International Journal of Industrial Engineering and Management (IJIEM), Vol.1 No 3, 2010, pp.

105 - 109
Available online at www.ftn.uns.ac.rs/ijiem
ISSN 2217-2661

How to Overcome the Barriers Between Economy and Sociology

With Open Innovation, Open Evaluation and Crowdfunding?
Robert Freund
PhD Candidate, Martin – Luther University, Halle Wittenberg, Germany, info@robertfreund.de

Received (10.07.2010); Revised (19.09.2010); Accepted (30.09.2010)

Abstract
This paper is structured in the following way. The first part describes Open Innovation as a business
model which uses internal and external knowledge for innovation. Part two focus on the large base of
ideas which can be evaluated (intern/extern) with IT-solutions (Open Evaluation). And in part three it is
argued, that crowdfunding can overcome the barriers between economy and sociology.
Key words: open innovation, open evaluation, crowdfunding

1. INTRODUCTION
Table 1. The themes found in the existing literature on Open
More and more organizations are confronted with highly Innovation [4]
dynamic external organizational environments. The Themes References
drivers of change are globalization, sustainable The Notion of Chesbrough, 2003, 2004, 2006;
development, new technologies and the aging Open Chiaromonte, 2006; Gassmann &
population. The pressure on organizations forces them Innovation Reepmeyer, 2005; Gaule, 2006;
to continuously adapt to the environmental shifts [1] and Gruber & Henkel, 2006; Motzek,
to create organizational forms able to provide faster and 2007; West
innovative response to market threats and opportunities & Gallagher, 2006; West,
[2]. Inovation is a key-factor of business success [3], but Vanhaverbeke, & Chesbrough, 2006
in “many organizations, especially those with a Business Chesbrough, 2003, 2007;
traditional approach, innovation is often only seen as models Chesbrough & Schwartz, 2007; Van
valid when it is completely ´homemade´. This traditional der Meer, 2007
view of innovation – Closed Innovation - completely Organizational Brown & Hagel, 2006; Chesbrough,
disregards the growth market of demand-driven design and 2003; Dahlander & Wallin, 2006;
innovation” [4] or Open Innovation (Figure 1). boundaries of Dittrich and Duysters, 2007; Fetterhoff
the firm & Voelkel, 2006; Jacobides &
Billinger, 2006; Lichtentaler & Ernst,
2006; Lichtenthaler, 2007; Simard &
West, 2006; Tao & Magnotta, 2006
Leadership Dodgson, Gann & Salter, 2006;
and culture Fleming & Waguespack, 2007;
Witzeman et al., 2006
Tools and Dodgson, Gann & Salter, 2006; Enkel,
Figure 1. The innovation continuum [5] technologies Kausch & Gassmann, 2005;
Open Innovation is “the use of purposive inflows and Gassmann, Sandmeier & Wecht,
outflows of knowledge to accelerate internal innovation, 2006; Henkel, 2006, Huston &
and expand the markets for external use of innovation Sakkab, 2006, 2007; Piller & Walcher,
(...). Open Innovation should use external ideas as well 2006; Tao & Magnotta, 2006
as internal ideas, and internal and external paths to IP, patenting Chesbrough, 2003; Henkel, 2006;
market, as the firms look to advance their technology” and Hurmelinna, Kyläheiko & Jauhiainen,
[6, 7]. Research activities has been focused on the appropriation 2005
notion of Open Innovation, business models, Industrial Berkhout et al., 2006; Bromley, 2004;
organizational design and boundaries of the firm, dynamics and Christensen, Olesen & Kjaer, 2005;
leadership and culture, tools and technologies, IP, manufacturing Cooke, 2005; Vanhaverbeke, 2006
patenting and appropriation, industrial dynamics and
manufacturing (Table 1). This paper affects the themes Alliances and Open Innovation systems might facilitate
business model, tools and technologies. the diffusion of knowledge over firms and within firms
much better, adding to the chances of recombining

