Open innovation has been positioned as a solution to myopic internal R&D efforts, with crowdsourcing being the primary means with which large organizations are willing to outsource their internal R&D. While crowdsourcing is effective in solving small problems such as coloring and naming of products, it lacks effectiveness as a serious means of engaging in open innovation. Although crowdsourcing is a version of open innovation, it is not the end-all-be-all of open innovation, with tech scouting, external licensing, and other efforts offering far better rewards for the effort.
At The Heart of Crowdsourcing
At the heart of the open innovation concept is the idea that crowds aa group can provide more intelligent and accurate solutions than a single individual. The origins of this concept lie in the statistician Francis Galton, who in 1906 observed a competition in which 800 people attempted to guess the weight of an ox at a county fair. After performing statistical analysis on the outcome, he determined that the average guess (1,197lb) almost precisely matched the actual weight of the ox (1,198lb).
While the concept sounds like it can hold water when applied to innovation, this argument is flawed. R&D challenges and innovation problems are rarely so linear that generalists have the deep, technical knowledge to develop a solution. R&D issues require specific knowledge that is used in proper context to the problem an organization faces; organizations will rarely release enough information to make an accurate assessment due to potential trade secrets and liabilities. Given how interdependent and complex technological problems are, there is very little evidence that crowdsourcing can provide the depth of knowledge needed to succeed. Crowdsourcing involves a very transactional relationship that doesn't lead to the types of benefits that are seen from a long-term technology partnership.
Crowdsourcing also fails from the reality that customer suggestions do not directly translate to customer purchasing behaviors. As seen with Quirky, crowdsourcing functioned as the core of the innovation product in terms of developing and marketing product categories. The venture, while initially successful, failed due to the reality that the features typically suggested by crowdsourcing enthusiasts are ones that either do not have a wide market appeal or do not translate into sustainable product categories. Since crowdsourcing attracts a specific consumer type such as first adopters, they fail to serve as a representation of the consumer market.
For Everything Else, There's Tech Scouting
The most effective method of open innovation is technology scouting. Technology scouting enables organizations to identify, acquire, and implement external innovations that can be directly applied to their product line or business needs. Since internal scouts are well versed in the needs of the organization, they are best able to effectively and efficiently identify viable technologies. While outsourcing scouting work to external management consultants can serve as an effective stop-gap, a real innovation strategy relies on internal teams functioning in complement to internal R&D and product development teams.