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Narrowing the Gap

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Innovation Through Cooperation

Part of the book series: Management for Professionals ((MANAGPROF))

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Abstract

What has been done so far to make it possible for inventors and businessmen to work together to realize ideas? Many interesting approaches exist that work around Arrow’s paradox. The most prominent and promising so far is to offer prizes. A prize is promised for the best idea to solve a given problem. This has proven a successful method. Many platforms have sprung up offering innovation prizes, creating a multi-billion dollar industry. But innovation prizes have some severe limitations. They only apply to ideas that address given problems. Many ideas are novel in nature, or improve on something already quite good. No prize exists for them. Prizes help, but do not solve the paradox.

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Notes

  1. 1.

    Sobel (1995), cover

  2. 2.

    For an intriguing and entertaining description of the ‘Problem of longitude’ see Sobel (1995)

  3. 3.

    Incidentally, the same issue seems to be acute again today – though in a different context: space exploration (see example of NASA Prize of space storage below)

  4. 4.

    For details on Nocolas Appert, see appert-aina.com (02.03.2013). On the Orteig Prize, see, for example, charleslindbergh.com/plane/orteig.asp (02.03.2013) or innovationinthecrowd.com/2011/03/01/charles-lindbergh-and-the-orteig-prize/ (02.03.2013); for the Kremer Competitions see haerosociety.com/About-Us/specgroups/Human-Powered/Kremer (02.03.2013), for the Igor I. Sikorsky Human Powered Helicopter Competition see vtol.org/hph (02.03.2013), and for the Ansari X Prize see space.xprize.org/ansari-x-prize (02.03.2013). For driverless vehicles, see Defense Advanced Research Projects Agency (DARPA) Grand Challenge (darpa.mil/About/History/Archives.aspx 02.03.2013). On the prediction of the location of potholes, see InnoCentive (innocentive.com/ar/challenge/9932752 02.03.2013), on designing toilets see Gates Foundation (gatesfoundation.org/media-center/press-releases/2012/08/bill-gates-names-winners-of-the-reinvent-the-toilet-challenge 02.03.2013), and on sequencing genomes see the Archon Genomics X PRIZE (http://genomics.xprize.org/ 02.03.2013). For more examples, see Krohmal (2007) and Love (2008), also Davis and Davis (2004) and Maurer and Scotchmer (2004).

  5. 5.

    Clearly the value of the prize often extends far beyond the pecuniary. It may include the prestige, etc. (see especially also Brunt, Lerner, and Nicholas 2008. For an intriguing example also see Nelson 1993). Should this however become less the exception, but rather the norm, the non-pecuniary aspects (standing out, acquiring prestige, etc.), now of considerable value, will diminish fast.

  6. 6.

    See Abernathy and Rosenbloom (1969). Also Sommer and Loch (2004), Terwiesch and Ulrich (2009) and Girotra et al. (2010), Kornish and Ulrich (2011).

  7. 7.

    Blue-sky prizes, as sometimes proposed, fall victim to Arrow’s Fundamental Paradox in the sense of adverse behavior and conflict potential. Where such prizes are indeed effective typically more subtle mechanisms are at work (see discussion in Chap. 10).

  8. 8.

    See Page (2007), also Jeppesen and Lakhani (2010). Also see Granovetter (1973). Also Abernathy and Rosenbloom (1969). Related also Bonawitz et al. (2011)

  9. 9.

    See Wired Magazine (2006), also Howe (2009). Sometimes also other expressions, implying very similar concepts but from a slightly different perspective are used: e.g. ‘broadcast search’ (Lakhani 2006 and Jeppesen and Lakhani 2010), or ‘distributed innovation’ (Lakhani and Panetta 2007), or ‘Tournaments for Ideas’ (Morgan and Wang 2010)

  10. 10.

    See for example the analysis of participants in the NASA Challenges (InnoCentive 2010, p. 23).

  11. 11.

