ijirae:: jyae10090crowdinnovating: a conceptual model

International Journal of Innovative Research in Advanced Engineering (IJIRAE) ISSN: 2349-2163 Issue 7, Volume 2 (July 2015) www.ijirae.com

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Crowdinnovating: A Conceptual Model Yi XU*, Zhiying LIU**, Qingxiang CHEN

*Correspondence author, Lecturer，School of Management, University of Science and Technology of China **Professor，School of Management, University of Science and Technology of China

Student，School of Management, University of Science and Technology of China Abstract：The internet is democratizing innovation and generates the Web2.0 model. Crowdinnovating has become a new innovating pattern. This paper describes the evolution from traditional innovating patterns to the crowdinnovating pattern. The authors define the concept of crowdinnovating and classify it into enterprise-leading and crowd-leading innovating patterns. A conceptual model of crowdinnovating is proposed. Finally, the academic prospect for crowdinnovating is discussed. Key words: crowdinnovating, crowdinnovator, Web 2.0, crowdsourcing, open innovation, democratizing innovation

INTRODUCTION Innovation provides a fundamental source for an enterprise to build and sustain its competitive edge. Schumpeterian innovation theories believed that most innovative activities are performed by researchers, R & D professionals and entrepreneurs. Bessant(2003), however, proposed strategies for developing high involvement innovation, and held the view that all the employees rather than the R&D professionals only could become ultimate sources for innovation. In a sense, the exploration of high involvement innovation developed into the first attempts to democratize innovation. Scholars at the time did not pay enough attention to a wider range of the general crowd. Due to the technical diversification of products, the intensification of system complexity, as well as the integration of modern science and technology (Coombs et al.，2002), enterprises began aware of the limitations of non-open innovating patterns. Chesbrough(2003) proposed the concept of open innovation and thought the traditional closed innovation overaccentutating internal control could not adapt to the new business environment any more. Chesbrough believed that open innovation is the use of purposive inflows and outflows of knowledge to accelerate internal innovation and expand the markets for external use of innovation. Von Hippel (1986) studied user innovation and demonstrated that the external lead users played a more and more significant role in innovation. To sum up, enterprise innovation evolved from a closed innovation to a open one. Now the innovative activities of modern enterprises are characterized by the involvement of and collaboration among not only the lead users but also the general crowd. The continuously upgrading Information and Communication Technology (ICT) has been changing the innovation paradigms and paths. The scope of innovators has greatly expanded. The long-tail effect (Anderson, 2008) has emerged. Entrepreneurs, R&D professionals, consumers and users can no longer represent all the internal and external innovators. Zhao (2009) put forward the concept of mass collaborative innovation and believed employees, users and the general crowd were the three sources producing the mass collaborative innovation. The three sources were characterized by their non-organizational features, and the boundaries in between the three sources over the internet-based collaborative innovation platform were gradually blurred (Zhao F. et al., 2009). Song G. (2009) thought the development of ICT facilitated the emergence of knowledge society whose fluidity helped to democratize the innovation, and the traditional laboratory boundary and the innovation boundary were gradually diminishing and melting. Such a revolutionary change was called by Song G. as “innovation 2.0” (Song G. et al., 2009). In industries focusing on such “analytical” knowledge (Laestadius，1998) as information technology and biological technology, the innovations were usually dependent on sophisticatedly coded knowledge. The Linux open-source software, drawing wisdom from the general public via the internet, surpassed the social barriers hindering innovations. Every one capable of the development could play a part. Threadless.com made a success via an online T-shirt design website where anyone could design and select their satisfying patterns.



The Procter and Gamble company built an innovating center via the Innocentive website, publicized part of its R&D programs and provided substantial rewards so as to obtain best solutions from a global think tank. This innovating practice significantly cut down its R&D spending. The Web 2.0 information sharing mode set up a platform for both enterprises and the crowd to acquire innovating knowledge, upgrade innovating products and share innovating achievements. These cases ignited broad academic interest. The Economist magazine put forward the concept of “mass innovation” in 2007 and prospectively said, “we all are innovators”. Similarly, Anderson (2012), basing his new concept of “maker” upon his study on the new 3D industrial revolution, believed that the synergetic development of internet and 3D technology brought about the perfect integration of the world of bytes and the world of atoms. Every common people, according to Anderson, could be capable of both designing industrial products via computers and manufacturing products at lower costs, so we ushered in a new stage where “everyone is an innovator”. Presently the academic circle tends to regard the internet-based mass innovation as a crowdsourcing. Crowdsourcing is only one of the typical practices for enterprises to utilize mass innovation and cannot reflect all the embedded values of mass innovation. This paper terms the new internet-based mass innovation as “crowdinnovating” and elaborates the theoretical foundation of crowdinnovating from the perspective of knowledge transfer. Furthermore, the authors build the “C-D-M” conceptual model and analyze its features of by studying the Innocentive crowdsouring pattern and the App Store.

