You touch on a very interesting point of discussion related to the Crowdsourcing model, namely that production may be inefficient in terms of dollars and cents (production as a function of RATE, # PEOPLE, and HOURS per PERSON). You are taking the argument ever further by including the opportunity cost of researchers’ time that could/should be spent on other projects. The global economic view is the right one, although I come to a very different conclusion.

Whether we realize it or not, our R&D systems today are hierarchical and centrally planned. The model of hiring large numbers of industrial and academic researchers and spending years to innovate something new is too narrow and closed and ignores the sheer potential of people everywhere to advance the cause. Large organizations (Corporations, Government, Academia, etc.) make assumptions about where innovation will come from and then they hire/fund research programs with very specific and deep capabilities to innovate against them, virtually ensuring that only selected individuals and programs (with highly correlated approaches and perspectives) are matched with the research agendas.

Some organizations actually believe they already employ everyone in the world with anything relevant to say in their respective field and actively avoid seeking out solutions and perspectives from elsewhere. And don’t get me started on the adverse impacts of silos and lack of information sharing …

Unfortunately, this means that organizations spend far too long and far too much on research approaches that fail – ensuring that at any point in time, millions may be working on problems that may easily have been solved by others. The economics look even worse when viewed across the entire economy. From a societal perspective, we should wince at the thought that so many people may be working on research programs inefficiently.

We believe innovation often happens where we LEAST expect it, where domain knowledge intersects diverse multidisciplinary experience and visionary “connect the dots” style inventiveness. The “uniquely prepared mind” can be as powerful as any corporate lab. And an “Open” research approach trumps by far the NIH status quo of today.

InnoCentive’s model is about getting to as many people as possible as quickly as possible to ACCELERATE breakthrough innovation. Measured simply in terms of the dollars and cents of labor contributed to solving a single problem across solvers, you may be right. If success is viewed though in terms of SUCCESS RATES (solving problems, curing diseases, etc.), TIME to MARKET (NPV of accelerated innovation), and COSTS EFFICIENCIES (better matching problems to potential innovators and NPV of efforts avoided) then “Open” and crowdsourced innovation is compelling indeed.

There is one additional point to consider, we believe the Problem Solvers in these innovation markets are highly intelligent actors. In other words, they value their time and quickly abandon approaches when they don’t believe they have a high probability of submitting a winning solution (this should be institutional behavior as well, but not always the case as we all know). From the point of view of both our Innovation Seekers and Problem Solvers, the innovation crowdsourcing market approach is surprisingly efficient.

So you asked the question, does this approach result in lost production when viewed across the economy? I believe this approach actually increases production, particularly when viewed across the economy.

One final point, we do not advocate scrapping R&D, simply evolving it to make the best use of internal and “Open” approaches to drive innovation.

Hope all is well and please do keep the debates at the forefront.

Best regards,

Dwayne Spradlin
CEO InnoCentive

P.s.: Long term and “Big” science is another story, but when the world demands biodegradable plastics and better treatments for neglected diseases RIGHT NOW, we must challenge the status quo approaches and employ every tool in the arsenal.

What Crowdspring could improve, in my opinion, is the winner takes all system. Why not have a reward system resembling a Golf tournament? In golf, Tiger Woods doesn’t take home all of the purse. All the players make a little money according to a formula. Applied to Crowdspring, you would reward all participants (even if it’s just a few cents for last place.) The question is how to tabulate the winners. Well, the winner is the one chosen by the client but his choice could be helped by the participants themselves. To make the cut (i.e. get some cash) the artists would also be asked to review their competing peers and grade them by a deadline. In no time, you would have a leaderboard to present to the client. Once the client’s grading is factored in, you have the final tabulation and the money is split. That’s fair just as it is in professional golf. Some guys never win a tournament but do make a living.