Private-Collective Innovation Model
Description
Peter Troxler:
"In innovation research, however, it is still relatively early days of accepting the open source way as a mode of innovation of any substantial relevance. von Hippel and von Krogh (2003) proposed the explanation of a ‘private-collective innovation model’ that combines elements of the traditional private investment model of innovation and the collective action model of innovation of public goods. Participants use their private budget to create innovations they freely reveal as a public good (private investment model). In return they do not want legal protection for the exclusive commercial exploitation of their innovation, but other private benefits such as learning, enjoyment and community participation (collective action model)." (http://wikis.fu-berlin.de/download/attachments/59080767/Troxler-Paper.pdf)
Discussion
Advantages and Costs
"Benefits and Costs of Private-Collective Innovation, by Ali Kousari and Chris Henselmans:
The private-collective innovation model has two components: private and collective (public). The private component is supported by private investment, which is usually protected through patents, copyrights, and trade secrets. The collective component relates to the provision of public goods that are defined by non-excludability and non-rivalry. Non-excludability means that any person or organization that uses the public good freely cannot withhold it from others (von Hippel & von Krogh, 2003). Innovations arising from the public model are supplied to the public at no charge. By combining features of public and private models, a new innovation model is created in which participants invest in knowledge and disseminate it to the public free of charge. An example is F/LOSS that is disseminated to the public by companies that invested in creating it. This type of knowledge sharing has become very common in the software world and it is notable that all the participants benefit from it.
As long as the cost of making knowledge public is less than the benefits, it is appropriate to disseminate knowledge (von Hippel and von Krogh, 2003). Normally firms protect their knowledge by creating processes and firewalls that are costly. However, even though the risk of this knowledge being exposed is reduced, it is still present. By disseminating knowledge, the cost of knowledge management is reduced significantly (Stuermer et al., 2009). Moreover, knowledge sharing also has benefits for the company releasing it, including the enhancement of its reputation and positioning it as a source of expertise in the domain or industry. These effects promote trust among customers or end users and provide a competitive edge against potential competitors (Stuermer et al., 2009). Another argument for sharing knowledge is cost savings. The cost of innovation is reduced since other organizations and individuals share labour costs and contribute previously developed components.
A well-researched example of private-collective innovation is the development of the Nokia Internet Tablet. After studying this project, Stuermer and colleagues (2009) identified seven benefits of private-collective innovation:
1. Enhanced company reputation: Nokia’s reputation was enhanced among F/LOSS developers by its willingness and expenditure in making the Internet Tablet software F/LOSS.
2. No source protection costs: releasing software as F/LOSS eliminates the costs involved in trying to protect the source. And as mentioned earlier, source protection might be in vain since for some products source code leaks out to the public eventually.
3. Innovation without high R&D costs: F/LOSS may enable easier, faster, and lower-cost product development.
4. Leader advantage: being first to come out with a new device can be an advantage if public involvement goes viral. The product technology can become the standard.
5. Opportunity to learn from others and by doing: collaboration in software development provides many opportunities for learning. For example, developers can learn from experts in other domains. Also, junior developers have an excellent opportunity to learn from more experienced developers.
6. Reduced development cost: greater productivity can be achieved despite reductions in paid labour. Also, code written for one F/LOSS project often can be integrated into other F/LOSS projects, which further reduces development costs.
7. Improved quality and maintenance: with greater numbers of individuals involved with F/LOSS code and a greater number of individuals contributing to testing efforts, software quality is likely to be better than an in-house alternative. Software defects are identified and fixed sooner in F/LOSS.
Although the research was specific to the Internet Tablet project, many of these research findings have also been corroborated by authors studying other private-collective innovation projects.
Stuermer and colleagues (2009) identified five hidden costs of private-collective innovation projects. These costs are:
1. Enabling others to contribute: an innovator needs to make the tools, training, and infrastructure available to allow easy entry for new contributors.
2. Releasing control: F/LOSS projects are controlled by a community. An innovator's control is limited after releasing software as F/LOSS.
3. Lack of product differentiation: competitors can use the publicly available software to create products similar to the innovator’s product. This reduces the ability of an innovator to create a unique product.
4. Protecting business secrets: since a development community has to have some idea of a product's direction to enable them to contribute to it, a business may have to carefully divulge sufficient information to empower the community, without tipping off a competitor.
5. Organizational inertia: an innovator has to check any third-party software for hidden IP. This takes time and resources and has an effect on F/LOSS project progress." (http://www.osbr.ca/ojs/index.php/osbr/article/view/1256/1201)
More Information
Paper: Private-Collective Innovation: Let There Be Knowledge, Ali Kousari and Chris Henselmans. Open Source Business Resource, January 2011: The Business of Open Source
URL = http://www.osbr.ca/ojs/index.php/osbr/article/view/1256/1201
"Many innovators (companies or individuals) opt for a private innovation model. This model uses resources to create a product whose intellectual property (IP) is protected by the firm. At the opposite end of the scale is the collective innovation model, in which innovators collaborate and expend resources to produce a public good. Many free/libre open source software (F/LOSS) projects rely on collective innovation. Some innovators are now combining the two models into a private-collective innovation model, in which an innovator may chose to collaborate with other innovators and spend private resources while still keeping some IP private. For example, a company may release its product’s source code to the public in the hope of attracting a community of contributing developers. Such a company commits its own resources to a project, but may still hold on to the intellectual property.
The success of private-collective innovation is dependent on many factors including: project interest and value, company reputation, and project status. There are benefits and risks to private-collective innovation which must be carefully weighed before making a decision to employ this model. Private-collective innovation involves the sharing of knowledge and, in some cases, the sharing of IP that may or may not be patented."