    (i) Data-Driven Forecasting of Solar Events (gw.innocentive.com/ar/challenge/9059496 02.03.2013); (ii) Improved Barrier Layers … Keeping Food Fresh in Space (gw.innocentive.com/ar/challenge/9050426 02.03.2013); (iii) Mechanism for a Compact Aerobic and Resistive Exercise Device (gw.innocentive.com/ar/challenge/9051616 02.03.2013).

  12. 12.

    See InnoCentive 2010. NASA has published some excellent maps locating the various project teams and submitters.

  13. 13.

    InnoCentive 2010, p. 30–31

  14. 14.

    InnoCentive 2010, p. 27–28

  15. 15.

    InnoCentive 2010, p. 29

  16. 16.

    whitehouse.gov/blog/2010/07/13/nasa-open-innovation-competition-delivers-three-winning-solutions (02.03.2013). Also nasa.gov/centers/johnson/news/releases/2010/J10-017.html (02.03.2013).

  17. 17.

    Also see Morgan and Wang’s decision tree when and when prizes are appropriate (Morgan and Wang 2010, p. 81. Also see Terwiesch and Xu 2008 and Boudreau et al. 2011).

  18. 18.

    See John Davis blog on InnoCentive (blog.innocentive.com/2008/07/15/john-davis/ 02.03.2013).

  19. 19.

    See New York Times (2008). Also see Wired Magazine (2006) for the example of Ed Melcarek.

  20. 20.

    The Economist 2012c. Also see caltech.edu/article/13432 (02.03.2013).

  21. 21.

    Bar one aspect: Prizes transfer the risk of failing to come up with the winning idea to the inventors. They may invest time and effort, often resources into the invention process – and not win. They typically receive nothing for their efforts. Openness may stifle participation and reduce effort if too broad or too appealing even. The chance of solving it is reduced; the risk increases and many will not partake. This may be dismissed with reference to informed choices and calculated risk for the participants, but may raise macro-inefficiency concerns (see Scotchmer 2004; Taylor 1995; Che and Gale 2003; Moldovanu and Sela 2001; Garcia and Tor 2009; Konrad and Kovenock 2010. Also Boudreau et al. 2011).

  22. 22.

    The literature on the use of innovation prizes can be traced to a lengthy tradition (e.g. Polanyi 1943; Wright 1983; de Laat 1996; Kremer 1998, 2000; Shavell and van Ypersele 2001; Gallini and Scotchmer 2002; Scotchmer 2004; Maurer and Scotchmer 2004; Davis and Davis 2004, etc.). Discussions typically focused on comparing prizes to patents systems, discussion efficiencies and the use of knowledge in the public domain. Analysis often was based on fairly restrictive assumptions (see for example discussion in Shavell and van Ypersele 2001). Still, many insights can be gained from this literature. The question however differs to the one here as none of the literature considers cooperation and efficiency of implementation in a constraint realization environment, but rather equates invention to innovation. From a more applied business perspective, also see McKinsey (2009), Lakhani and Jeppesen (2007), and Kalil (2006). A more journalistic overview: The Economist 2007, 2010a, 2010b. Also see the related literature on research contests (Terwiesch and Xu 2008; Taylor 1995; Che and Gale 2003), though, again, mainly focused on the optimal design.

  23. 23.

    Rigby and Zook (2002, p. 83). McKinsey (2009, p. 16) shows a fast growth in ‘innovation prizes’ estimating the total prize sector to be up to 2 billion dollar in 2007.

  24. 24.

    See innocentive.com/about-innocentive (02.03.2013)

  25. 25.

    See innocentive.com/about-innocentive/facts-stats (02.03.2013)

  26. 26.

    See innocentive.com/faq (02.03.2013)

  27. 27.

    See innocentive.com/about-innocentive/facts-stats (02.03.2013) and innocentive.com/for-solvers/why-solve (02.03.2013).

  28. 28.

