L05 A: Boudreau, K., & Lakhani, K. (2009). How to manage outside innovation.

Question 1

From our research, we have identified three critical issues that managers should take into account when making (open vs close innovations) that decision. Specifically, the discussion must look at:

Answer 1

(1) the type of innovation that will be shifted to external innovators,
(2) the motivations of those individuals and
(3) the nature of the platform business model (who pays whom)

Question 2

Three platform business models:

Answer 2

From “High control by platform” to “high autonomy of external parties”:

Integrator platform
(External innovators -> platform -> customers)

Product platform
(Platform –> external innovators –> customers)

Two-sided platform
(Platform -> external innovators & customers)

Question 3

Should companies organize outside innovation through collaborative communities or competitive markets?

Answer 3

Communities when:
- Innovation problem involves cumulative knowledge, continually building on past advanced solutions that depend on integrating skills, knowledge and technologies that transcend an individual contributor’s purview.

• More oriented toward the intrinsic motivations of external innovators (e.g. desire to be part of some larger cause).
• Members concerned that work could be coopted or used in ways that they did not intend clearest disadvantages in working with high-control platform.

Markets:
- Innovation problems are best solved by broad experimentation across a set of technical approaches or customer groups.

• Tend to reward extrinsic motivations (such as through financial compensation).
• In a competitive market, profit-seeking innovators might be wary of getting locked into a platform whose owner could later change the rules of the game.