What are the similarities and differences between a community-driven product development process and a traditional product development process within a firm?

Traditional product development processes require a strategic plan that sets in motion research into ideas to satisfy the needs of the customers targeted by that strategic plan.  Once a product idea is determined, typically approvals of that product idea and the various features are acquired.  This includes the allocation of a budget to develop the product.  Typical traditional product development processes would then include prototype-evaluate-test-implement-test.  Finally the product is ready to market and sell...and the business must cross its fingers and hope for a winning product solution.  The process, however, can be lengthy and require many managerial signoffs before deployment of the product can take place.  The costs for traditional development are often substantial even though only a small number of individuals might contribute to the product's development.

Community based development often still includes prototype, evaluate and test phases but doesn't include most of the other aspects of traditional development.  Since the community provides their talents and effort, managerial approvals to transition from one stage of a project to another do not exist.  A significantly larger set of individuals will typically contribute to the development process of a community based project than in traditional product development.  If there is compensation for a community based project, this compensation is either small or limited to a few contributors(for instance the winner of a contest).  This limited compensation makes the cost of community based development often lower than traditional development.  Because of the sheer number of contributors, development time can often be shorter as well.  In addition the community will often provide extremely effective testing and market validation results.  If the product design and implementation makes it through the community development process, it by definition satisfies the needs of the community and likely satisfies the needs of the target consumers as well.