2. AKSHAY BORHADE, 4007/20 InnoCentive.com(A)
ICT FOR ORGANIZATIONAL EFFECTIVENESS
EXECUTIVE SUMMARY
This case is about the concept “Open Innovation” i.e. the practice of being open to external sources
for fulfilling ones R&D requirements. Open Innovation is a more efficient, effective and fair way of
innovating. It is faster, cheaper and more efficient. However, they are some privacy issues associated
with the benefits. Open Innovation approach to managing innovation calls for a paradigm shift in
the way R&D divisions work.
Fig 1.1 Traditional innovation approach
In traditional innovation approach, as shown in figure above, lots of effort has to be put in for the
R&D department. Some innovation has to be done from scratch in spite of that being done by the
competitor. Thus, it is tantamount to the wastage of effort and R&D funds which can be directed
elsewhere.
Whereas, in the open innovation approach, the organization can aggregate all the ideas pertaining to
the technology and carry forward the same. Thus it asks for well-directed effort by the R&D
department. As shown in fig 1.2, the marketing department aggregates all the ideas from the external
resources and analyzes it to forward the report to R&D department. The R&D then couples it with
the internal innovative capabilities, thus saving effort and funds.
Fig 1.2 InnoCentive (open innovation) approach
MARKETING
DEPT.
INNOVATIVE IDEA 1
INNOVATIVE IDEA 2
INNOVATIVE IDEA 3
INTERNAL
INNOVATION
THROUGH R&D
MARKETING
1. Predicts the future
needs in the market
2. Ask the R&D
department to develop
products/processes which
can profitably satisfy
these needs better than
the competitors
R&D
1. Innovates internally
2. Takes input from
various stakeholders from
inside (and to a limited
extant outside) the
company
3. Comes up with the
desired products
PRACTITIONERS
EITHER ACCEPTED
OR REJECTED
SOLUTION
3. AKSHAY BORHADE, 4007/20 InnoCentive.com(A)
ICT FOR ORGANIZATIONAL EFFECTIVENESS
ORGANIZATIONAL AND MANAGERIAL CHANGES OF THE
INNOCENTIVE BUSINESS MODEL
FOR INNOCENTIVE
1. Image of being the most powerful crowdsourcing platform in the world.
2. Facilitates global collaboration with number of powerful organization in different industry
and maintaining relations with the same.
3. Repositories of tons of creative solutions for a same problem which can be sold and revenue
can be generated.
4. Become an interface between creative people and companies at large.
5. Develop a new economic, sustainable and creative business model.
FOR CORPORATIONS USING INNOCENTIVE
Advantages
1. Find successful solutions to an internal problem through number of available creative
solutions.
2. The burden of R&D for innovation reduced tremendously.
3. R&D budget for finding a solution for the problem saved.
4. R&D workforce required also reduces as most trivial problem solved by InnoCentive. Thus,
very high Return on Investment for Human Resources.
5. Complements internal research with external ideas.
6. Access to worldwide network of highly qualified and intelligent scientists.
Problems
1. Loss of privacy and exclusivity – the competitors get to know what the organization is up to.
E.g. Samsung using open innovation will expose it strategy of launching new smartphones to
all the cell phone manufacturing companies. In addition, the local Indian companies like
Micromax gets the leader’s technology free-of-cost and with no effort.
2. Loss of competitive advantage – the competition in the industry becomes meaningful only
because of the R&D talent of an organization. With open innovation, R&D of different
firms aggregate virtually forming an single entity, thus no competition.
3. Another major concern which holds back organizations from adopting the open innovation
model is the ownership of Intellectual Property.
FOR USERS POSTING CHALLENGES
1. Gives access to big organizations and companies worldwide which otherwise seem
impossible for these talents.
2. Recognizes the talent, gives them the platform and pays appropriately (reward generators)
for the ideas.
3. Permits to be recognized internationally as a problem solver as well as solution finders.
4. Interacting platform for this group of intellectuals.
4. AKSHAY BORHADE, 4007/20 InnoCentive.com(A)
ICT FOR ORGANIZATIONAL EFFECTIVENESS
KEY MANAGERIAL CHALLENGES FOR THE INNOCENTIVE BUSINESS
MODEL
1. Retaining talents and pool of revenue-generating intellectuals from going with the
competitors. This talents can be seen as “Temps” and are easily approachable by any
organizations. Thus, paying them appropriately, training and other customized benefits
needs to be designed.
2. Partnerships with organizations – Designing contracts of medium to long-term partnership.
Thus locking in both the organizations and the temps working on the problem of the
organization for a long time guarantees continued revenue.
3. One of the key problems is the organizations repugnancy towards open innovation because
of the concerns of IPR. InnoCentive tries to solve this problem in two ways – firstly, it has
well defined policies regarding ownership of IPRs which are communicated to all parties in
advance. Secondly, it promises handsome financial rewards to successful parties, in exchange
of their IPRs. These financial rewards are also announced in advance. Till date InnoCentive
has paid out more than $3.5 million in awards to over 300 winning Solvers without ever
having an issue around payment or IPRs.
4. Maintaining the reputation of the solutions posted by the “solvers” associated with
InnoCentive. Any worthless or insensitive ideas has to cropped out of the system which
require a team to analyze the solutions. Thus, proposing a winning solution and maintaining
the validity of the solutions by InnoCentive gives them competitive advantage over
competitors.
