Innovation requires sources of novelty, but the challenge is that not all sources lead to innovation, so its value needs to be determined. However, since ways of determining value stem from existing knowledge, this often creates barriers to innovation. To understand how people address the challenge of novelty, we develop a conceptual and an empirical framework to explain how this challenge is addressed in a software and scientific context. What is shown is that the process of innovation is a cycle where actors develop a novel course of action and, based on the consequences identified, confirm what knowledge is necessary to transform and develop the next course of action. The performance of the process of innovation is constrained by the capacities of the artifacts and the ability of the actors to create and use artifacts to drive this cycle. By focusing on the challenge of novelty, a problem that cuts across all contexts of innovation, our goal is to develop a more generalized account of what drives the process of innovation.

As of 2013, Havas was the 6th largest global advertising, digital, and communications group in the world. Headquartered in Paris, France, the group was highly decentralized, with semi-independent agencies in more than 100 countries offering a variety of services. The largest unit of Havas was Havas Worldwide, an integrated marketing communications agency headquartered in New York, NY. CEO David Jones was determined to make Havas Worldwide the most future-focused agency in the industry by becoming a leader in digital innovation. The case explores the tensions within the company as David Jones attempts to change the company to compete in an industry undergoing digital transformation. The case uses the example of the acquisition of Victors & Spoils, a crowdsourcing advertising agency, to examine internal reactions.

This paper studies two fundamentally distinct approaches to opening a technology platform and their different impacts on innovation. One approach is to grant access to a platform and thereby open up markets for complementary components around the platform. Another approach is to give up control over the platform itself. Using data on 21 handheld computing systems (1990–2004), I find that granting greater levels of access to independent hardware developer firms produces up to a fivefold acceleration in the rate of new handheld device development, depending on the precise degree of access and how this policy was implemented. Where operating system platform owners went further to give up control (beyond just granting access to their plat- forms) the incremental effect on new device development was still positive but an order of magnitude smaller. The evidence from the industry and theoretical arguments both suggest that distinct economic mechanisms were set in motion by these two approaches to opening.

Following its 2011 win of the Broad Prize, the most prestigious award available for urban school districts, Charlotte-Mecklenburg Schools must hire a new superintendent. This case examines the context of a large urban public school district and how its Board of Education and superintendent were able to create an environment that successfully fostered innovation, using a variety of tools including policy, structure, tools, and culture. It explores the particular constraints and barriers of public education and how the district leadership navigated them. Covers issues such as the resistance to innovation in the public sector, the importance of leadership in building a culture of innovation, the use of autonomy and accountability to encourage individual creativity, the difficulty of managing multiple stakeholders, and the challenge of sustaining improvements over changes in leadership.

Teaching Note for HBS Case 612-066.

The case describes OpenIDEO, an online offshoot of IDEO, one of the world's leading product design firms. OpenIDEO leverages IDEO's innovative design process and an online community to create solutions for social issues. Emphasis is placed on comparing the IDEO and OpenIDEO processes using real-world project examples. For IDEO this includes the redesign of Air New Zealand's long haul flights. For OpenIDEO this includes increasing bone marrow donor registrations and improving personal sanitation in Ghana. In addition, the importance of fostering a collaborative online environment is explored.

Platforms have evolved beyond just being organized as multi-sided markets with complementors selling to users. Complementors are often unpaid, working outside of a price system and driven by heterogeneous sources of motivation—which should affect how they respond to platform growth. Does reliance on network effects and strategies to attract large numbers of complementors remain advisable in such contexts? We test hypotheses related to these issues using data from 85 online multi-player game platforms with unpaid complementors. We find that complementor development responds to platform growth even without sales incentives, but that attracting complementors has a net zero effect on on-going development and fails to stimulate network effects. We discuss conditions under which a strategy of using unpaid crowd complementors remains advantageous.

This supplemental case follows up on the Netflix Prize Contest described in Netflix: Designing the Netflix Prize (A). In the A case, Netflix CEO Reed Hastings must decide how to organize a crowdsourcing contest to improve the algorithms for Netflix's movie recommendation software. The B case follows the contest from the building of the platform in 2006 to the awarding of the highest prize in 2009. The B cause also considers the aftermath of the contest, and the issues of successfully implementing a winning idea from a contest.

This chapter reports on an actual field experiment that tests for the influence of “sorting” on innovator effort. The focus is on the potential heterogeneity among innovators and whether they prefer a more cooperative versus competitive research environment. The focus of the field experiment is a real-world multiday software coding exercise in which participants are able to express a preference for being sorted into a cooperative or competitive environment—that is, incentives in the cooperative environment are team based, while those in the competitive environment are individualized and depend on relative performance. Half of the participants are indeed sorted on the basis of their preferences, while the other half are assigned to the two modes on a random basis.

The “self-organizing” of online crowds — or workers, more generally — into teams is a non-trivial problem of coordination and matching, in a context in which other parties are simultaneously competing for partners. Here, we experimentally investigate the capacity for workers in online crowds to self-organize into teams, within a scientific crowdsourcing contest. We compare matching outcomes and performance to those in a comparison group in which we eliminate the coordination and matching problem altogether (by directly assigning individuals to Pareto efficient teams). Online crowd members do remarkably well relative to the benchmark achieving 13% more functioning teams. Teams also tended to be more effective, by several measures. (We found no evidence these levels depending on the size of the self-organizing pool of workers.) Conditional on having formed, the self-organizing teams also benefit from several advantages in performance.

The case describes the efforts of Beiersdorf, a worldwide leader in the cosmetics and skin care industries, to generate and commercialize new R&D through open innovation using external crowds and "netnographic" analysis. Beiersdorf, best known for its consumer brand Nivea, has a rigorous R&D process that has led to many successful product launches, but are there areas of customer need that are undervalued by the traditional process? A novel online customer analysis approach suggests untapped opportunities for innovation, but can the company justify a launch based on this new model of research?

Teaching Note for HBS Case 610-074.

This case presents the Myelin Repair Foundation's accelerated research collaboration model for drug discovery. It highlights the challenges of building a multi-disciplinary and multi-institutional research collaboration that is attempting to create a treatment for multiple sclerosis based on a novel scientific approach. The case provides details on how norms of academic research and intellectual property had to be updated to enable collaboration. The current dilemma facing the CEO and COO of the foundation relates to setting strategic priorities for research so that a treatment for MS can be ready in the next ten years. The strategic choices need to account for the complexities of drug discovery, the uncertainty of commercial partners' interest in the therapeutic approach and the constrained donor-based fundraising environment.