Definitions Crowdsourcing, Innovation, and Appropriability€¦ · Title:...
Transcript of Definitions Crowdsourcing, Innovation, and Appropriability€¦ · Title:...
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College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
Crowdsourcing, Innovation, and Appropriability
Christopher L. TucciChair in Corporate Strategy & Innovation
Ecole Polytechnique Fédérale de Lausanne (EPFL)
March, 2015
College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
Agenda
1. Definitions
2. Motivation3. Crowdsourcing and innovation4. Crowdsourcing and appropriability
5. Conclusions
College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
What is innovation?
● Innovation is the use of new knowledge to offer new products, processes or services
● It involves invention and commercialization (and appropriation)
R&D
Invention
Product development and marketing
Commercialization
Strategic positioning,
making money
Appropriation
Innovation
Competitive advantage
Source: Afuah, Strategic Innovation, 2009
College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
Open Innovation
§ Bring “inside out” and “outside in” in addition to traditional R&D
§ Making traditional R&D more “innovative”– Corporate venturing / CNVG
§ Inside out– Spinoffs & spinouts– Systematic licensing
§ Outside in– Corporate-university technology research centers– Corporate venture capital– Distributed innovation / crowdsourcing
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College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
Open Innovation
§ Bring “inside out” and “outside in” in addition to traditional R&D
§ Making traditional R&D more “innovative”– Corporate venturing / CNVG
§ Inside out– Spinoffs & spinouts– Systematic licensing
§ Outside in– Corporate-university technology research centers– Corporate venture capital– Distributed innovation / crowdsourcing
College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
Crowdsourcing
§ Collecting and aggregating input from a “crowd”
§ The act of outsourcing a task to a “crowd,” rather than to a designated “agent” (an organization, informal or formal team, or individual), such as a contractor, in the form of an open call
College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
INNOVATION and crowdsourcing
1. Crowdsourcing content (Web 2.0)
2. Crowdsourcing to improve products and services directly3. Crowdsourcing to seek input on innovation activities4. Passive crowdsourcing (Web 3.0)
College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
INNOVATION and crowdsourcing
1. Crowdsourcing content (Web 2.0)
2. Crowdsourcing to improve products and services directly3. Crowdsourcing to seek input on innovation activities4. Passive crowdsourcing (Web 3.0)
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College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
CASE: CNN iREPORT
College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
CASE: LEGO UNIVERSE
College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
LEGO: A slight tangent
College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
Product innovation pre-Web2.0
§ What was the last innovation you can think of in a travel (bookings) web site?– Ability to store and retrieve records?
– Faster search for fares?– Nicer interface?
– Ability to book both flights and cars?
§ These are all relatively incremental innovations
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College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
CASE: TripIt
College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
Combining travel and social networking
College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
Ideas for retailers
§ Sharing purchases with your “friends”
§ Sending the customer information on related purchases§ Friends who bought what you bought also bought…§ Informing your friends that you are going to / are in the
store§ One of your friends is actually in the store right now§ Real-time ads based on things your friends bought / like
§ (I realize that these are kind of invasions of privacy, but so is Facebook!)
College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
INNOVATION and crowdsourcing
1. Crowdsourcing content (Web 2.0)
2. Crowdsourcing to improve products and services directly3. Crowdsourcing to seek input on innovation activities4. Passive crowdsourcing (Web 3.0)
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College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
Case: Netflix Prize (background)
College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
Case: Netflix Ratings Database
§ The permanent contest was meant to last at least 5 years
§ Within 15 months, 30’397 contestants had registered, grouped in 24’836 teams from 167 different countries
§ 21´345 submissions were received from 2’925 different teams
§ The leading team (two AT&T researchers) achieved an improvement of 8.57% after one year, winning them $50K
§ Within three years the same team, combined with another leading team, had won the Netflix Prize!
College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
CASE: Facebook Translation Project
§ Launched on December 27, 2007
College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
Case: Google Image Labeler
§ What is this picture?
§ When you and your randomly assigned partner pick the same words, you get “points”
§ What for?– HINT: users vs consumers���
vs customers
§ Guess how much time
the winners spend?
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College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
Ideas for retailers
§ Algorithms for store layouts given customer purchasing and demographic data
§ Algorithms for purchase recommendations (online or in-store)
College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
INNOVATION and crowdsourcing
1. Crowdsourcing content (Web 2.0)
2. Crowdsourcing to improve products and services directly3. Crowdsourcing to seek input on innovation activities4. Passive crowdsourcing (Web 3.0)
College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
Examples of getting input from the crowd
• In 2006, IBM conducted two public worldwide brainstorm sessions on-line, to get feedback on promising technologies, backed with $100 million
• In 2001, GoldCorp put their company’s geological data online, offering $575’000 in awards to those who could pinpoint the location of gold mines. The winners found real mines from the data alone.
