In some cases, firms find in the open-source community a source of voluntary efforts, providing valuable donated complements to the firm’s core innovation. Encouraging users to share their product experience and propose ways of improvement is a well-known strategy for firms. This method has been used by firms in the IT industry, in the form of integrating user developed software, filing the gaps of the internally developed software code. Such cases include IBM’s SHARE user group and Digital Equipment Corporation’s DECUS.

Avalanche Technology Cooperative is a Minneapolis-based nonprofit organization, founded in 2001 with the aim to serve as a “forum” for IT customizations, developed by local IT users. The Avalanche platform enabled companies, which lacked such integration modules, such as SAP and PeopleSoft to tap into the pool of user improvements and integrate various software packages into their own core modules.

On the other hand, the PC gaming industry is in a constant competition with lower-costing gaming consoles such as Microsoft’s Xbox or Sony’s PlayStation. Hence, PC game publishers have adopted the advantageous strategy of allowing PC users to “tweak” and update their games by creating their own mods, which are sometimes open-sourced. Gaming companies encourage this user behavior by releasing editing tools, popularizing the most creative of mods and their creators and even buying the mods outright. From an economical perspective, this strategy highly elongates the otherwise relatively short demand period for PC games, and provides companies with additional time during the burdensome and time-demanding process of developing follow-on products. Additionally, mods supply game studios with a free source of external innovation, proposing ideas for enhancement of current products or even founding ideas on the development new ones (as was the case of Counter Strike, evolving from a modification of Half Life to an independent major success game). At the same time, mods keep a gaming product current for considerably longer periods of time without the need for any interventions from the creator company.

Maximizing Returns of Internal Innovation

By using donated complements firms maximize their returns by providing an extensible platform for external contributors, which provide additional ideas on how to improve the internal innovation in order to build a better product. Such an approach creates a positive feedback loop in which the contributions of a single user enhance the quality of the product, thus attracting more users which are also prone to contribute their improvements. Not only does such tendency boost sales, but also has the potential to lower significantly the costs for in-house R&D.

Role of External Innovation

External innovation in cases of donated complements proves to be of considerable value for companies, since it originates from the customer community itself. This makes donated complements the strategy, which moves closets to the so called “user-centric innovation”, described by Von Hippel (1986)[1]. Additionally, donated complements add variety and novelty to the established company products and inject external creativity in the internal R&D process.

Motivating Participation

The challenge of motivating contributors becomes even more intense when it comes to donated complements. If we look at mods which are mainly created for intrinsic reasons, such as the love for a game, enjoyment, direct utility and so on, gaming companies still continue to apply various kinds of techniques in order to encourage contribution. Such efforts include: minimizing technical obstacles, such as creating development tools or releasing the source code of the game; development of the necessary infrastructure, including forums, distribution sites, promoting mod creators and their work. Last but not least, giving credit to top contributors proves to be a very efficient strategy for motivating participation. For instance, since 2002 Apple has been giving annual awards for the best open-source solutions created by users to deal with various company issues. This provides the user with recognition from both peers and professional partners (potential employers or fellow-colleagues) and with non-monetary rewards such as pride and self-content.

Related Risks

Risks persist to be related with the loss of control over the company’s product. Mods can evolve and start being disseminated without the consent of the original author. The game product could take unpredicted directions, as such was the case of GTA: San Andreas, one mod of which enabled a pornographic mini game, which led to the rating of the game as “Adults Only”, thereby limiting its availability. Donated complements enable third parties to control the user experience and sometimes change the overall direction of the product lifecycle.



[1] Hippel, Eric von (1986), "Lead users: a source of novel product concepts", Management Science: 791–805