Open (Crowd-sourced) Innovation May Not Be Your Cup of Tea

By Shlomo Maital


   An article in McKinsey Quarterly *  warns that open, or crowd-sourced, innovation (in which customers generate the innovation, rather than just the R&D department), may not be ideal for you or your organization.

  But how do you when it is, and when it isn’t?

  Ask three questions, McKinsey experts counsel.

“Having studied the case of infrastructure software closely, we believe executives can gain some insight into this possibility by asking three questions that underpin the logic of competing by protecting the open space—open competition, as you might call it:

1. Do specialized firms offer proprietary solutions within certain layers of my industry’s value chain?  2.  Do integrated firms seek to cut development costs in my industry by drawing on open technologies to substitute for these proprietary solutions? 3.  Are the underlying technologies complex—consisting of so many bits and pieces that a significant number could inadvertently infringe on proprietary IP held by specialized firms?

The more affirmative the answers to these questions may be, the more likely it is that the interests of specialized vendors of proprietary solutions will collide with those of firms drawing on open innovation, which could involve any type of open good, from software to the genetic code to crowd-sourced designs for parts or tools.  

  The simple point here:  If some key parts of your product or service are protected by patents, or if your clients’ products are patent-protected, open technologies that are not protected may risk infringement.

   Systems where everything is patented, or where nothing is patented, are simple. Systems that mix the two are complex.  This is just another realm where the complexity of managing – in this case, managing innovation – is growing rapidly.

* Managing the Business Risks of  Open Innovation. McKinsey Quarterly, Jan. 2012.