From Open Design to Open Strategy: Managing the Evolution of Crowdsourcing-Based Business Models

Creative firms build their competitive advantage on their ability to harness crowds. Such firms, however, often find themselves facing stiff competition as they race against their competitors to attract the largest crowds. In order to obtain economies of scale, these creative firms need to find ways to develop new and innovative ideas, which they can transform into action without increasing costs. As crowd size increases, the urge to offer a wider range of possibilities and involve crowds in the decision-making process pushes firms to make the shift from an open design to an open strategy-based business model. During this transitional period, which is marked by the growth of a firm’s crowdsourcing platform, many elements of the firm’s business model and governance practices must evolve. In this chapter, we examine the processes by which firms approach this transitional phase, focusing upon the management strategies firms employ in crowdsourcing-based business models in the period between the launch and adoption of a full open strategy…