The Development Of The First Worlds Crowdsourced

Published Date: 02 Nov 2017

The strategies adopted by companies seeking to implement technological innovations in products and services have been significantly changing in the last years. One of the notable elements of evolution is related with the way the companies conduct research & development (R & D) of new products, services and business models. The paper aims to identify practices of collaborative innovation that have been used in the development of new products and the case from the automotive industry project was chosen for its empirical study. Even though this industry has experienced the development of R & D together with its suppliers, the concept of co-creating value with end-users (crowdsource) is new. This paper presents the project of the Fiat Mio investigating the development of the process where different practices of collaborative innovation were adopted, which provided Fiat access to a different pool of knowledge, outside of its boundaries.

Introduction

In knowledge-intensive industries, the practice of collaborative innovation has already occurred for some time, as it is the case of the biotechnology industry or electronics (Dittrich and Duysters, 2007). However, the collaborative practices innovation in mature industries, such as product development in the automotive industry is less conventional. The tradition of this industry is the development of products by means of high level of internalization, in particular due to the high investments in specific assets for the production of vehicle components (Clark and Fujimoto, 1991).

One of the most popular cases in the car industry of collaborative innovation is the Toyota case. Toyota was one of the first companies in car industry to establish partnerships with suppliers in order to develop new technologies (Fujimoto & Takeishi ,2001). Whether it is a coincidence or not, Toyota for the third year in a row was crowned the world`s largest automaker organization, selling over 9, 7 million vehicles in 2012, which was a record for the company. Furthermore, it is one of the leaders in the technology innovations, offering products that are leaner, more economic, and environmentally friendly in comparison with the majority of its competitors (www.Nytimes, 2013).

Despite the existence of studies that provide evidences of cooperation in the process of innovation in the automotive industry, researches describe a relationship that usually occurs within the supply chain (Bueno & Balestrim ,2012) .There are no many studies that provide evidence of cooperation, between automotive organizations and member outside of the supply chain, as end users, universities and other actors in search for innovation.

The success of Toyota together with the speed of how information nowadays is transferred over the worldwide web creating a global communication platform, has inspired other vehicle producers to search for new forms to conduct their businesses, accelerate their innovation process and attract more customers. One of such organizations is Fiat Brazil that released a project asking customers to submit their ideas on a blog or via Twitter that could be a valuable input to design a concept-car and uses the project results to rearrange their established business model.

This paper aims to develop a research based on a Collaborative Innovation with an Open Source Approach for the Development of the world’s First Crowdsourced car.

Crowdsource as described by Jeff Hove is the "act of a company or an institution, taking a job traditionally performed by a designed agent (usually an employee ) and outsourcing it to an undefined, generally large group of people in form of an open call"( Howe, J,2006; pp 2 )

This paper presents a program by Fiat Brazil when in August 2009 the company asked customers to submit ideas on a blog or via twitter that could be used to design the concept-car Fiat Mio. The new car was launched in October 2010 at the Brazilian car show. This event is one of the most popular car events in Brazil and attracts thousands of customers and organizations involved in the automobile industry. With only thirteen months to develop the car, Fiat created this project with the objective to understand the relationship between the consumers and the product. The aim was to gather a large pool of innovative ideas from different kind of sources and analyze the benefits of open innovation strategy and how to incorporate these innovations to their products as well as to their business model. Fiat Mio has not developed for commercial production, however, Fiat wants to use the project to inspire future designs, innovate in technologies, business structure and use the good solutions and propositions developed by the project to be integrated in other future models that are commercialized by the organization.

In order to facilitate the reader's understanding of theoretical and empirical evidence, the paper is structured as follows: initially, it presents the theories about the field of study addressing the concepts and the structure of close and open innovation; how it affects R&D development and the drawback pointed by scholars to the open innovation strategy. The second section describes the results of the case study, and finally, presents the final considerations connecting the theory to the empirical data.

Souce: www.fiatmio.cc 10/01/2013

Chapter 1: Literature Review

Many scholars have been attempting to identify the best way for innovation to be developed. Schumpeter (1950) suggested that large firms operating with large oligopolistic industries were more likely to develop radical innovation. Many other scholars recognize the importance of large organization in the development of innovation on its industries. The suggestion is based on the concept that only large organizations have enough resources to fund large R&D budgets and the necessary infrastructure in order to develop innovative products or services (Haberberg & Rieple; 2008).