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mature and emergent knowledge [8]. Open Innovation 2. OPEN EVALUATION

today has a much broader application than first
proposed by Chesbrough [9], e.g. the “Lead User Selection and evaluation of innovative ideas or
Concept” or “User-Centred-Innovation” [10], or concepts are typical activities of the company itself. The
“Interactive value chain” [11]. The emerging research benefit of Open Innovation is a much larger base of
field of Open Innovation is in a phase that is still very ideas and technologies. Open Innovation tools e.g. lead
fluid [4], with many national/global [12] and regional [13] user method [18, 19], toolkits [20, 21], communities [22,
Open Innovation activities. 23] or innovation contests [9], allow external partners
too to evaluate and select. Internal and external (IT-)
Transferring knowledge, creates a rich variety of evaluation of ideas is called Open Evaluation [24]. To
possible research issues and is an operation that handle the huge amount of ideas created by online
should be separately managed and guided for each communities isn’t that easy. A good example is
enterprise. The most certain result is viewed through Google’s Project 10100 where thousands of people from
the power of external tendencies, which could be more than 170 countries submitted more than 150.000
brought into the firm and implement new products and ideas, from general investment suggestions to specific
services. The previous essential strategy of Closed implementation proposals. These ideas were evaluated
Innovation will be continuously transformed into Open by 3.000 Google employees [25] and not by the crowd
Innovation. The distribution of knowledge take place not (community).
only in research facilities in specific enterprises but
also, among the customers, governments, institutes, The relevant differences emerging in the new
universities, schools and companies. Companies can generation of innovation communities are: the
find vital informations and knowledge everywhere in “virtuality” and the “connectivity” dimensions enabled by
such an environment. Open Innovation works from the Internet, this changes the rules of innovation
external ideas and knowledge in conjunction with the generation, evaluation and dissemination; and the
internal research and development activities. This process of spreading of new ideas, becomes global and
bidirectional relationship offers new ways to create fast [26]. So it´s not only important that a company
value. The existence of many smart people outside a interact with customers, it is more important to analyze
company is not a regrettable problem for the prosperity how they collaborate [27].
of the company, it indicates also an opportunity for the Another example is the company Atizo [28] a specialist
company. In a better system, the internal research and in crowdsourcing and IT-based open community
development occurs awareness, connection and management, located in the Swiss capital Berne.
information from outside research and development. Founded quite recently in May 2007, the company has
The innovation process is more profitable, valuable and already been able to attract an impressive list of
the effort is multiplied many times through the partners: PostFinance, CreditSuisse, Swiss Post,
inspiration of the system. It becomes a value creation Toshiba, Fuji, Mammut and Google are among the
engine, value according to the customers, so it is clients of the provider of Switzerland´s first
essential for a company to learn from its customers. crowdsourcing platform [5]. Atizo administers a growing
Internal research and development is indispensable web-community of creative thinkers, who are
because they solve internal complex dependencies in characterised by their user, consumer and special
fabricated technologies. The internal activities besides knowledge. For the mobilisation of this community and
can define the analogy of the value segments along the yet other innovator teams, Atizo continually develops
value chain and link them with external activities, if it is innovation management tools, which are applied in
necessary, to create and deliver value to the customers. innovation projects of companies and organisations of
The focus of this system is that a new network of all sizes and sectors. The Atizo process in detail [28].:
knowledge, expressed mostly by internet, is functional Generate ideas:
and viable. The knowledge-based economy can be 1. Clients formulate a briefing of ideas and decide
supported by Open Innovation [14, 15]. on an award
Successful Open Innovation depends on the open 2. Innovators collect as much inspiration and input
character of the business model and on network-like as possible in an open and collaboratively
interactions between multiple parties in the process designed public online brainstorming phase
of innovation [16]. The more complex knowledge 3. Clients select the best ideas and divide the
bases, products or processes become, the higher the award
dependence on various external sources of information, Evaluate ideas:
ideas and knowledge. These external sources may in
turn be representatives of completely different 4. Clients define innovators' profiles for
technologies or “sectors” as traditionally understood; assessment of ideas, formulate criteria and look
causing sectoral systems of innovation to blend with for the best ideas to be assessed.
each other [17]. The variety of variables that needed to 5. Various innovators evaluate the best ideas
be taken into account make a clear assessment and selected
evaluation of the overall system for companies alone 6. Interesting favorites for implementation
an impossibility. It is against this backgrund that crystallize out of the results
evaluation is a critical success factor for Open
Innovation business model.

