Platt Perspective on Business and Technology

Innovators, innovation teams and the innovation process 12 – acquiring innovation through crowdsourcing as a special case 2

Posted in HR and personnel, strategy and planning by Timothy Platt on July 6, 2013

This is my twelfth installment in a series on innovators and the process of innovation (see HR and Personnel, postings 154 and following for Parts 1-11.) And this is my second installment for this series at least, to focus in on acquisition of innovation and insight from the open community and the crowd (see my first which appeared here as Part 11.)

I focused in Part 11 on the individual innovator as he or she participates through crowdsourcing channels in value exchange transactions. I wrote about what crowdsource innovators want and expect from the businesses that acquire their innovations and insights. I wrote about the de facto social contracts that they enter into, and that the acquiring business in effect writes and offers when they come together for these exchanges of value. My goal for this posting is to more explicitly discuss the due diligence issues that those innovation acquiring businesses need to address when considering and entering into crowdsourcing as a channel for market-driven and market-prioritized innovation acquisition. And I begin with the social contracts that govern these arrangements.

• Most businesses, and even most businesses that regularly negotiate with and enter into business agreements and formal legal contracts with third party providers, at least start out addressing crowdsourced innovation acquisition as much more freeform and informal, and as being much more ad hoc.
• This is a mistake; any and every outside-sourced innovation acquisition should be approached and formally agreed to by contract and both to define and protect the interests of the acquiring party and to define and protect the interests of the source innovator. And for crowdsourced innovation, that means understanding and acknowledging the social contracts that are always in place and it means developing and implementing a more formally legally binding contractual process that meshes with the social contract and the societal and crowd-based expectations that help to shape it.
• That, I add includes protecting the acquiring business and the actual original source innovator if someone else is seeking to sell off an innovation that is not theirs, either from their having devised it or from their having gained exclusive ownership rights to it from whoever did.
• That protects all parties involved by formally stating what value the innovation source/owner would receive and on what terms and over what timeline.
• And that would unequivocally specify what levels and timeframes of use and of exclusivity of use that the acquiring business would be acquiring, defining the terms of their ownership or license to the acquired innovation.
• Permanent and irrevocable ownership transfer subject only to the terms of the sales contract being honored by the buyer, would mean outright sales and acquisition. Time limited purchase or purchase without exclusivity would in effect constitute licensure and certainly for intellectual property such as innovative design or other strictly informational or other non-rivalrous innovative goods so transferred.
• See my postings: Depreciation of Value in Non-Rivalrous Goods and the Business Intelligence Life Cycle – 1 and its Part 2 continuation for a discussion of valuation depreciation, as the issues raised there would play a significant role in determining the overall long-term value of any crowdsourced innovation acquired, as would emergence of new and competing or superseding innovation in the marketplace and obsolescence, and of course the issues of exclusivity and the like as touched upon above.

I am going to step back from the lines of reasoning and discussion that I have been pursuing over the last six installments of this series up to now, counting this one, where I have been analyzing outside sourced innovation acquisition per se, to more fully consider what types of innovation might make the most sense to bring in from what types of sources and through which of the various types of acquisition channels that have been discussed. And I will discuss that in the context of innovation acquisition through in-house development, as discussed in the first half of this series up to here, as a baseline framework for benchmarking relative valuations. Meanwhile, you can find this and related postings at HR and Personnel and also at Business Strategy and Operations and at its continuation page: Business Strategy and Operations – 2.

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