More proof that sharing is good, von Hippel style

Our video called the Red Hat Way starts:

“Your mother was right. It’s better to share.”

There’s more proof that your mom was right in the business world every day.  Today in Orlando, experts from around the world are gathering for the inaugural Open Innovation Summit, highlighting companies like Proctor & Gamble, Mozilla, Xerox, and Johnson & Johnson who have seen success with collaborative innovation. My company, Red Hat, has also done pretty well with this approach.

Now, in a new working paper released yesterday entitled Modeling a Paradigm Shift: From Producer Innovation to User and Open Collaborative Innovation, Eric von Hippel and Carliss Baldwin examine the body of research to draw some conclusions about why more people are moving away from simple producer/consumer models to open collaborative innovation models.

You may have heard of Eric von Hippel, one of the world’s leading experts on open innovation. I like that he’s written about open source many times before, including in his 2005 book Democratizing Innovation and in his 2002 HBR paper Customers as Innovators.

In this paper, von Hippel and Baldwin argue that the number of places where traditional 20th century “producer” innovation (companies making products for users without collaborating with them) makes sense is rapidly shrinking. Why? From the paper:

“Our analysis will lead us to conclude that innovation by individual users and also open collaborative innovation are modes of innovating that increasingly compete with and may displace producer innovation in many parts of the economy. This shift is being driven by new technologies, specifically the transition to increasingly digitized and modularized design and production practices, coupled with the availability of very low-cost, Internet-based communication.”

So the answer is simple. Design is cheaper. Communication is cheaper. And they continue to get cheaper every day due to technological advances. Yeah, we knew that– but still nice to see the academic evidence.

The authors go a step further by further concluding that this shift is a Good Thing that policymakers should embrace.

“We will argue that when it is technologically feasible, the transition from closed producer or single user innovation to open single user or collaborative innovation is also desirable in terms of social welfare, hence worthy of support by policymakers. This is due to the free dissemination of innovation designs associated with the open model. Open innovation generates innovation without exclusivity or monopoly, and so should improve social welfare other things equal.”

According to von Hippel and Baldwin, governments may need to do more to drive toward open collaborative innovation if we want to take full advantage of its promise.

“Are government policies currently at least even-handed with respect to these innovation models? Or do they on balance encourage closed innovation relative to open user and open collaborative innovation? We suspect the later is the case… The roots of this apparent bias in favor of closed producer-centered innovation are certainly understandable– the ascendent models of innovation we have discussed in this paper were less prevalent before the radical decline in design and communication costs brought about by computers and the Internet. But once the welfare-enhancing benefits of open single user innovation and open collaborative innovation are understood, policymakers can– and we think they should– take steps to offset any existing biases.”

Agreed. It is amazing to see how much collaborative innovation has taken off, even with the deck stacked against it. Your mother would be so proud.