A powerful business model that has emerged on the web is opening up your product or service to allow others to do the innovating for you.  Examples abound, Facebook and the iPhone, have had over 50,000 applications each developed for them by people outside their organisations. Amazon, Google, eBay and YouTube have for years provided access to developers to take their data or content and use it how they see fit. Scroll down to the bottom of the page on any of these sites and you will see a link for “Developers” or sometimes “API” (Application Programming Interface). An example of an innovation from an API is a demonstration site we developed in Deloitte’s Innovation Program is http://www.vizzl.com which provides a visual search interface over Amazon, eBay and YouTube and deployed the same interface in Facebook called “Friendly Search”. 

In effect this business model leverages lessons learn’t from the Open Source Movement and the concept of “Crowdsourcing”.  I often say to people developing new products or services that they need to adopt the concept of “porosity”, or make your product porous so others can take things and add to them.  Clay Shirky, the US internet luminary, talks about “Failing for Free”.  Effectively many of the applications developed will not set the world on fire but some take off and are picked up by millions of users.  We also see this with iPhone apps and Games. If you can get 50,000 adaptations to your product for free you will out innovate your competitors.

We have seen this model move into the physical product world with organisations like Lego building the “Mindstorms Developer Community” or http://www.threadless.com where TShirt designs are submitted, Threadless users then rate them and if the ratings receive a high level of ratings, the design is put into production and the designer is paid $12,500.  Effectively you get you product designs and market research for free and only produce products that will sell.

The R and D community working on the principle of the smartest guys are probably outside use a website called www.innocentive.com to post major R and D challenges with a bounty and provide the capacity for people around the world to solve their most pressing challenges.

To make it work:

 -          Think about where you can “let go of control”

-          Design your product or service to be porous and facilitate participation through online tools such

-          Think about the incentive, sometimes the “cool” factor is enough but ability to generate income is also a strong crowd puller

-          Think about where you can source the right crowd

Some Australian companies that have adopted the model include Atlassian and Red Ballon Days.