I. REASONS FOR THE EMERGENCE OF CROWDINNOVATING The crowdinnovating has been brought by the synergy of the intensified enterprise competitions, the upgraded internet

technologies, the developed individual innovating capacities, and the individualized customer needs. Among the above, enterprise competitions, individual innovating capacities, as well as customer needs are long-standing prerequisites for crowdinnovating. The transformation of knowledge transfer brought by the internet technology constitutes the fundamental reason for the birth and development of crowdinnovating.

Knowledge transfer plays a key role in innovation by providing complementary knowledge (Mowery et al.，1996) and recombined new knowledge (Nelson et al.，2005). Knowledge acquisition costs and effectiveness are the two major concerns for innovation. Besides, knowledge can be classified into two categories: explicit and implicit (Cowan et al.，2000). The codified explicit knowledge can be transferred in an easier way and at a lower cost, but the technical innovation ususally demands more of sticky implicit knowledge. The elaborated codification for implicit knowledge, however, is often missing. Challenges become conspicuous when the effective transfer is required for the sticky knowledge. In the context of Web 2.0, the knowledge transfer is promoted in two ways: the application and spreading of explicit knowledge and the transfer from implicit knowledge to explicit knowledge (Liu P., 2007). Such changes are achieved through the upgraded knowledge acquisition, communication and sharing.

First of all, the internet technology has reduced the knowledge acquisition difficulties and costs. The past years has witnessed the optimization of internet infrastructure (algorithm, storage, bandwidth, etc.) and the corresponding costs have dropped quickly. Cyber citizens can easily download mass knowledge data，and the hardware costs and time costs for knowledge acquisition are significantly lowered. Of course, the acquisition of target knowledge from the mass knowledge pool is far from easy. That is to say, easy access to knowledge does not mean effective acquisition of target knowledge. RSS and Tag techniques are developed and become effective tools to filter and integrate information and the knowledge retrieval and acquisition grow more effective and easier (Boulos et al.，2007).

Furthermore, the internet technology facilitates the knowledge communication process. In the era of Web 1.0, the individuals are just knowledge receptors rather than disseminators. The Web 2.0 era has witnessed the effective communications and knowledge sharing upon internet-based platforms. The decentralized open networking and bottom-up communications have produced a huge stock of knowledge.



Such trend-leading technologies as BLOG, Wiki and forum (Levy，2009) have reinforced mass participation in the transmission of knowledge and realized point-to-point communications among individuals. Networks are more than information carriers. They become social platforms. With the development of multimedia codification technology, more and more knowledge rich in implicit information can be communicated (Panahi et al.，2013). The download and storage of videos can go beyond the explicit limitations of plain text knowledge. The online knowledge transfer becomes more than an explicit-explicit transmission. It can be an implicit-implicit socialization process, which is of great important for the frequent communications of implicit knowledge.

III. CONCEPT, FEATURES AND CLASSIFICATION OF CROWDINNOVATING

A. Concept and model of crowdinnovating

Crowdinnovating is a new concept put forward in this paper and the authors define crowdinnovating as follows: Crowdinnovating is an internet-based innovating pattern where the innovators perform their innovation via various

internet platforms built by enterprises or individuals, and/or reveal or sell their innovating achievements via the internet; and where other enterprises or individuals (demanders) source, acquire and utilize the innovating achievements via the internet.

There are three implications of crowdinnovating. First, individual interest, low-cost niche, self value fulfillment or the synergy of other social impacts (Battistella et al.， 2012; Battistella et al.，2013) amount to the comprehensive crowdinnovating motivations. Second, the diversity and complexity of innovation needs, and the anonymity and participation of users via internet have democratized innovations to a great extent Third, the massive knowledge resources and the continuously upgrading knowledge transferring efficiencies, the developing innovation communities, and the gradually maturing innovating tools, have contributed to the sustained crowdinnovating capacities.