• swissnoise.ch wisdom of the crowds
College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
Ideas for retailers
§ Designing promotions
§ Evaluating new clothing styles§ Voting on features / models of electronics
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College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
INNOVATION and crowdsourcing
1. Crowdsourcing content (Web 2.0)
2. Crowdsourcing to improve products and services directly3. Crowdsourcing to seek input on innovation activities4. Passive crowdsourcing (Web 3.0)
College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
Waze
§ An iPhone and Android app that constantly tracks your movements via GPS
§ All users’ movements are aggregated and reported as real-time traffic flow, road reports, gas station prices, and speed traps (!)
College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
Crowdsourcing and appropriability
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College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
Why participate?
1. Doesn’t this just create competitors?
College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
APPROPRIABILITY and crowdsourcing
1. Definitions
2. Crowdsourcing to improve products and services directly3. Crowdsourcing to seek input on innovation activities4. Passive crowdsourcing (Web 3.0)
College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
Imitability
● Imitability refers to how easy it is to copy a firm’s products or services ● It heavily influences appropriability, because the easier it is to copy something,
the lower the chances that the inventor can appropriate benefits from it ● Imitability ranges from high (easy to copy) to low ● Most of our thinking about imitability is based on IP protection, although this is
not the only mechanism for reducing imitability
Imitability
low
high College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
Issue: diffusion of solution
§ Open source software is about two types of openness:§ Openness to the public so that anyone anywhere could
participate in solving a problem and
§ Openness in that nothing was proprietary
§ Crowdsourcing can incorporate proprietary elements§ Some innovation intermediaries arrange for “solvers” agree
to give up IP rights to receive the “prize”
§ Some companies that sponsor crowdsourcing similarly require giving up IP rights or incorporate an exclusive license in the prize or payment
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College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
Issue: holdup
§ Highly unlikely I haven’t heard of it so far)
§ But the winner of a crowdsourcing tournament could refuse to license the idea with the idea of renegotiating the prize / payment
§ In many cases, the exercise can be designed to get participants to agree before participating– In the case of passive games etc. this is not an issue
College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
Issue: competitive leakage
§ When you sponsor an open competition, everyone knows what you are working on
§ In some cases, e.g., IBM Global Innovation Jam, you may find the results worth it
§ In other case, companies can work with innovation intermediaries to disguise the “seekers” and reformulate the problem so that third parties do not recognize the business goal
College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
Side note on leakage / spillovers
§ Solving a problem internally does not guarantee inimitability since there are other ways through which knowledge can leak, such as– employee mobility– product reverse engineering
College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
Complementary Assets
● Everything required to commercialize a technological innovation besides the technology itself
● What are some examples of complementary assets? ● Sales force, manufacturing, marketing/merchandizing,…
● Are complementary assets the same as complementary goods? ● No, sales of complementary goods stimulate sales of the original product (or service) and vice
versa
● When do we care about complementary assets? ● How do we decide whether we should care about a particular
complementary asset?
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College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
Importance vs. Control
Important? No Yes
Control
Tightly held
Freely available
College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
Importance vs. Control
Important? No Yes
Control
Tightly held
Freely available
Important and tightly held
Unimportant or freely available
College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
Complementary asset framework
Complementary assets
Unimportant or Freely available
Important and tightly held
Imitability
Low
High
College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
Complementary asset framework
Complementary assets
Unimportant or Freely available
Important and tightly held
Imitability
Low
High
Inventor “wins”
Customers “win”
CA-holder “wins”
Bargaining Game (usually CA- Holder)
Adapted from Teece (1986); Henderson (1993)
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College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
Role of complementary assets
§ Goldcorp owned the land with the gold whose location crowdsourcing helped the firm pinpoint, and
§ Netflix controlled– the physical distribution of DVDs and– the data on the network of users from
whose behavior the movie-recommendation algorithm was derived.
College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
CONCLUSIONS
1. Crowdsourcing content (Web 2.0):1. focus on network, interactivity2. try and avoid translators
2. Crowdsourcing to improve products and services directly1. Focus on complementtary assets2. Or “run strategy”
3. Crowdsourcing to seek input on innovation activities:1. Risk of diffusion2. Focus on complementary assets3. Consider innovation intermediary
4. Passive crowdsourcing (Web 3.0):1. protect data
College of Management of Technology
Christopher Tucci Copyright © EPFL, Lausanne, Switzerland
Thank you!
Christopher L Tucci
[email protected]://csi.epfl.chTwitter @cltucci