Other scholars as Tripsas & Gavetti (2000) disagree with Schumpeter’s assumption. In their concept new entrant and smaller firms are more likely to develop radical innovation. Sadler-Smith & Badger (1998) suggest that large firms tend to avoid radical innovation because of the inertial forces associated with large scale operations, also because of its established revenue stream and suppliers relationship.

Rothwell (1995) described this innovation process, as "closed innovation." He suggested that in closed innovation, organizations control each step of the process, and is also responsible for ensuring coordination and collaboration in order to protect the investments. Any innovation developed by the organization is kept closely guarded and protected by patents or other forms of protection mechanism. Furthermore the levels of new ideas and products or services are limited to the organization`s internal capacity and resources, and business market as it can be seen in Figure 1.

Figure 1. Closed Innovation

The problem for smaller firm regarding closed innovation is that even having the culture to create innovative ideas, small firms do not have resources to commercialize radical innovations successfully, therefore an intermediary way is necessary to allow this innovations to be developed and commercialized (Haberberg & Rieple; 2008).

To overcome these issues presented above, another concept has been proposed. Chesbrough (2003) described it as "open innovation", which is the alternative to the dominant model presented by Rothwell (1995) -"closed innovation". Chesbrough describe "open innovation", as the engagement of external agents collaboration into the business activities. He claims that this engagement leads acceleration of innovation, giving businesses a better understanding of the trends of the market, and also faster responsiveness to its changes.

At its most extreme, the "open innovation" concept can include anyone that wishes to participate in the new product or service development process; firm’s competitors, customers as well as non-aligned individuals. The cooperation of the project related to a new product or service can be conducted online by using networks, blogs and websites as the means of communication. Additionally it can also use physical methods, such as workshops, gathering thousands of people to collaborate on the process of development for a new product or service (Bueno et al , 2012).

1.2 Moving Towards to Open Innovation:

In the early stages of the process of technological innovation achieved until the 1980s, whole business activities were conducted internally, and companies were responsible to generate knowledge, develop the product and sell it on the market. Until then large firms played an important role in the development of radical innovation (Rothwell, 1995). However, the digital era is transforming the way organization conduct businesses. Berman (2012) attribute these changes to the level of information available in the worldwide web. With over two billion people connected to the internet, social media is quickly becoming a key factor of communication and collaboration in business process, providing customers with a range of new choices and a larger variety of resources, many of which are beyond the influence of traditional business model.

Chesbrough & Schwatz, (2007) suggests that information accessibility and technology are reducing product life cycle. Their assumptions are based on the speed with which nowadays the new products are launched. Therefore in order to sustain customer base, information about products are becoming as important as the products themselves, leading companies to focus on complementary activities to reshape customers value propositions by including them in the business value chain.

In order to adapt to today’s market, leading organizations are transforming their operation model. The increasing technological complexity in the development of new product in the twenty first century, and the customer’s expectation for self-tailored products and services are forcing organizations to search for external knowledge. Organizations are expanding collaborative relationship with other agents as customers, suppliers, partners and even competitors in order to achieve the customer’s expectations and maintain competitive in the existing market, and also to create opportunities in different markets through business diversification strategy (Hage & Hollingsworth, 2000).

Berman (2012) suggests that the strategic path for the business transformation is divided into three basic approaches: first organizations need to focus on customer value suggestions, also transform the operating model, and then combine those approaches by applying customers’ suggestions into their product and service; and adapt their operation structure in order to satisfy the twenty first century customers’ needs. Organization that is able and eager to do so, is in a unique position to seize industry`s leadership.

1.3 open innovation approach

Bueno et al (2012) suggests that nowadays innovation is the key for organization competitive advantage. Open innovation gives this competitive advantage by allowing organizations to make significant changes in products, services or processes faster than in close innovation format. With open innovation approach organizations can offer new goods faster to the market, also introduce new methods of productions, open new market for organizations, acquire new source of raw or semi-finished products and also access technologies and skills lacked internally giving organization an upper hand in competitive market.

1.3.1- Idea-generation in open innovation.

Pinto et al (2012) refer to ideas as "seed corn" from which new ventures will be cultivated: "in order to take roots they must connect with customer needs, and also generate excitement among employees" (Pinto et al, 2012; pp36). Open innovation can provide these roots in two distinct ways.