Fig. 1 Crowdinnovating Model

The crowdinnovating results from the growing innovation networking collaborations and individual innovating capabilities, as well as the breakthroughs of internet innovation externalities. In the crowdinnovating model, the innovators include not only enterprises (entrepreneurs, R&D staff) and users but also the general crowd. This pattern consists of two fundamental processes: 1) The innovators, motivated by their own interest, low costs niche and/or self value fulfillment, are active in exhibiting, sharing and commercializing innovating achievements (including ideas, technologies, products and services). 2) The innovators, based on their own demands, are at the same/different time active in sourcing, acquiring and utilizing the crowdinnovating achievements. (See Figure 1). Based upon the above analysis and previous studies, we propose the following conceptual model for crowdinnovating: Community- Development- Market (C-D-M) model. (see Figure 2)

Crowdinnovators

Source, acquire & utilize innovating

achievements

Various Platforms Including Internet-Based Platforms

Exhibit, share, & commercialize innovating

achievements

Crowdinnovators



Fig. 2 C-D-M Crowdinnovating Model

（a）Internet based knowledge community In the C-D-M crowdinnovating model, the internet serves as a knowledge storing and transferring platform where the

crowdinnovators can acquire and share knowledge. The internet based knowledge undergoes continuous externalization, socialization, integration or internalization (Nonaka，1995), and becomes new knowledge after accumulation and transferring. The innovation demanders usually are happy to offer knowledge for innovation so as to acquire effective innovating achievements. The internet provides open learning opportunities for the crowdinnovators. The knowledge originating from the crowdinnovators constitutes a key foundation for further innovation. On one hand, further innovation demands integration of more professional and diversified knowledge, and the internet based knowledge transfer provides complementary knowledge for innovation. On the other, new ideas and creative solutions are often generated when the existing knowledge is restructured or recombined. When individuals internalize knowledge after a series of transfer, new knowledge is often generated. When the generated knowledge is further externalized, the creative ideas or solutions may come out. In the knowledge acquiring and sharing process, the community becomes a major platform for crowd communications. Due to the democratic nature of the internet, the innovation resources become democratized. To sum up, the maturity of internet-based knowledge community is a prerequisite of crowdinnovating.

（b）R&D process of crowdinnovating The implementation of innovation is featured by R&D activities. The crowd, motivated by personal interest or profits,

recognizes innovation needs and performs innovation activities via the internet platform. During the process, the crowd can select suitable missions from the innovation needs announced by organizations, or perform independent innovation after voluntarily indentifying potential innovation demand. Therefore, the crowd often acquires innovation information, performs peer communications and feedbacks, and upgrades their innovation via the internet despite that not all the crowdinnovating processes are exclusively internet based. The internet plays a role of platform for R&D activities by providing open and standardized platform， and facilitates the communication among crowdinnovators. A typical case is the software development where the launchers divide the development into several comparatively independent modules and publicize them via the internet for crowdinnovating. The module developers can make real-time peer communications via IT professional forums so as to source algorithms.

Crowdinnovators

Acquire,& share

knowledge

Knowledge community---------------development platform------------------------------Market

Publicize R&D

needs/

demands

Search &

buy goods/

services

Crowdinnovators

Acquire &

share

knowledge

Discuss and

analyze R&D

needs/ demands

Display &

sell goods/

services



Organizations or individuals publicize their innovation needs via the internet platform to source solutions or reduce innovation risks. Meanwhile, they usually establish special mechanism to encourage crowdinnovating. Now the major ways to publicize innovation needs include intermediate platforms, online innovation centers and innovation contests announced via websites. In order to promote individuals to participate in the innovation, the launchers need to build effective management patterns and provide such supportive tools as open innovation standardized platform and on-line professional communities. Von Hippel and Katz（2002） have proposed ways to generate innovating tools for users. On one hand, the product development is divided into subtasks to reduce the transferring cost of the sticky knowledge. On the other, proper development can combine innovating knowledge needed by the users with innovating tools so as to reduce the stickiness and make the implicit knowledge explicit.

