Web 2.0 is about harnessing the potential of the Internet in a more collaborative and peer-to-peer manner with emphasis on social interaction.

« July 2008 | Main | September 2008 »

August 19, 2008

Crowdsourcing of Innovation

Let us examine the Transaction cost dimensions associated with the concept of Crowdsourcing. Transaction cost (Ronald Coase, 1937) and its applicability in the context of a firm comes into reckoning while discussing the issue of Crowdsourcing. Transaction cost for a firm, according to Ronald Coase refers to the “cost of providing for some good or service through the market rather than having it provided from within the firm”. Typical transaction costs incurred by firms include search costs, coordination costs, governance costs etc. This perspective enables a firm to make key decisions on which of the activities need to be kept within the firm (hierarchy) and which of the activities can be outsourced/procured externally (markets). The key advantages of IT enabled Crowdsourcing platform examples we listed in the earlier post is that they reduce search costs at the same time enabling very easy participation by customers by reducing the entry barriers for participation.
 Extending the concept of Transaction costs to Crowdsourcing leads us “Innovation cost” of enterprises. Innovation costs are the costs incurred by enterprises if they executed all aspects of innovation (from idea generation to execution) within the enterprise (Innovation Hierarchy). This can be contrasted with Crowdsourcing of Innovation (Innovation Markets), where the dependence on external entities for innovation insights are higher. For firms to adopt Crowdsourcing of innovation, the benefits need to be higher than the costs incurred in externalizing innovation. Let us look at the advantages as well as disadvantages related to Crowdsourcing of Innovation
Advantages of Crowdsourcing of Innovation:
·         Identify as well as appropriate value from the community
·         Identify new and innovative ideas
·         Develop as well as execute some of these ideas in participation with the community
·         Listen to the voice of the customer
·         Reduce the cost of innovation
·         Reduce costs related to market research
Disadvantages of Crowdsourcing of Innovation:
·         Community motivational issues
·         Intermittent participation by key participants may delay the output
·         IP ownership issues of crowdsourced products/services
·         Threat of competitors acting on some of the ideas as the ideas are available in the public domain

Posted by Dr. Jai Ganesh at 08:25 PM | | Comments (3) | TrackBacks (0)

Subscribe to this blog's feed

Blogger Profiles

Recent Posts

Categories

Infosys on Twitter


Archives