First organizations can gather insights from external partners by recruiting a variety of people from outside the company, industry, and experts to participate in a research project and collect information about the organization`s market, product and customer. This group can vary from academics, technical experts, lead user, futurists, external users and others. Furthermore organization can send employees to the field to capture customers’ insights.

According to Pinto et al (2012) involving different minds and voices in the process allows organizations to access a larger variety of new ideas, as groups of individuals with similar values tend to produce similar ideas.

Online forum is becoming an increasingly popular source for starting dialog with customers about their needs and suggestions. The empirical data for this paper is a good example. More than 17000 participants around the world submitted over than 11000 ideas for the new car of the future, becoming the world’s first crowd-sourced car produced in 2010 (Ibid).

Second way to pull external ideas is from other organizations that are specialized in idea development, thus expanding organization’s partners. It can be a consultant organization or inventors that are looking for partnerships with companies possessing meanings to bring their innovations into the market in exchange for capital return for their ideas (Ibid).

1.3.2-Idea Development in Open Innovation

Ideas development in the open innovation format can vary depending on the development required to release the product to commercialization. When organizations are missing only specific technical solutions, they can acquire it by getting in contact with external developers, using an idea broker that holds the technology requested or acquiring patents. Furthermore when a higher degree of research and development is required, organizations can use venture-base development. This process requires organizations to support universities or research centers financially in order to develop the raw ideas requested into market-ready opportunities.

If organization requires a quick response to the market, driven by competitive market environment, acquisition of a market-ready idea in the form of small company can be the best alternative to acquire the innovation requested, giving organization the knowledge in the areas that it was lacking before (Chersbrough, 2003).

The idea-generation and idea development can be seen in image 2. The commercialization of the new idea are not mentioned in the literature review, as the conducted empirical research is more focused about a prototype, which has not a commercial propose as the product for Fiat in the actual market.

Image 2: Open Innovation

Source : Chesbrough, H; 2003

1.4 Open Innovation Is to Everyone?

The benefits of open innovation are straight-forward: the company is no longer constrained by its own ideas, technologies and innovations. However organizations still fear the chances of losing control of key capabilities, assets and technologies that creates values for the company. Many scholars argue that open innovation is not without its difficulties and criticize by presenting its drawbacks.

Chesbrough (2003) argue that open innovation can generate excessive sources for the R&D department, but with the abundance of ideas it can be difficult for organizations to abstract the good ideas from many irrelevant or poor-quality ones.

Jacobides & Bilinger (2006) also describe that if the idea is open to competitors, organizations tend to avoid spending resources in R&D for the development of the product or service, claiming the risk of not getting a return from the investment that organization do not hold the intellectual property .

The open innovation also requires a large investment in coordination, developing a mechanism that will assemble the network, select the participants in the processes, measure the performance, and coordinate the entire process of the project (Ibid).

Haberberg (2008) suggests that despite the increasing popularity and support from many scholars and organizations, the open innovation is by no means yet a mainstream model of innovation development. Therefore, in order to change operation format to open innovation, the main question business managers need to ask is: ‘‘How can my company create significantly more value by leveraging external partners to bring many more innovations to market?(Pinto et al, 2012; pp41).

Chapter 2: Empirical Section

The empirical material for this paper focuses on a project conducted by Fiat Brazil for the construction of the Fiat Mio, a project of a concept prototype car with the aim to create understanding on the practice of collaborative innovation. The research includes information related to the development process of project, external sources of knowledge and the type of relationship established with external collaborators.

In order to conduct the empirical research, material were collected from the blog FIATMIO.CC and the making-off of the project. Secondary data was conducted using existent empirical literatures, magazines and online newspapers about the project and also about the automotive industry. The last part analyzes the data, with the objective of bringing evidence about the practices of collaborative innovation in the project and connecting it to the literature review.

2.1 Fiat Mio Project

Fiat decided to present a car innovation not only in concept but also in process of R & D, using an open platform for innovation. The company organized a participative project, in which consumers were invited to give ideas for the car of the future through a platform mounted on the internet for this purpose: Fiatmio.cc.

The Fiat Mio was something new worldwide in the automotive industry. Never before has a car manufacture opened the process of development and design of their product to the public suggestions. The tradition of this industry is the development of products by means of high level of internalization.

