Open innovation, co-creation: why blockchain is a small revolution

No one could argue that today open innovation faces problems both of ethics and efficiency. But what if blockchain was a way to give back freedom and empower communities of individuals who want to create and innovate?

Open innovation is happening everywhere. After having for so long kept it solely for their local partners, companies are now expanding the scope, especially through digital tools, into a universal approach which — let’s be honest — is creeping in all directions. Enterprises are now targeting individuals and small organizations: so user–customers become ‘co-creators’ and are involved… for free. In her book, “Le travail du consommateur” (The Consumer’s Work) (La Découverte), the French labor sociologist Anne-Marie Dujarier pointed out how this phenomenon of pseudo co-creation results in an uptake of the value created by individuals. Similarly, are these now very fashionable collaborations between large companies and start-ups not also examples of problematic relationships, more often of win–lose rather than win–win, of course to the disadvantage of the smaller partner?

The limits of open innovation

Much has been written on the problem of large companies appropriating intellectual property for free by collecting the ideas of others. But the problem is wider: it is the issue of trust. Recent work undertaken on behalf of the “Alliance pour l’innovation ouverte” (Alliance for Open Innovation) has revealed one of the key questions which these links between large and small companies inevitably raise: that of an imbalance and the distrust which may result from it, causing demotivation among the different players and ineffectiveness in open innovation approaches, together with significant inertia.

Large traditional companies are far from being the only ones to blame. Platforms which become major players in the new economy are also capturing the value created by others. These intermediaries of course have their value, but recent controversies over the operating conditions of Uber drivers illustrate that sharing added value is far from distributing it fairly among all stakeholders.

But other drawbacks affect open innovation which cannot be attributed to outsourcing companies or intermediaries, but to individual co-creators themselves. The cause is a natural phenomenon that is at work in every group: the natural competition that exists between individuals. Collective intelligence and cooperation are not easy to bring about and then, because there is no system for recognising individual contributors, are largely thwarted by the contributors’ reluctance to spontaneously share information and ideas.

Another problem of open innovation both highlights and explains this: the difficulty in establishing traceability and capitalization of ideas and knowledge. We often say that ideas are everywhere … and therefore belong to nobody, that new knowledge often comes from repurposing existing knowledge. So how can we motivate innovators to get more involved and become true inventors rather than recyclers of ideas?

We need a renewal, yes, but which kind?

Let’s recap: open innovation has limitations and so should reinvent itself on the basis of renewed confidence and values ​​where ethics prevail. In the era of the uberization of knowledge and the surge in expertise, we would gain a lot by implementing incentive schemes to boost the creativity and inventiveness of individuals and create healthy competition between them. But this needs real recognition of their unique contributions.

Even in communities which preach strict equality between co-creators, some are more creative and innovative than others. The fact is that in any group leaders eventually emerge and distinguish themselves by their vision and drive. Besides, in these communities don’t we identify the so-called ‘lead users’, who are far more advanced than the simple ‘users’?

In other words, innovation distributed in a more horizontal and collaborative way is good but is not enough. Mixing it with a somewhat more vertical ‘bottom up’ or ‘top down’ approach is not necessarily incompatible and does no harm. In this way, if innovation can combine ideas from many with a true vision from a few, it can reach a new level.

This is the way innovations emerge: an effervescence of innovation resulting from the accumulation and sharing among peers, then a development into a virtuous spiral which, by a kind of quantum leap, rises to a higher level of progress

Fortunately a solution is beginning to take shape: bypassing intermediaries or, similarly, allowing individuals to be recognized (and possibly paid) for the value they create is making co-creation easier. However, if the mindset needed for this re-appropriation exists, the tools to implement it are often lacking. It is time to call upon technology to serve these objectives.

Safety and traceability

The democratization of 3D tools for modeling prototypes as well as for manufacturing with 3D printers holds great promise. Virtual living labs and fablabs are certainly a promising way forward for open innovation and co-creation but among those tools which are the hot topics nowadays blockchain has become the unavoidable one. What does it promise as a driver for open innovation and co-creation?

Blockchain can be defined as the decentralized and comprehensive history of all transactions since they were carried out and which have been recorded as consecutive blocks in a large ledger. The security of a transaction is ensured by a network of computers that validate and certify the transaction before encrypting it permanently in a block. Once registered, it is unfalsifiable, transparent and easily verifiable. So transactions take place peer-to-peer (P2P) within a distributed network.