（c）On-line technology market When the crowdinnovators complete innovation, they may display and sell their innovative products/services and the demanders can screen, source, acquire and utilize the target products/services from the magnanimous online stock of innovating achievements. Among these achievements, the patented technologies protected by laws and regulations are easier to publicize, but the innovators are somehow reluctant to reveal or share their creative ideas lacking of legal protection and vulnerable to leakage and plagiarism. For the demanders, it is challenging to source and internalize their target crowdinnovating achievement. First, the online innovating achievements are magnanimous and chaotic, so the identifying and sourcing processes have to be costly and time-consuming. Second, the sourced achievement must undergo integration and internalization, which demands the corresponding capabilities of the demanders. The internet also serves as a technology market, facilitating the transferring and trading of technical achievements. In the technology market, the pricing of technology proves to be challenging and the two applicable pricing methods are competition and negotiation. The past years have witnessed the robust emergence of internet-based venture capitals and the technology pricing therefore becomes more mature. In this crowdinnovating model, the crowdinnovators (enterprises and/or individuals), based on the web platform, acquire and share knowledge, collaboratively develop products/services, and sell and/or buy innovating achievements. In nature, crowdinnovating is a process where all the crowdinnovators create synergic values. The process is complex, diversified and dynamic, and the proposed crowdinnovating model is only conceptual. It is worth noting that crowdinnovating is related to but different from crowdsourcing. Both crowdinnovating and crowdsourcing are derived from the wisdom of crowd. They both involve the participations of unspecific enterprises/individuals. Nevertheless, they are different in the following aspects. To begin with, there is a specific innovation demand specified by the demander in the crowdsourcing process where the business model to perform the contracted mission or provide the solution is usually well defined. In crowdinnovating, the crowdinnovators voluntarily participate in the innovating and voluntarily transfer their achievements, but usually there is neither specified innovating demander nor specified innovating solution provider. Furthermore, the target of crowdsourcing is not necessarily innovating product/service. Sometimes what the demander wants to source is just a common product/service. In crowdinnovating, however, the product/service to be transferred or traded must be an innovating achievement. In addition, a specific demander usually leads the crowdsourcing process where the solution providers are open and unspecified, while the Crowdinnovators not only lead but also voluntarily participate in crowdinnovating. Finally, a dominating way for the demander to seek collaborative innovation via crowdsourcing is to publicize its demand, while the crowdinnovators may try diversified collaborative ways. To sum up, the authors believe crowdinnovating democratizes innovations and crowdsourcing aiming at innovation is only one pattern of crowdinnovating.



TABLE 1

CROWDSOURCING VS CROWDINNOVATING

Crowdsourcing Crowdinnovating

Demander specific unspecified

Participant unspecified unspecified

Process leader Specific demander crowdinnovators

Way to seek innovation To publicize the demand diversified

B. Features of crowdinnovating Compared with common collaborative innovations, crowdinnovating possesses some unique features (See Table 2). First, the crowdinnovators are not such organizations as enterprises and universities. They may be neither organized nor closely related. Their links are rather loose and even weak. The diversified crowdinnovators result in the pluralism of platform resources and the breakup of knowledge barriers, leading to the democratized innovating resources and chances. For example, enterprises sourcing innovation via the internet can directly contact unspecified individuals who are willing to participate in the innovation. Besides, the complexity and cross-disciplinary features of crowdinnovating needs and demands require crowdinnovators with different talents and academic backgrounds.

Second, the majority of crowdinnovating processes are web based, including the acquisition and sharing of knowledge as well as the commercialization and trading of innovating achievements. During the knowledge formation and communication, the internet serves as the medium for knowledge transferring. During the innovating, the internet becomes the platform to facilitate crowdinnovators’ communications and collaborations. During the commercializing and trading of innovating achievements, the internet plays the role of technology market. Therefore, the internet is crucial for crowdinnovating. In addition, the characteristics of internet result in the difficulty of the participation in crowdinnovating by enterprises that are highly dependent on “empirical” knowledge, while the analytical knowledge based enterprises can easily modularize their knowledge for crowdinnovating.

Third, crowdinnovating reduces the R&D risks and costs and improves innovation efficiency. In the crowdinnovating

pattern, the enterprises focus more on sourcing and utilizing innovating achievements than on screening creative ideas and implementing R&D. Because the majority of innovating processes are performed outside the enterprises, the innovating risks are not borne by the enterprises only. Furthermore, the crowdinnovators are usually self-motivated. To sum up, enterprises in the crowdinnovating pattern are sometimes neither the innovating launchers nor the innovating implementers. They may directly screen and acquire innovating achievements. The diversified choices improve the cost-effectiveness. The totally open technology capitalization ensures the high efficiency of the innovation utilization.

