Featured Research: The Value of Crowdsourcing: Can Users Really Compete with Professionals in Generating New Product Ideas?

Today I am happy to present you another paper in our series of recommendable reads:  A study by two fellow researchers on the question whether or not crowdsourcing is „worth it“. Also, thank you all for the great feedback on this new series! I will continue to introduce new papers over the next weeks. 
 

JPIMThe Value of Crowdsourcing: Can Users Really Compete with Professionals in Generating New Product Ideas?
By Marion K. Poetz and Martin Schreier
 

Published in: Journal of Product Innovation Management,  Vol. 29 Issue 2 (March 2012)
Download working paper version at SSRN.com or Bocconi University 

Generating ideas for new products used to be the exclusive domain of marketers, engineers, and/or designers. Users have only recently been recognized as an alternative source of product ideas.Whereas some have attributed great potential to outsourcing idea generation to the “crowd” of users (“crowdsourcing”), others have been more skeptical.

Our colleagues Marion K. Poetz from Copenhagen Business School and Martin Schreier from Bocconi University join this debate by presenting the first real- world comparison of ideas actually generated by a firm’s professionals with those generated by users in the course of an idea generation contest.

MAM baby productsFor their research, the two scholars coopersated with the MAM Group, a leading company in the baby products. MAM is based in Austria and sells more than 40 million baby products sold each year, being the market leader in many countries, It especially has positioned itself as the firm that is highly capable of designing leading-edge baby products (as demonstrated by several international design prizes).

In their study, Martin and Marion first faciliated a company-internal idea generation process (i.e., ideas generated by professionals) that led to a total of 51 ideas.

Users and customers, in contrast, were invited to submit their new product ideas via an online ideation contest. The incentives for participation were a cash prize of €500 for the winning idea and 50 noncash prizes to be raffled off among participants. Overall, 70 users participated in this idea generation contest.

Executives from the company then evaluated all ideas (blind to their source) in terms of key quality dimensions, including novelty, customer benefit, and feasibility. The following picture has the core results:

Peotz_Schreier_2012_Table_1_JPIM_3-2012-p252

 

As the table shows, Marion and Martin find that on average user ideas score higher in novelty and customer benefit, but lower in feasibility. Even more interestingly, they find that user ideas are placed more frequently than expected among the very best in terms of novelty and customer benefit.

My comments to this paper:

First, this finding is even more striking as the researchers did not use a state of the art ideation contest and invested much into external recruitment of ideas.It really shows the value of looking out of the box and engaging for your firm’s periphery.

However, this does not mean that a company’s internal R&D people are dump and we all sjopuld better get rid of them. No! For most ideas and innovation, I strongly believe that the internal innovation function still provides the more valuable, as feasible, input of ideas. Consumers only can take a very limited number of highly novel ideas and products.

But in the few times where a company really needs radical innovation, engaging with external users may be more beneficial.

But these external users are often not the customers of the firm (here I find the paper a bit misleading). It are not „average“ customers of a firm that come up with the really good ideas, but industry experts, young designers, lead users, and other „non-representative“ people that take the opportunity of an ideation contest to pitch their idea to a potential manufacturer.  And these contributors will not work for Euro500 price money in the mid term!

 

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.