[OI Market Study 2013] Key Results – Global Market for Open Innovation Support

OIAS coverWhen engaging in OI, organizations face the challenge of creating the internal ecosystem
that allows them to profit from external input in an efficient and effective
way. Professional assistance is offered by Open
Innovation Accelerators

OIAs are intermediaries,
consultancies, and agencies helping their clients to accelerate an open
innovation project by providing dedicated tools, methods, access to an
established community of solvers or participants, but also education and
process consulting.

 With more than 160 players, the market for OIAs however is getting
complex and difficult to navigate. Hence, we reached out to 160 providers of (inbound) open innovation
to join a 90 min survey investigating the OIA’s business model and
environment, productivity, services offered, project specifics, and
characteristics of their participant pool. In addition, we asked about
estimates for the development of the open innovation market.

59 (37 percent) of
the OIAs contacted provided us with a complete data set. For the remaining
companies, we used secondary data sources.

In total, our study
is the largest inquiry of the global market of open innovation services. In the
following, we will provide some high-level results.

Market Structure

OIAS graphic 1We find that the
market for open innovation is getting mature
. On average, OIAs have already
conducted a high number of client
, many of them 200 and more. Still, the market for OIAs shows continuous growth

Ideation contests are seen as the most promising open innovation format. They cover
almost 80 percent of the entire open
innovation market. Secondary services like software support, consultancy, or
executive education enhance the offerings of many OIAs.

But we find that OIAs also
increasingly reach out to functions
beyond new product development
. The core idea pattern of open innovation to
engage an open, undefined network of people in form of an open call or open
search activity seems to be transferrable to a variety of tasks, including
marketing, customer service, recruitment, knowledge management, and HR.

When comparing our 2013 data with data from an earlier
study in 2010, we find that about 20 percent of the 2010 OIAs do not exist any
longer or have been acquired by other players. We expect an even stronger wave of acquisitions and mergers
for the coming years.

The average
for an OI project with an OIA is €43,000. But project costs differ
widely, ranging from €12 (for a basic monthly description of an OIA
web-service) to €164,000 (for an OI consulting service). The main project cost driver is personnel capacity. In the end, OIAs are no IT services or
"self-service internet platforms", but knowledge-intensive service
businesses. Recruiting experienced project managers and analysts becomes a
major challenge for many OIAs.

Services & Methods

In general, OIAs differ, first of all, regarding their
approaches how to tap into an external knowledge space. These approaches can be
differentiated according to the way how
contributors for a specific project are selected
and the collaborative
process is being initiated. We find three options:

  • Open Call: Calling for individuals to identify themselves by
    contributing to a given task;
  • Open Search. Searching for relevant information or individuals
    according to a given task
  • Selective Open Call: Calling for individuals, but within a pre-defined set
    of potential participants (a hybrid between the previous two options)

These three options also help to structure the service
types that OIAs offer when we add the type of information requested by the
client: information about market needs or information about technical solutions:


OIAS chart 1

Table: Open Innovation Approaches and practical examples


with an OIA

Picking the right intermediary depends, first of all, on the type of task and the nature of
the innovation problem. Not all OIAs are suited for every open innovation
challenge. OIAs further differ with regard to the breadth, scope, and structure
of their pool of potential participants, and the options for clients to control
access to this pool and the interaction within a given project. Furthermore,
outcomes of an OIA project can range from raw ideas to sophisticated concepts –
and selecting an OIA very much depends on the expected outcome and preferred degree of outsourcing the OI
function to the OIA.

From a client perspective, the OIA business has two major characteristics, distinguishing it from
conventional innovation consultants. These two characteristics also should be
key decision criteria when selecting an

First, software plays an essential part of any open innovation venture. Web 2.0 and social software technologies allow OIAs
to operate globally and integrate large numbers of participants without high
transaction cost. In 90 percent of all cases, OIAs offer a distinct software
solution. Hence, selecting an OIA also means deciding whether the software
solution should be implemented in-house (following a traditional license model) or using it as a web-service or via a hosted service of the OIA.

Secondly, OIAs build on the involvement of a community. OIAs connect clients through their communities with a
variety of external actors, most of them are new and unknown to the client
(this "looking out of the box" is exactly the value of open
innovation). OIA services differ significantly regarding their community
composition. In average, we find that OIAs have an existing pool of
participants (their "community") of 20,000 members. But OIAs
specializing on ideation or technical contests often have communities of more
than 100,000 members. To join the pool of participants, prospective
participants have to accept general terms and conditions, but in general do
sign not a formal contract. This is a core difference of open innovation via OIAs
compared to traditional forms of R&D networks or alliances.

Between communities, the general level of expertise of its members differs significantly among the
different services. OIAs offering technical search services in form of
technology scouting, for example, have access to high level expert communities,
while OIAs focusing on ideation and concept generation often have a broad, very
heterogeneous community of "average" consumers.

For the full picture, refer to The Market for Open Innovation: The 2013 RWTH Open Innovation
Accelerator Survey
. authored by Kathleen Diener & Frank Piller, 2nd
edition, May 2013. Lulu Publishing: Raleigh, USA
(available via study.open-innovation.com).

Check back from more updates and key results from the OIA 2013 market study!

About the Author:

Frank T. Piller is a Co-Director of the MIT Smart Customization Group at the MIT Media Lab, Massachusetts Institute of Technology, USA, and a chair professor of management at the Technology & Innovation Management Group of RWTH Aachen University, Germany, one of Europe’s leading institutes of technology. Before entering his recent position in Aachen, he worked at the MIT Sloan School of Management (2004-2007) and has been an associate professor of management at TUM Business School, Technische Universitaet Muenchen. Frequently quoted in The New York Times, The Economist, and Business Week, amongst others, Frank is regarded as one of the leading experts on strategies for customer-centric value creation, like mass customization, personalization, and innovation co-creation. His recent analysis of the crowdsourcing business model “Threadless” (co-authored with Susumu Ogawa), an innovative crowdsourcing business model in the fashion industry, has been elected as one of the Top-20 articles in MIT Sloan Management Review.