Innovation modes blended innovation based in costs adapted by Onsanity
Basic modes of innovation
Innovation by individual users and open collaborative innovation increasingly compete with producer (company) innovation in many areas. This is what Baldwin & von Hippel (2010) concluded in their research (1). From one side the change towards individual innovation is facilitated by increasingly digitized production practices and the availability of very low-cost, Internet-based communication. On the other hand the need for collaboration is a consequence of the increasing sophistication and complexity of products and services. Furthermore, acceleration of knowledge production is the direct responsible for the multiplying of innovation opportunities.
The table below summarizes the three modes of innovation; it’s to say the three different ways to organize resources for the generation of value through innovation.
Producer (Classical Innovation)
A single non-collaborating firm that produces their designs in order to sell it to users or other companies.
Any firm that designs produces and sells products or services.
Individual or single user
A single firm or individual that creates an innovation with the initial intention of using it.
A professional or a consumer creating a new device for it’s own use.
A group of contributors (individuals or companies) share the effort of design and reveal the outputs openly for free.
“Open source” products or any other asset created collectively.
Not the only one, but a relevant element to consider in deciding how to combine properly or where to begin with the modes of innovation is the kind of costs involved in the innovation processes. An innovation opportunity has four generic costs: design, production, communication and transaction. Innovators playing as rational actors will move to the mode with more advantages.
The generic costs and its impact on innovation modes are summarized in the next table.
Innovation mode advantages
Cost of creating the instructions that when implemented will bring the innovation into reality.
As complexity and amount of knowledge involved in design increase more collaboration will be required.
Cost of carrying out the design instructions to produce the specified good or service.
As investments necessary for the production increases a producer with more resources or even the collaboration of producers will be needed.
Costs of transferring design-related information among participants, both individuals and organizations during the design process.
Individual innovators or people in the same organization have les communication costs. The communications costs of an open collaborative project across organizations are the greater.
Cost of establishing property rights, keeping it secret or writing contracts among others.
The complexity of relationship among partners or intermediations during collaboration increases the costs.