Finally, crowdinnovating further democratizes innovation. In nature, crowdinnovating means everyone has the chance to innovate. Von Hippel（2009）describes the process in detail in his studies. With the development of computer software and hardware, the innovation tools become upgraded and the innovation communities grow diversified. People’s innovating capabilities are so essentially and quickly improved that individuals can make direct use of mature software designing tools, sophisticated hardware and electronic products, as well as CAD designing tools. The development of computer industry gradually reduces the costs of innovation tools. The individuals can equally share the innovation resources. The traditional centralized innovating pattern becomes low-efficient due to the dispersed distribution of innovation knowledge. The equality of availability of innovation resources further facilitates the implementation and acquisition of innovation. Von Hippel regards the process as the democratization of innovation opportunities.



TABLE 2

CROWDINNOVATING VS COLLABORATIVE INNOVATION

Crowdinnovating Collaborative Innovation

Innovator Crowdinnovators Organization

Role of organization Launcher and/or participant Launcher or participant

Innovation risks Low High

Controllability Low High

Innovation efficiency High Low

Key process Commercialization Development

Key resources Innovation tools pool Alliance

Application fields Analytical knowledge based industries Development of sophisticated key

technology

C. Classification of Crowdinnovating

Crowdinnovating can be classified into enterprise-leading and crowd-leading patterns. The enterprise-leading crowdinnovating refers to a process where the crowdinnovators, led by the enterprise innovating

needs, identify opportunities and participate in the enterprise innovation. In this process, the enterprise as the innovation leader and launcher believes that “team wisdom often surpasses individual wisdom” (Surowiecki，2004) and actively invites the crowdinnovators to participate in the innovation. The enterprise first identifies the innovation target according to its market demand, then itemizes the innovation problems into modularized innovation needs, and builds or utilizes effective web platforms to facilitate the crowd participation. The large-scale participation can be based on collaboration or competition (Le et al.，2011), depending on the innovating needs publicized by the enterprise. Generally speaking, the enterprise-leading crowdinnovating pattern means the enterprise consciously utilizes the crowd wisdom. It is also a typical crowdsourcing pattern of technology innovation.

The crowd-leading crowdinnovating is a process where the crowd voluntarily obtains innovation opportunites, and implements and commercializes innovation without any specified innovation demand. In this pattern, the crowdinnovators, without any specific innovation guidance, are motivated by their own interest. They identify the innovation opportunity and produce creative ideas based on their own conditions and resources. The innovating achievements are made through the prototyping and commercialization of creative ideas. This innovating pattern may result from long-term planned crowdinnovating activities, or may originate from “improvisation” inspired by suddenly popped-up creative ideas. In this pattern, the crowdinnovators’ personal interests and self-fulfillment rather than external motivations play a decisive role.

TABLE 3

CLASSIFICATION OF CROWDINNOVATING

Enterprise-leading Crowd-leading

Aim of innovating Making profits Motivated by personal interest or profit

Innovating leader Enterprise Crowdinnovator

Innovating need Specified Unspecified

Innovating logic Cause and effect logic Effectiveness logic

Features Web-based, large-scale Crowdinnovators capture innovating opportunities. The innovating may or may not be web

based.



IV. CONCLUSION AND PROSPECT Based upon previous studies, this paper proposes the concept of “crowdinnovating” and conducts a preliminary study of its connotations and features, aiming to attract academic attention to this new innovating pattern. Crowdinnovating is a trend leading innovating pattern that has already existed in practice but lacks sound theoretical explorations. The innovation democratization era has brought about both new challenges and opportunities for our theoretical explorations of innovation. First, insufficient attention has been paid to the motivation of crowdinnovators, the crowdinnovating mechanism, and the profit allocation of the capitalized crowdinnovating achievements. Second, the state-of-the-art crowdinnovating practice seems insufficient to construct an overall mechanism by which enterprises can develop an optimized platform through which the crowdinnovating achievements can be best identified, sourced and utilized. Last but not least, the democratization makes crowdinnovating go beyond an economic concept. A cross-disciplinary study is necessary, including psychology, sociology, management science and information technology studies.

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