CONFIDENTIAL. I saw that word in every single technical drawing during my 4 years working for Toyota. After co-leading the product development process of Toyota’s worldwide best-selling truck (see Exhibit 1), I wondered if it was possible to develop vehicles without being so “strictly confidential”. Well… the answer is YES!
Founded in 2007 by Jay Rogers (HBS 2007) with a belief in open collaboration and co-creation, Local Motors Inc. (LM) began low volume vehicle manufacturing of open-source designs using multiple micro-factories.  LM stands out for combining new innovative technologies to launch Olli, the first co-created, self-driving, electric and 3D printed shuttle (see Exhibit 2).
Applying crowdsourcing innovation, can dramatically reduce costs and lead time of a vehicle development process, while sourcing the company with creative ideas. The design process of a new vehicle in a typical manufacturing company lasts at least 1 year and costs millions of dollars utilizing valuable resources such as highly skilled designers and engineers At LM things are a little bit different (see Exhibit 3). Olli’s current design was conceived by a 24-year-old Colombian after winning the Urban Mobility Challenge: Berlin 2030. He was paid $28,000 (roughly 2 monthly salaries of senior engineers) for winning the challenge and is expected to obtain royalties when LM begins commercializing the shuttle. 
In addition, it is important to discuss how the company is deploying distributed innovation. LM launches challenges and hosts an open innovation crowd-powered SaaS platform that community members can use to co-create products such as Olli. But it is not only about cars, LM developed the Launch Forth platform, which works with big-name manufacturers such as GE and the Airbus to help companies innovate and manufacture products faster.
In this process, it is critical for the company to get motivated talent. Participation can be due to either extrinsic or intrinsic factors. Extrinsic are related to rewards or just specific individual needs to perform the task. Intrinsic values are more emotional and comes with enjoyment, having fun and the social benefits of being part of a community.  LM is hugely leveraging the external factors through monetary prizes and royalties to further motivate its community (See Exhibit 4). Furthermore, it is relevant to note that LM not only outsource the idea-generation process which ends up in the vehicle design, but also the empowers the participants in the idea-selection process to vote in challenges and design contests (see Exhibit 5).
After analyzing the importance of open innovation in LM and how the company is using this megatrend, I think there is still room from improvement. My recommendation for Jay Rogers’ company is that it appeal more to intrinsic values to motivate people and foster knowledge sharing.
LM seems to be focusing too much on economic rewards. Trying to foment joy and a stronger sense of identity among the community members might trigger intrinsic motivation within participants and thus, less need for economic incentives. Optimizing on only one dimension might have the effect of limiting participation.
The second advice relies on that there are two ways to organize external innovation: collaborative community or competitive market (see Exhibit 6). Currently LM is in the competitive market group. Participants have economic incentives to differentiate, to search for novel solutions and to protect rather than share knowledge. I believe LM could take more advantage of the crowd-source innovation if it promotes mechanisms to further increase knowledge sharing within participants.
To sum up, LM is changing the paradigm of the confidentiality in the vehicles development processes. It is leveraging its community-based innovation platform to deliver quickly, cost efficient and creative vehicles.
However, I find myself struggling with the following questions:
- Should LM let community members vote in the design decision or just outsource the design development and decide by itself which product to launch?
- Should it give more even more autonomy to participants, allowing them to sell directly products to customers?
Exhibit 1. Toyota Hilux 2018.
Exhibit 2. Local Motors Olli.
Exhibit 3. Product Development process comparisons between OEMs and Local Motors Inc.
Source: Essay writer.
Exhibit 4. Motivation drivers for external innovators.
Source: K. Boudreau and K. Lakhani. How to manage outside innovation. MIT Sloan Management Review 50, no. 4 (Summer 2009): p.71.
Exhibit 5. Different Innovation approaches.
Source: A. King and K. Lakhani. Using open innovation to identify the best ideas. MIT Sloan Management Review 55, no. 1 (Fall 2013): p.43.
Exhibit 6. Differences between ways to organize external innovation.
Source: K. Boudreau and K. Lakhani. How to manage outside innovation. MIT Sloan Management Review 50, no. 4 (Summer 2009): p.74.
 Source [Acrofan, “Local Motors Inc. announces partnership with Robotic Research, LLC”], via Factiva, accessed [November 2018].
 Alina Selyukh, “A 24-Year-Old Designed A Self-Driving Minibus; Maker Built It In Weeks”, National Public Radio, June 29, 2016, [URL], accessed November 2018.
 Source [Hayley Ringle, “EXCLUSIVE: Local Motors launches new division to help big-name manufacturers innovate faster”, Phoenix Business Journal, September 13, 2016], via Factiva, accessed [November 2018].
 K. Lakhani and J. Panetta. The principles of distributed innovation. Innovations: Technology, Governance, Globalization 2, no. 3 (Summer 2007): p. 103.
 A. King and K. Lakhani. Using open innovation to identify the best ideas. MIT Sloan Management Review 55, no. 1 (Fall 2013): p.43-45.
 K. Lakhani and J. Panetta. The principles of distributed innovation. Innovations: Technology, Governance, Globalization 2, no. 3 (Summer 2007): p. 104.
 K. Boudreau and K. Lakhani. How to manage outside innovation. MIT Sloan Management Review 50, no. 4 (Summer 2009): p.71.