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Freund 107

Realize ideas: Customer and context-specific Open Evaluation means

7. Clients draft a project assignment and to reflect on cultural values, especially in the central
assemble teams european region with its mix of cultural diversity.
8. In a collaborative, closed process in co- Table 3. Design elements and cultural values [30]
operation with the client, innovators develop Design element of Cultural Value
concepts or first prototypes. innovation process
9. Clients evaluate results and award innovators Topic specification
depending on the particular projects. Low task Low level of uncertainty
Unlike facebook.com, xing.com, or odnoklassniki.ru, at avoidance
atizo.com the community is not the client but the High task High level of uncertainty
business partner of the platform provider. This is avoidance
indicated by two further links called projects and Eligibility
rewards [5]. Ideas are evaluated by the community of Individuals Low Collectivism
members, which is not open. But an Open Evaluation Teams High Collectivism
process, based on IT-technology, should not work with Reward motivation
a predefined network and innovation contests should High monetary reward High performance
take into account more dimensions. There are several orientation
dimension at the front end (Idea screening, product Low monetary reward Low performance orientation
related discussion forums, idea contests, communities or
of creation) and at the back end of new product non-monetary reward
development (Toolkits for user co-design and Evaluation
customization, virtual concept testing & trading, toolkits Jury of experts High power distance
for user-innovation, peer-production: Crowdsourcing) Peer review Low power distance
[29]. A framework of dimensions and specifications
(Table 2) in innovation contests could be a good To evaluate ideas by the community is an important
starting point for a systematic approach to Open step forward but the next step, to realize and finance
Evaluation. these ideas, is the key to success.
Table 2. Dimensions of innovation contests [24]
Dimension Specification 3. CROWDFUNDING: ECONOMY AND
Medium Online, mixed, offline SOCIOLOGY
Organizer Company, public organizations, non Companies which use a crowdsourcing approach, in
profit, individual contradiction to companies that use an Open Innovation
Topic Low, defined, high approach, do not use a predefined group of experts or
specification companies. They outsource functions to an undefined
Elaboration Idea, draft, concept, prototype, network of people in the form of an open call, where
solution, developing companies with an open innovation approach use a
Target group Specific, unspecific predefined (often contract based) network of experts to
Participant Individual, team, both collaborate with [31]. There are four types of
Runtime Very short-time, short-time, long time, crowdsourcing [32]: Collective intelligence [33, 34, 35],
very long time crowdcreation, voting and crowdfunding.
Reward monetary reward, non-monetary Crowdfunding is about financing of projects and people
motivation reward, mixed by large crowds. Instead of seeking finance from
Community Existent, nonexistent institutional sources, the supporting community is asked
functionality to spend money for ideas or projects. A crowdfunded
Evaluation Jury of experts, peer review, self- network can assemble and disassemble at any time,
evaluation, mixed and is therefore different to traditional cooperations [31].
A new way to monetize web activities based on
crowdfunding are represented by Rewrd (based in
2.1 Cultural Values
Thessaloniki, Greece, launched in April 2010), Startnet
Open Evaluation can contribute to the innovation (Germany) and Flattr (based in Malmö, Sweden,
process in marketing research, idea generation, idea launched publicly in March 2010 and then opened up to
screening and marketing [24]. But as innovation activity the public in August 2010).
globalizes, managers in general, and innovation This bottom-up approach in financing innovations is a
managers in particular, must increasingly understand combination of economy (capitalism) and sociology
which design elements mirror the cultural values of the (social aspects). To make business in a social, complex
global internet community [30]. Topic specificity, and uncertain environment is difficult, because
evaluation, eligibility and rewards (Table 3) are central economists and sociologists each hold half of the truth,
elements of innovation contests reflecting cultural „so to speak, when it comes to markets, it seems
values such as uncertainty avoidance, power distance, natural that they should try to coordinate their efforts”
collectivism and performance orientation [30].

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