From this definition it is clear that blockchain technology enables security, capitalization, traceability and measurement of peer exchanges, even when they take place in a gift / counter-gift logic. So it allows a measurement of the value created by each person. If we transpose these principles of the open source spirit, which were originally intended for the field of bitcoins, to transactions between innovators, we can see all the potential of renewal that open innovation and co-creation could benefit from.

Indeed, you could imagine that, just as with bitcoin transactions, each individual innovator’s contribution is encapsulated within an identified and secure block. In co-creation projects these blocks of innovation could then be identified and attributed with certainty to each contributor, with ad hoc terms of recognition and compensation. Note that this system could work at a totally individual level or by grouping clusters according to the granularity which is required by specific entities (collectives, associations, start-ups, SMEs, etc.).

And what if blockchain was a response to globalization within reach of SMEs and start-ups, giving everyone back the opportunity to develop their particular talents and express their uniqueness and genius?

Many application domains

When we talk about open innovation and blockchain the concept of coopetition comes into the picture. Indeed, with the new practices of datascience, classification algorithms and artificial intelligence, we realize that to take advantage of a market it is in the interest of competitors to pool their data. This involves a new form of governance based on the principle of a collective datastore to allow such sharing.

The challenge is no longer consolidating data, but privacy and the ability for market players to decide the level of information they are willing to share with their competitors.

This type of governance combining open innovation with coopetition is relevant to many sectors.Take for example the startup Ledgys, one of the French blockchain players. They offer a cross-platform to build market-oriented applications and are working on the following topics: sharing a database of CVs showing the experience candidates have gained in an industry, sharing metrics on quality of service between common suppliers (carriers, producers), new approaches in crowdfunding, etc. So in the logic of open innovation, innovation marketplaces can be created (in pharmaceuticals, for example, or in the field of patents) or warehouses of code shared between competitors in which developers’ contributions are assessed and paid for by the community. The economic interest in this approach is that competitors share the basic elements of their R&D.

In the words of the French digital expert and entrepreneur Gilles Babinet: “blockchain can help in making the world more horizontal”. By allowing stigmergy processes, it aims to mobilize collective intelligence, introduce a spirit of sharing, pool the contributions of community members, and generate a more natural, fair and motivating cooperation. By managing the individual reputations of the members of a community, blockchain also creates healthy competition between co-creators. Finally, by linking the principle of coopetition to open innovation, it creates a new paradigm, making this open innovation more efficient, productive, and ethical.

But we need to recognise that blockchain in its current state is not exempt from questions, relating to technological, practical and societal issues.

Technologically the challenge for blockchain is to grasp ideas and co-creations and to transcribe them correctly. But if normalized data from bitcoin transactions is easy to inscribe in chained blocks, it gets more complicated when it comes to multi-dimensional content with highly qualitative, and therefore subjective, components.

Computing power

Another issue is the question of compliance in the transmission of data. If, for simple data, control and scalability are easy, when the data is massive and complex, as is the case in the field of co-creation, the exponential growth of the network means proper compliance of the information contained in chains of blocks cannot be ensured. But researchers, such as data scientist Jean-Pierre Malle, are working on these issues and it is hoped that these limitations will be removed in the future.

The need for enormous computing power, along with the associated costs, low yields and slow transactions, is also an issue that will have to be solved.

The security and reliability of the system poses another challenge. Recent events have shown that blockchain is not without flaws. Should we not be afraid that groups of individuals will set up a coalition to influence or divert to their advantage the added value of ‘blockchainized’ contributions?

Ultimately, provided people do not become locked in to one technology, however promising it is, and that human and ethical questions prevail, the possibilities of blockchain are certainly worth exploring by those who believe in the virtues of co-creation.

N.B. This text is an adaptation in english of an article originally published in French on the website of Harvard Business Review France on july 12, 2016. http://www.hbrfrance.fr/chroniques-experts/2016/07/11628-open-innovation-co-creation-pourquoi-la-blockchain-est-une-petite-revolution/

To discuss the prospects that ‘blockchain and open innovation’ open up, La Fabrique du Futur will be organising a dedicated forum on 7 December 2017 in Paris (www.blockchain-agora.com).

You can also share your thoughts on our new LinkedIn group.