Tuesday, June 07, 2005

Imploding Suns and Open Innovation

For the very few who haven't heard already ;) the eBay Developers Program won the 2005 CODIE for Corporate Achievement this past month(http://www.siia.com/codies/2005/winners.asp). They don't actually tell you exactly why you won (or maybe they just didn't tell me). If you read the siia site, the Corporate Achievement award goes to"a business or corporation that enhances the overall development of the software and information industry. Nominees must illustrate how the company’s product or service has changed the industry’s operations, perspective or business models".

Since I'm not in the know as to exactly the reason we won the 2005 CODIE, let me hazard a guess. Something the eBay Developer Program has championed for the past 3 years is the concept of open innovation. I'm not referring to open source specifically (though we just announced our open source efforts this past week- check http://www.developer.ebay.com/programs/marketing/codebase/). Rather the concept of open innovation relies on building a large, growing network of entrepreneurial, hungry and single-minded developers. This requires putting out as wide a base of functionality and utility to your platform as possible, preferably by building to a common standard of APIs. When this network reaches a certain threshold (especially when coupled with significant financial incentives), innovation is relentlessly pursued both within the strategic scope of said platform and well outside of it (I'd argue the more outside the better from an innovation standpoint).

With our intention to define eBay as THE transactional platform of choice, eBay has done a good job of pursuing open innovation over the past few years via the Developers Program. Good enough to support a wide range of 3rd-party applications (currently over 1,100) covering buying, selling, searching, data, wireless and market intelligence. Good enough to win a CODIE for corporate achievement as well. Great example is www.bonfiremedia.com. We recently closed and announced an agreement with Bonfire to market and support their WAP and Java/Brew application under the eBay Wireless brand (thanks Alex and Rich!). Great example of eBay working with outside innovation and harvesting it to the benefit of eBay, the developer and our broader community.

That said, it's interesting to look closely at the 'dark' side of innovation. Well known companies like Digital, Apple, HP and others pursued a different path which I'll describe as 'owned innovation'. I define owned innovation where R&D and IP is in-house or acquired. These are the companies reknown for their incredible engineering, patents and bleeding-edge technology. (Microsoft for example isn't this type of company... While they have great engineers, their marketing and business acumen won over better technology. Frankly, as a platform provider for PCs, hand-helds and game boxes, MS drives more open innovation than owned.)

What marks owned innovation vs open is that ultimately, open always wins. That's not an opinion, its simple reason. No matter how many geniuses you hire on your team, there's always +1MM more geniuses out in the market coming up with brighter ideas. Paradigm shifting innovation is generated from the masses, not from corporate R&D... and paradigm shifting innovation tends to cut owned innovation at the knees (i know im rehashing the innovators dilemma, bear with me) The greatest example of this is Sun. They OWNED the market for high-end internet-ready servers. They had the best engineers in the valley. They tried to own the market as a result, only to be completely undercut by lowly Intel-based machines. Intel-powered machines inexpensive enough to serve the interests of the broader community, a community hell-bent on finding a cheaper solution to a problem Sun had thought already solved. Now with almost half of their revenues gone from Sun's heyday (all of 4 years ago), Sun is embracing open innovation (and open source) with a vengeance.

So for companies who are heavily resourced with the "smartest" engineers and staff, here's a shot across your bow. Be humble, limit the hubris and open your platform as widely as possible. Build an enduring community of developers to support your goals. And identify and grow those developers and applications that don't necessarily support your goals today. Ultimately these are the same guys who could throw a wrench in your plans if not supported or open entire new markets if you do...


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