Gifts or Markets?

It has been shown that if you pay people to give blood, they give less blood.

This is because what was previously seen as a gift has been turned into a market. The payment forces you to assess the value of the transaction and ultimately many people feel it’s not worth the bother. Also, it is more likely to attract people who are doing it just for the money which can negatively impact on the quality of blood donated.

Similarly, many large companies make the opposite mistake and take what is essentially an ideas marketplace and try to turn it into a gift. Namely they expect people to share ideas and work them up for them for free.

“For complex and creative tasks, financial incentives have a negative impact on performance.” Dan Pink

In our experience, money is never the primary motivator of external collaborators, but that doesn’t mean it’s not important. Our rule of thumb is if people are sharing ‘just’ ideas, then there should be recognition and ideally rewards (which can be quite small). However if you are expecting people to ‘do some work’ then that effort needs to be repaid somehow.

If the ultimate reward is the opportunity to ‘do business together’ (the best incentive there is in our view) then you need to be really clear on the timing, process and criteria by which you will make a decision. Else, it’s impossible to be able to make an assessment of the risk verses potential reward.

So think carefully about whether you are in the business of reciprocal gift giving, or in the business of creating a marketplace. Don’t cheapen a gift by paying for it. And whilst open innovation at it’s best is about doing things better, cheaper and faster, it does not mean that you can get something for nothing.

By Roland