Fiat saw the Mio project as a different way of think about cars, the organization aimed to learn from the project a cooperative form to make decisions, looking for ideas outside of its main capabilities in order to adopt new products; new production processes and new forms of organize their business.

The platform created by the project was what supported the whole process. It consisted of three interfaces for interaction with consumers: free ideas, technical assembly and making of. Each had a role in the project and was emphasized at different stages of product development, and all were designed to interact with external agents that participate in the construction of the car. On the site, the public could follow the whole creation of the vehicle, which had its open development. The interface had emphasis on capture the ideas and share information between users and the company. The second interface called assembly technique was used to foster discussions on topics that have not been pursued further, or to confirm the interpretations that technicians performed at the ideas posted. The third interface was the making-of, which allowed monitoring the development of the car, covering the work of engineers, designers and professionals from other areas of the company involved in the project Fiat Mio

2.1.2 Project kickoff.

The fiat Mio project were divided in four phases of development : (1) Planning and Introduction , (2) Exploration of Concept Ideas (3) Design Concept, which was divided into two parts (Open Concept and the Fiat Concept ) and (4) Branding, as it is represented in the Figure 3.

Figure3: The Process of Open Innovation for the Fiat Mio Project

The Planning and Introduction last for 5 months and was the phase that initiated the project, the brainstorm in decision of how to interact with consumers and involve them in the development of the car. At the end of this process a platform for the internet, Fianio.cc was created giving Fiat the necessary platform to communicate with external cooperators. The next phase was the open Concept Ideas , which consisted in generate ideas for the product , the public would post their ideas also comment on the idea of other, and even vote on them with the objective to capture ideas and share information between users and company at this point the project had 13 months last for its deadline.

The design concept phase was divided into two parts. The first, open concept design, aimed to interpret the ideas generated, and the collective creation between the company and consumers who participated in the creative process. The concept created led to a specification, which was an open document with open intellectual property, describing the concept developed for the car based on what was raised during this phase. The second part was the Fiat design concept, which was the development of Fiat. It was the company's reading about the concept that was created, and these ideas developed by the interpretation of employees were part of the intellectual property of Fiat therefore could not be used as open sources. On this part of the process participants would be able to express their opinion on the products developed by the technicians and vote for product to be used in the construction of the car.

The challenge for Fiat at this part of the process was to somehow materialize all this ideas, trends, technologies suggested by the public into a final product.

The final stage, called open Branding begun prior to the completion of the project development. It was at this stage that decisions occur on the launch of the car, the aims was to define the launch campaign, integrating the consumer once more through marketing decisions, disclosure and release . This phase would help the project to attract a larger vary of people not limiting it to those interested in car.

2.3 External Sources of Knowledge

The project had great consumer intensity in the stage of the ideas generation and product decisions. In addition to the consumer, the company used also other external sources of knowledge for the development of this car.

In the early stage of the project, Fiat visited universities and invited students and teachers to participate in the project through fiatmio.cc platform, in order to attract ideas from experts in areas related to cars, furthermore Fiat interacted with the universities as suppliers, acquired some patents owned by universities when the company needed a technology that was not available to them.

Based on the fact that the car was projected thinking on the future, at the design stage, Fiat lacked many of the technologies required and raised in the idea phase of the project. Therefore the company needed to search for organizations that could supply these technologies at least in prototype level. Fiat had two forms of suppliers: the current organizations which were already used to work, or which kept closer ties with, and new firms which would fulfill the technologies when the current suppliers lacked the technologies that were needed. These groups of supplies were based on universities and specialized research groups that could develop the product requested at least in prototype level.

One of the most important suppliers in the management of the project and connect the organization with the public was the agency Click responsible for the management of the media platform. Playing the role of intermediary agent throughout the entire project, Click created a platform consisting of three interfaces for interacting with consumers: Free Ideas, Technical Assembly and Making-of, which was designed to maintain the integration with co-creators throughout the entire construction of the car.

The collaboration evidenced in the case of the Fiat Mio goes from a partnership to carry out an activity of less complexity to the joint development of technology between the company and other stakeholders. The practice of collaborative innovation can be aggregated into three groups: a) the acquisition and licensing of technology, b) collaboration in R & D, and c) collaborative management of R & D.

