When business executives and economists think about whether developing an innovation will be worthwhile, they tend to focus on the economic value of the outcome of the innovation process. “Will we earn enough profit from using or selling X innovation to justify the money and time required to develop it?” is, in effect, the question they ask.
However, that standard cost-benefit assessment is seriously incomplete when applied to individual innovators. These individuals can gain significant benefits from participation in a development process as well as — or even instead of — benefits from using or selling the innovation created.1 When innovation project sponsors can offer volunteer innovators such benefits, the net cost of those innovation projects can be much lower.
To understand this idea, consider the fact that innovation centrally involves problem solving. In other situations, problem solving is known to be valued by participants for the process itself. That is, people often engage in problem solving for the value of participating in the process — independent of any value derived from the solution found. Crossword puzzles provide a good example. Crossword aficionados can spend hours working hard to solve a crossword puzzle. Their reward is entirely in the fun of solving, not in the solution found. (After all, the solution is already known to the puzzle designer.) Indeed, if you were to offer avid crossword puzzle fans the puzzle solution to save them the effort of doing the puzzle for themselves, your offer would certainly be declined — and you might well be reproached and told not to spoil the fun.
We define “innovation process benefits” as all those benefits that innovators will get if they directly participate in the innovation development process — and will not get if somebody just hands them the solution to an innovation challenge. Important examples of innovation process benefits include enjoyment and learning obtained from participation in the project, as well as reputational gains obtained from being known as having made high-quality contributions. Innovation process benefits are distinct from benefits associated with using or selling the innovation created. They are only available to participants in the development process.
1. N. Franke and M. Schreier, “Why Customers Value Mass-Customized Products: The Importance of Process Effort and Enjoyment,” Journal of Product Innovation Management 27, no. 7 (December 2010): 1020-1031.
2. K.R. Lakhani and R.G. Wolf, “Why Hackers Do What They Do: Understanding Motivation and Effort in Free/Open Source Software Projects,” in “Perspectives on Free and Open Source Software,” ed. J. Feller, B. Fitzgerald, S.A. Hissam and K.R. Lakhani (Cambridge, Massachusetts: MIT Press, 2005): 3-21.
3. G. von Krogh, S. Häfliger, S. Späth and M. Wallin, “Carrots and Rainbows: Motivation and Social Practice in Open Source Software Development,” MIS Quarterly 36, no. 2 (June 2012): 649-676; and Lakhani and Wolf, “Hackers.”
4. J. De Jong, F. Gault, J. Kuusisto and E. von Hippel, “The Diffusion of Consumer-Developed Products in Finland: Evidence of Market Failure,” working paper, MIT Sloan School of Management, Cambridge, Massachusetts, 2013.
5. C. Hienerth, E. von Hippel and M. Berg Jensen, “User Community vs. Producer Innovation Development Efficiency: A First Empirical Study,” Research Policy, in press.
6. S. Cooper et al., “Predicting Protein Structures with a Multiplayer Online Game,” Nature 466, no. 7307 (Aug. 5, 2010): 756-760.
7. N. Yee, “Motivations for Play in Online Games,” CyberPsychology & Behavior 9, no. 6 (December 2006): 772-775.
8. Cooper et al., “Predicting Protein Structures.”
9. Cooper et al., “Predicting Protein Structures with a Multiplayer Online Game,” Fig. 54.
10. C. Franzoni and H. Sauermann, “Crowd Science: The Organization of Scientific Research in Open Collaborative Projects,” Research Policy, in press.
11. J. Füller, K. Hutter and R. Faullant, “Why Co-Creation Experience Matters? Creative Experience and Its Impact on the Quantity and Quality of Creative Contributions,” R&D Management 41, no. 3 (June 2011): 259-273.
12. Personal communication with Johann Füller, cofounder, Hyve Innovation Community, 2012.
13. J. Füller, “What Motivates Creative Consumers to Participate in Virtual New Product Development?” American Marketing Association Educators Proceedings 18 (summer 2007): 111-121.
14. R.M. Stock, P. Oliveira and E. von Hippel, “Impacts of Hedonic and Utilitarian Motives on the Novelty and Utility of User-Developed Innovations,” working paper, MIT Sloan School of Management, Cambridge, Massachusetts, 2013.
15. L. Dahlander and M. Magnusson, “How Do Firms Make Use of Open Source Communities?” Long Range Planning 41, no. 6 (December 2008): 629-649.
16. K.J. Boudreau and K R. Lakhani, “High Incentives, Sorting on Skills — Or Just a Taste for Competition? Field Experimental Evidence from an Algorithm Design Contest,” working paper 11-107, Harvard Business School Technology & Operations Management Unit, Boston, Massachusetts, 2011; and B.M. Hill and A. Monroy-Hernández, “The Remixing Dilemma: The Trade-off Between Generativity and Originality,” American Behavioral Scientist 57, no. 5 (May 2013): 643-663.
17. G.S. Becker, “A Theory of the Allocation of Time,” Economic Journal 75, no. 299 (September 1965): 493-517; and R. Gronau, “Leisure, Home Production and Work — The Theory of the Allocation of Time Revisited,” Journal of Political Economy 85, no. 6 (December 1977): 1099-1123.
18. See L. von Ahn, B. Maurer, C. McMillen, D. Abraham and M. Blum, “reCAPTCHA: Human-Based Character Recognition via Web Security Measures,” Science 321, no. 5895 (Sept. 12, 2008): 1465-1468; and C. Shirky, “Cognitive Surplus: Creativity and Generosity in a Connected Age” (London: Penguin Press, 2010).
i. E. von Hippel, S. Ogawa and J.P.J. de Jong, “The Age of the Consumer-Innovator,” MIT Sloan Management Review 53, no. 1 (fall 2011): 27-35.
ii. De Jong et al., “The Diffusion of Consumer-Developed Products.”
iii. Hienerth et al., “User Community vs. Producer Innovation.”
iv. De Jong et al. “The Diffusion of Consumer-Developed Products.”
v. Hienerth et al., “User Community vs. Producer Innovation.”
vi. J. Schell, “The Art of Game Design: A Book of Lenses” (Burlington, Massachusetts: Morgan Kaufmann, 2008).