.

Deliotte UK. (2016). The three billion: Enterprise crowdsourcing and the growing fragmentation of work.

Estelles-Arolas, E. and Gonzalez-Ladron-de-Guevara, F. (2012). Towards an integrated crowdsourcing definition. Journal of Informational Science, 38 (2), pp. 189-200.

Howe, J. (2006). The rise of crowdsourcing. Wired, 14 (6), pp. 1-4.

Majchrzak, A & Malhotra, A. (2013). Towards an information systems perspective and research agenda on crowdsourcing for innovation. Journal of Strategic Information Systems, 22 (4), pp. 257 – 268.

Phillips, J. (2010). Open Innovation Typology. International Journal of Innovation Science, 2 (4), pp. 175 – 183.


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