Open Innovation From A Practitioner's Perspective


Open Innovation in Software

Open Innovation in Software

Jeff Howe, in his book Crowdsourcing, presents three forms (or categories) of crowdsourcing. The reason I mention crowdsourcing is because I believe open innovation is a form of crowdsourcing (or an example of crowdsourcing). I also think that a lot of principles of crowdsourcing (community, diversity, competitions, reward/recognition) apply to open innovation.

The three categories of crowdsourcing (according to Howe) are as follows:

1)   Prediction Market or Information Market

Such as a ‘futures’ market for a new movie release, these tend to have a set of fixed outcomes that participants choose from (success or failure, who will win, etc). Examples include Iowa Electronic Markets, Hollywood Stock Exchange, and Betfair.

2)   Problem Solving or Crowd Casting Network

Here you are looking for expertise in a large crowd to solve a specific problem, such as InnoCentive. You still need to share across the crowd (and a diverse one at that) because you’re not sure who in the crowd can solve your problem.

3)   Idea Jams

As the name implies, they’re much more open-ended and are less structured. Here you are brainstorming new ideas/applications for a given product or service.

What I like about this framework is that it works perfectly for open innovation. In other words, you can use open innovation in each of the above categories. For prediction markets, imagine inviting a network of suppliers, employees, partners, retirees to vote on a series of possible outcomes (or options) for a given product launch. What’s ‘open’ about this is whom you invite and how you frame the questions.

Problem solving networks are probably the most common examples of how open innovation is being carried out today. What’s important to remember is that in reality this represents only a portion of an overall open innovation strategy, yet for many companies they latch on to this approach and consider it their ENTIRE open innovation strategy.

Idea jams are very interesting because here’s where diversity can pay off in a big way. By bringing in people who know nothing about your particular business or product you can open up the possibilities to new and interesting uses for your products and new markets for your business.

One other key element of any open innovation strategy is the concept of community. It is important to incorporate aspects of social media and social networking in any open innovation activity (to the extent possible).

If we take the three above categories and map them in software, (both the service and the product side), one can start to see interesting strategies emerge for each grouping, as shown in the following table:

Table 1 – Possible open innovation tactics for each category of crowdsourcing
strategy, for software as a service and software as a product.







Information Market

  • Bring the crowd (new and experienced users) to vote on the top service improvements they’d like to see (using a form of prediction market or exchange)
  • Bring the crowd (new and experienced users) to vote on the top product improvements they’d like to see (using a form of prediction market or exchange)


Crowdcasting Network

  • Run prize-like competitions to find new applications for existing products
  • Allow user community to suggest new ways to deploy software-as-a-service business models
  • Post specific problems on other third-party innovation broker sites
  • Post specific problems that need solving on corporate site or on user community site
  • Topcoder programming competitions
  • Post specific problems on other third-party innovation broker sites
  • MATLAB is a good example:


Idea Jam

  • Run internal/external idea jams or brainstorming competitions
  • Invite external power users to internal idea jams
  • Release part of code to general public; allow for modifications
  • Run internal/external idea jams
  • Open up an app store to allow for new add-ons to existing products

Here is a good example from BT and their shift from a product to a service-based company (and how open innovation was a major factor in this transition):


Filed under: definitions, general, ,

2 Responses

  1. Tom Powell says:

    I would add a 4th category of crowdsourcing: Crowdfunding. Essentially, crowdfunding is the crowdsourcing of financing. being a great example of this along with others that I mentioned here:

    These would also be a good addition to open innovation in software. Such as a crowdfunded software project, only starting projects that reach a certain level of funding.

    There is also a fifth category along the lines of Mechanical Turk: breaking up large tasks into small tasks for the crowd to complete. This, however, is less relevant to open innovation in software.

    • Cesar Castro says:

      Good additions to the original post. Crowdfunding is an interesting idea, I’ve also come across the SEVEN Fund, which uses apply innovation principles to NGO funding.

      Your idea about breaking software into smaller chunks and running competitions sounds a lot like TopCoder.

      Thanks for your comments.

      – Cesar

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