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How to manage outside innovation

Example: Nintendo

Group 1bNadine Nordland, Sven Ahrens,

Anton Israelsson, Fredrik Kihlberg

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Outside innovation is done by markets and communities0

Outside innovation?

• “Open innovation”• Rely on outside knowledge• External source of ideas• External source of know-

ledge

• $5 Mio. question: How to efficiently manage this knowledge?

Competitive Markets

• Formal, rule based, contracts• Competitive, profit motive• Value capture by platform

owner through contracting or licensing

1

2 Collaborative Communities

• Informal, social interactions• Cooperative relationships,

sharing• Extrinsic and intrinsic

motivations• Value capture through

enhanced demand

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Three factors decide on which option to choose0

What type of innovation?1

What’s the motivation?2

What’s the business model?3

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Identify the type of innovation you want1

Cumulative knowledge

• Build on past advances from others

• Integrate skills from many diverse people

• Example: Mozilla Firefox• Millions of independent

developers build one version after another

Communities

Broad experimentation

• Encourage experimentation• Need to foster competition• Need for heterogeneity

• Example: InnoCentive.com• Companies look for an

answer to a problem, individuals can develop solution, winner gets $$$

Markets

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The innovators’ motivation drives your decision3

Money

User Need

Signaling and Career

Learning and Skills

Reciprocity

Reputation

Status

Fun and Enjoyment

Identity

Autonomy

Challenge

Extrinsic Motivations Intrinsic Motivations

Markets Communities

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There is no clear advice regarding the business model3

External Innovators

Platform

Customers

Platform

External Innovators

Customers

Platform

External Innovators

Customers

Integrator Platform Product Platform Two-sided Platform

Control

Autonomy

Apple App Store Gore-Tex Facebook Apps

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Some remarks…4

Hybrid models are possible, tooBe flexible, change if necessary

Match the nature of the innovationTailor the solution to your business

This is not about giving up power

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An example from the gaming industry: Nintendo Wii5

So, how do I make this Wii

successful?

Satoru Iwata, CEO Nintendo

What type of innovation?• Blue ocean, groundbreaking• Existing gaming industry

1

What’s the motivation?• Game developers want $$$• Developing what users want

2

What’s the business model?• Licensing (Two-sided platform)• No direct contact with consumer at

game purchase

3

Competitive Market