How to manage outside innovation

Group 6a

Two sources for innovation

Competitive markets

Contract based

Profit motive

Competitive relationships among innovators

Collaborative communities

Open sharing of information

Joint development

transparency

Three critical issues

1.Type of innovation

2. Motivation of the innovators

3. The platform business models

Type of innovation

Different circumstances require different innovations

Motivation of the innovators

Extrinsic Motivation

Intrinsic Motivation

The platform business models

Three types of platform business models:

• Integrator platform model• Product platform• Two-sided platform

Can work for both collborative communities and competetive markets

Integrator platform

The company incorporates outside innovations and sells the final products to customers.

- High control for the platform firm

- Example: Apple Appstore

Competetive market advantage

Product platform The external innovators build “on

top” of the platform and sell the resulting products to customers

- Lower control for platform firm

- Example: Google android (Hardware development)

Two-sided platform

External innovators and customers are free to transact directly with one another as long as they also affiliate with the platform’s owner.

- Very low control for platform firm

- Facebook (widgets)Collaborative community advantage

References Boudreau, K. & Lakhani K., “How to Manage

Outside Innovation”