2.4 Conclusion of the Empirical Finds

The project of the Fiat Mio allowed Fiat to experiment a different form of operation model, also allowed the organization to develop a larger varies of resources through a collective intelligence of thousands of consumers, universities and suppliers materializing the project in form of a product. Also allowed Fiat to build a platform for future open collaboration projects and reduce the time of project development from average three years to eighteen month. Furthermore the project gave Fiat a platform for customer relationships that can be used not only for future research of market and industry trends but also in identifying changes referring to the belief that consumer.

Chapter3: Findings and Discussion, Description of Findings

This paper had the aim to develop a research based on a Collaborative Innovation with an Open Source Approach. The literature started by presenting the Schumpeter(1950) concept that the innovation in R&D occur mainly on large organizations based on the fact supported by Haberberg (2008) that large organizations have the resources required to develop and commercialize the innovative products.

In fact, the empirical research confirmed Schumpeter´s concept in some extends. In the automotive industry, organizations tend to develop their ideas internally, avoiding any external participation in the research and development of new ideas and product , the mentality is based on the concept of retain the power of intelligence property for the products developed by the organization.

However Berman (2012) suggests that the form of conduct business on 21th century are changing, he attribute these changes to the level of information available in the worldwide web , also to the facility that individuals have in communicate and access information these days. These changes allowed new organizations to enter the automotive, industry creating a fierce competition for market share. The simple economic principle of demand versus supplier is forcing organizations to find alternative forms to offer to customers products with higher quality, differentiation, but with lower cost of production and development.

The empirical research found alternatives developed by car manufactures to overcome the issue presented in the last paragraph. Fujimoto and Takeishi (2001) studies shows that automotive companies began to establish partnerships to develop technologies with its suppliers, taking the first steps to opening up the innovation process. The most popular case is Toyota lean production strategy that uses suppliers as partners in the process of product development and design in order to gain competitive advantages into the market. These finds supports the "open innovation" theory presented by Chesbrough (2003).

Described as the engagement of external agent’s collaboration into organizations activities, the "open innovation" gives businesses a better understanding of the trends of the market, and also faster responsiveness to its changes. Power (1998) suggests that collaboration in process of innovation provides better results comparing to firms that work individually, reducing costs of technological development, the risk of market entry and development time of a new product

In the fiat Mio project the benefits of the open innovation can be detected by the time frame of the program, only 18 months. Five months were dedicated to the platform development and thirteen months for project management, where ideas were developed, products designed, and the technologies necessary to the construction of the car were acquired and the final product was launched.

The participation of the public gave Fiat designers and engineers a large vary of ideas that could be transformed into technologies that was not applied in automobiles. Taking ideas from different perspectives allowed the firm to incorporate new technologies and innovative ideas into the industry. However in order to develop these new ideas, would require from Fiat a large investment in R&D and would take years to be developed. With participation from a larger group of external suppliers, Fiat could acquire the technologies already developed by other organizations, or also could invest in organizations like universities and research centers to develop the technology that was not available in the market yet. The project allowed Fiat to focus on their core competences, speed the project, acquire lean technologies from specialized organization, lower investment and cost of R&D, and reduce the project lifetime.

Chapter4: Conclusion

The theoretical and empirical evidence presented in this study aim to contribute to the growing debate on the topic of technological innovation. The central purpose of the article was to identify practices of collaborative innovation and open source in the development of a new product. The empirical finds gave the base to confirm the trend of collaborative innovation and open sourced presented in the field of development of new components and technologies to the automotive industry.

The project also identified three relevant external stakeholders in the development of the Fiat Mio, including consumers, providers and a university. These findings suggest a change, although still experimental, in the scale of supplier’s participation adding consumers and educational institutions into the co-creation of a new product.

The concept of open innovation can have a large influence on the way that organization conducts their business; organizations from different industries are starting to migrate from close concept, focused too much on development driven by internal resources, towards a more opened model.

The interactions with the external environment are becoming more frequent, signal new directions for R & D of new products.

However is good to remind that fiat Mio was a project created to develop an prototype product , which allowed the organization to abuse in experimentation that are not the reality of development procedure in the automotive industry .

For future research is recommended to analyses the open innovation process in an manufacture product the will be produced in large global scale and how it would affect the organization to tailor products using opinion from global sources where cultural difference still play an important influence in consumers choices .