Various principles and concepts are used for managing research and innovation. You are probably familiar with these buzzwords: crowdsourcing, open innovation and a more recent one, co-creation. Organisations are gradually moving away from traditional work models; they are becoming a lot bolder and more inclusive in their approaches to innovation. As an innovation and idea management company we have witnessed successful use and implementation of these processes. Although these concepts are complementary they reflect different applications of innovation and idea management.
So, what are the major differences between these three concepts?
Let’s start with open innovation:
Open innovation means creating and innovating with external stakeholders: customers, suppliers, partners and your wider community. Companies are increasingly seeking to work and source knowledge beyond their boundaries. Henry Chesbrough defines open innovation as “the use of purposive inflows and outflows of knowledge to accelerate innovation. With knowledge now widely distributed, companies cannot rely entirely on their own research, but should acquire inventions or intellectual property from other companies when it advances the business model (…) Competitive advantage now often comes from leveraging the discoveries of others. An “open” approach to innovation leverages internal and external source of ideas.”
Open innovation creates an environment where individuals and organisations can actively get involved in the creation of mutually beneficial solutions. Through open innovation decision making is becoming a truly democratic process. It allows for a bolder, wider approach to problem solving. It suggests interacting with broader groups of stakeholders and it builds collaborative community engagement around specific challenges and issues: ideas and input flow into organisations from outside and smart, innovative solutions are easily generated. Open innovation is an inclusive, social way of solving complex issues and improving processes.
How does crowdsourcing differ?
Crowdsourcing occurs when an organisation outsources projects to the public. An organisation decides to tap into the knowledge of a wider crowd and input is sourced from a large and undefined group of people. Crowdsourcing requires a lower level of engagement and involvement than open innovation and co-creation. An organisation using crowdsourcing will set a challenge to the public and ask for opinions, insight and suggestions. It is an open call to the public whereby the organisation solicits solutions from the crowd – not genuine contribution and collaboration. Open innovation and co-creation imply a stronger involvement from the stakeholders who are included in the value and creation process.
What about co-creation?
While open innovation suggests active collaboration between different organisations and the sharing of intellectual property, co-creation relates more specifically to the relationship between an organisation and a defined group of its stakeholders, usually its customers. The most common definition is: “An active, creative and social process, based on collaboration between producers and users that is initiated by the firm to generate value for customers.” (C.K. Prahalad and Venkat Ramaswamy, Co-Opting Customer Competence, 2000). Co-creation means working with the end users of your product or service to exchange knowledge and resources, in order to deliver a personalised experience using the company’s value proposition. While crowdsourcing is people creating a great idea for you, co-creation is about people working with you to make a good idea even better. Co-creation is also a way of enhancing customer engagement by directly involving them in the company’s value creation and product development processes.