    See especially the finding in Jeppesen and Lakhani 2010, drawing on a large dataset of InnoCentive Challenges

  29. 29.

    ninesigma.com/File%20Library/Product%20Slicks/Datasheet-Tech-Search-final.pdf (02.03.2013)

  30. 30.

    Though NineSigma Grand Challenges come close, though with a more PR component to it (see ninesigma.com/open-innovation-services/grand-challenge 02.03.2013)

  31. 31.

    Not an idea, but connectivity and networking is rewarded. Spotting ideas, not just solving! This incentivizes more active matching, delivering the idea to the solver. It rewards knowledge intermediaries able to identify potential solutions even in the most unexpected areas. Though serious concerns of strategic behavior, pricing and potential abuse may arise. See especially also the findings from DARPAs Red Balloon and Tag Challenge (archive.darpa.mil/networkchallenge/ 02.09.2012, or web.mit.edu/press/2009/darpa-challenge-1210.html 02.03.2013). Also The Economist 2012d.

  32. 32.

    For a broader mapping, see Diener and Piller (2009). They also provide a brief overview and introduce more rigorous classification methodology and structure. For further discussion, also see Chesbrough (2006a). For a structured overview of history, concepts and the relevant literature on the diversity of intermediary functions also other than the passive approaches addressed here, see Howells (2006).

  33. 33.

    Also see Tapscott and Williams (2006). Also Articles in FastCompany (2002), and in Forbes (2000).

  34. 34.

    The Economist 2010b. Also Kay (2011), or Goldsmith et al. (2010). Also see National Research Council (2007), Stine (2009), as well as Ziens (2010).

  35. 35.

    The approaches still vary, though everyone still claims to be the incarnation of open innovation. No clearly dominant approach has yet emerged. Many adjustments are made along the way, signals of a fast evolving, but also not yet mature concept.

  36. 36.

    There may be some concern of macro-inefficiency. The more people participate in the discovery process, the more redundancy of activity is likely to occur. Duplications of efforts and costs occur. If this is greater than the benefits of additional discoveries resulting from this, and the efficiency gain in having access to the invention earlier, this could be deemed inefficient. (See Tandon 1983; Gallini and Kotowitz 1985). Also Maurer and Scotchmer (2002), and Scotchmer (2004). Similarly Che and Gale (2003), Fullerton and McAfee (1999), or Taylor (1995) who argue for a restriction in participants.

  37. 37.

    Also see McKinsey (2009, p. 46)

  38. 38.

    See for example Scotchmer (2004, p. 40), who acknowledges: “the innovator must trust that an appropriate prize will be given.” Also Maurer and Scotchmer (2004).

  39. 39.

    For an example see Maurer and Scotchmer (2004, p. 9). To be correct, Hyatt really simplified the production of celluloid, Alexander Parkes invented it.

  40. 40.

    This has been realized by many passive providers: e.g. InnoCentive. Additional mechanisms have been put in place (e.g. anonymity of seekers). “Managed intermediary process” are becoming the norm. These still do not address the issue fully. They still reveal plenty of information and can be an important source of information to competitors, and even without the details can inspire competitors to pursue similar research. See for example Lakhani and Panetta (2007).

  41. 41.

    Without getting into semantics, the difference would be that in these cases a specific task to be solved is posted. Ideas may be submitted that address this challenge. This is not an open invitation for any kind of idea. In the extreme – if the request for solutions is phrased so broadly as to include any kind of ideas – of course the two may coincide. In this case however the same issue of the information paradox would apply, and the notion of a passive approach, identified through its restrictive and targeted use to confine or avoid these issues, is lost.

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  1. African Development Bank, Carthage, Tunisia

    Georg Weiers

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Weiers, G. (2014). Narrowing the Gap. In: Innovation Through Cooperation. Management for Professionals. Springer, Cham. https://doi.org/10.1007/978-3-319-00095-4_9

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