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What’s really radical about open innovation

The authors of Wikinomics effectively convince readers that ideagoras are a fascinating and novel business phenomena but not one deserving their unqualified praise. Tapscott and Williams tend to overstate how revolutionary ideagoras are and obscure the negative impact of open innovation on labor in scientific and technological industries. Nor do they appreciate that the business model is bred by and profits from contradictions generated by the capitalist system itself. Nonetheless, ideagoras are an important development. The genius of ideagoras, however, is that they can do what business won’t: free resources for the creation of social goods, not just profits.

Tapscott and Williams argue that ideagoras are making permanent structural changes in traditional research and development processes. They report that venerated global corporations like Proctor & Gamble, Dow, DuPont, and Eli Lilly are seeking external sources of intellectual capital and resources for innovation via the Internet rather than using their own R&D departments (Tapscott and Williams, 2006, pg. 98). Ideagoras make it possible for corporations to engage and profit from the world’s best talent and resources without the cost of employing researchers and maintaining laboratories. Although most research and development is still conducted internally, Tapscott and Williams predict that companies will increasingly abandon the previous “invention model? for free market mechanisms that promote “fluid exchange of ideas and human capital (Tapscott and Williams, 2006, pg. 101-102). They cite Proctor and Gamble as a trendsetter, stating that the company seeks to source at least 50 percent of ideas for new products and services externally by 2010 (Tapscott and Williams, 2006, 106). They also cite AT&T, IBM, and Texas Instruments as trendsetters in another open innovation enterprise: licensing out intellectual property (Tapscott and Williams, 2006, 104).

Advertising patented ideas and inventions to the world is indeed a radical idea but not one that is revolutionizing business. By Tapscott and Williams’ own account, this ideagora concept was an attempt to resolve systemic problems bred by business itself. They point out that many of the pioneers of ideagoras realized their companies possessed thousands of unused patents that cost millions to develop but which their own business models prevented them from using. Companies found that 70-90% of their patents were considered unprofitable or “…a poor fit with a company’s brands and strategy (Tapscott and Williams, 2006, 102).? It seems only natural that these companies would develop a way to profit from these costly idle assets.

Nor is externally sourcing human capital and ideas a revolutionary concept. Tapscott and Williams argue that to remain competitive, companies must keep accelerating the pace of innovation. Businesses are now confronted with a dilemma of their own making: innovate or die. Moreover, keeping pace requires finding and tapping new and larger sources of scientists and engineers. As the authors point out, however, companies can’t afford to employ an unlimited number of researchers. Again, it seems only logical that businesses would seek to resolve this problem. Offering cash prizes to “freelance? researchers is providing both a cost-effective and highly profitable way to find and take advantage of top talent.

Ideagoras provide the optimal solution for both systemic contradictions. But Tapscott and Williams observe that “As companies climb up the open innovation learning curve, however, they soon discover that the real value of an open market for innovation lies in getting access to external ideas that can fill performance gaps or fuel their product pipelines (Tapscott and Williams, 2006, pg. 107).?

IBM, for example, has profited handsomely from the open innovation economy. An article published in The Economist last fall reports that the company made the radical move to using Linux software while continuing to churn out record numbers of patents for which they earn licensing fees of approximately $1 billion dollars a year (Economist.com, 11 October, 2007). Moreover, “Since an army of programmers around the world work on developing Linux essentially at no cost, IBM now has an extremely cheap and reobust operating system. It makes money by providing its clients with services that support the se of Linux—and charging them for it. Using open-source software save IBM a whopping $400m a year… (Economist.com, 11 October, 2007).?

Ideagoras are not truly revolutionary because they are not changing the fundamental structure or dynamics of the capitalist system. They are nonetheless, serendipitously ingenious. Tapscott and Williams hint at the ways companies like yet2.com and Innocentive enable progressive enterprises to transform propriety knowledge into important social goods. They report that through yet2.com, one small company was able to purchase a drug-delivery technology developed but neglected by Proctor & Gamble that offers an attractive and innovative approach to diabetes management (Tapscott and Williams, 2006, pg. 105).

The drug-delivery technology cited in Wikinomics is only one hundreds of the socially responsible ideas and innovations now available through open innovation communities. Yet2.com, for example, is currently featuring a patent for a biodegradable plastic that is “ … a more economic alternative than probably any other “green? and biodegradable plastics—and in fact more economic than most other non-“green? plastics, too (Yet2.com, 4 February, 2008).? They are also selling an all-natural preservative composed of white mustard essential oil that is an effective and cheaper alternative to artificial preservatives (Yet2.com, 4 February, 2008)? as well as acid extract from birch bark with potential agricultural and pharmaceutical applications including treatment of HIV, cancer, MRSA and skin protection (Yet2.com, 4 February, 2008).

InnoCentive has gone a step further and is actively seeking opportunities to apply open innovation models including crowdsourcing, collaborative competition and user-driven innovation to benefit people in developing countries (InnoCentive.com, 4 February, 2008). Of these models, user-driven innovation is the most “revolutionary? because it draws on the natural resourcefulness, creativity and competency of poor people to develop culturally and socially-specific solutions for their particular problems. InnoCentive is emphasizing two nonprofit approaches to user-driven innovation: Positive Deviance and Rural Innovations Network. Both are grassroots, organic models that evolve from the intelligence and creativity of local communities. These initiatives are finding effective, sustainable solutions to malnutrition and disease, human trafficking, illiteracy and corruption.

Innovation models like positive deviance and rural innovations networks are the real genius of ideagoras. It’s unfortunate that Tapscott and Williams mistook as revolutionary what amounts to more business as usual.

Sara 7 February.2008

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References

InnoCentive.com
http://www.innocentive.com/servlets/project/Pavilion.po?o=Rockefeller%20Foundationv
Retrived on 4 February, 2008.

Tapscott and Williams. Wikinomics: How Mass Collaboration Changes Everything. Portfolio Hardcover, 2006.

Yet2.com
http://www.yet2.com/app/insight/techofweek/41645?sid=200
Retrived on 4 February, 2008.

Comments

I think your notion of the attempted monetization of latent corporate intellectual capital as little more than business as usual is right on. Moreover, while technologically advanced and representing a shift in scale, this concept of Ideagoras does not seem to be something so new. For as long as I can remember, companies have directly sought feedback and ideas from their markets - all the way down to such basic levels as children's coloring contests winners that would appear on retail packaging. In this way, Ideagoras may also represent a counterpoint to this week's optional reading that diverges from some of the other new applications and communications approaches we've been studying.

Hello Sara, I love your title: "What’s really radical about open innovation". It brought be back to the 80's with the word radical, and I love the 80's! Later on, you had mentioned the word radical again with: "Advertising patented ideas and inventions to the world is indeed a radical idea but not one that is revolutionizing business." Then I read what you wrote later on: "Companies found that 70-90% of their patents were considered unprofitable or '…a poor fit with a company’s brands and strategy (Tapscott and Williams, 2006, 102).'" I was surprised with that statistic. I thought that was a very high percentage, and I was like "no way!" I had no idea. Perhaps the percentage will become less as the years go by and technology gets developed more. Thanks for your post!

The information you posted from The Economist was very interesting. The IBM executives who started using open source software were pretty smart and they probably made their shareholders very happy...making money is the American way (regardless of who it impacts). Which leads to my other point. I agree with you when you state: [the authors]...obscure the negative impact of open innovation on labor in scientific and technological industries. That was going through my head as I read Wikinomics. They say nothing about the impact on the actual workers who may lose their jobs because it is cheaper to find solutions overseas. It's the Wal-Mart way.