Open Expanded Innovation

Open innovation means – openness of the company to accept innovation from outside agents. External agents could be university scientists, privately funded scientists, startup companies or any person in the world. Open innovation continues to gather momentum and is expanding to additional areas such as websites seeking innovative solutions for improving customer experience and increasing revenues. Open innovation started out with product companies such as, Nestle, P&G, seeking innovation for new products, outside the company.

Finding Innovation by Using Existing Platforms

Netflix Co. decided to look outside the company for innovation in the site’s additional movie recommendation mechanism rather than develop this ability by the company’s employees. It can be assumed that the development of such an algorithm is not part of the company’s core skills, nor its core businesses. These and/or other insights apparently led Netflix to seek innovation in this area outside the company.

Open Innovation Offers New Ways to Increase Revenue

The open innovation model allows companies and individuals to create new revenues. The revenue model of Taboola, for example, a company that specializes in developing a recommendation algorithm for video files on websites, probably does not include the sale of knowledge to sites like Netflix. It can be assumed that a company such as Taboola that does not view Netflix as a competitor, could have offered a very professional solution and been granted one million US dollars revenue without increasing the expense structure accordingly, thereby creating a nice profit. Similarly to Taboola, companies such as Metacafe and YouTube have an algorithm that recommends additional movies, and these probably do not view Netflix as a competitor either. And maybe one of them could have won a million dollars too. These examples help us reach a very important insight: open innovation allows many companies, whose revenue source does not include on-demand selling of knowledge and solutions, to generate more revenues in new ways.

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Writer is a professional research consultant and internet enthusiast.

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