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BEYOND PRICING DECISIONS:

PREPARED FOR: Open And User Innovation Workshop, Harvard. BUSINESS MODEL INNOVATION IN THE TWO SIDED MARKET OF AN OPEN INNOVATION INTERMEDIARY. Professor Dr. Frank Piller Dr. Dirk Lüttgens Andy Zynga. BEYOND PRICING DECISIONS:. 07.24.2014. WHY THIS TOPIC?.

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BEYOND PRICING DECISIONS:

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  1. PREPARED FOR: Open And User Innovation Workshop, Harvard BUSINESS MODEL INNOVATION IN THE TWO SIDED MARKET OF AN OPEN INNOVATION INTERMEDIARY Professor Dr. Frank PillerDr. Dirk LüttgensAndy Zynga BEYOND PRICING DECISIONS: 07.24.2014

  2. WHY THIS TOPIC? • The market for Intermediaries has become very competitive globally, forcing the established players to “reinvent” themselves • Current literature on internal functioning of Intermediaries is light1, and Broadcast Search2 is looked at as a “black box” • OI Intermediaries operate in two-sided markets3, and literature sees pricing as the primary variable for business model innovation4,5 • This essay is an opportunity to open the “black box” of Intermediaries and show how service quality is a MAJOR variable for success • 1Howells, J., Intermediation and the role of intermediaries in innovation. Research Policy Journal, 35: 715-728, 2006 • 2Jeppesen, L.B., Lakhani, K.R., Marginality and problem solving effectiveness in broadcast search. Organization Science, 21:5, 1016-1033, 2010 • 3Holzmann, T., Sailera, K., Katzy, B.R., Matchmaking as multi-sided market for open innovation. Technology Analysis & Strategic Management, 26:6, 601-615, 2014 • 4Eisenmann, T., Parker, G., Van Alstyne, M.W., Strategies for two-sided markets. Harvard Business Review, 92-101, October 2006 • 5Kouris, I., Kleer, R., Business models in two-sided markets: an assessment of strategies for app platforms. International Conference on Mobile Business. Paper 22. http://aisel.aisnet.org/icmb2012/22. 2012

  3. THE RESEARCH QUESTION How do business model changes impact the success of different market sides of an open innovation intermediary that operates in a two sided market?

  4. RESEARCH IMPLICATIONS • Two Sided Market Success a function of Price AND service quality / process • “Success” with Broadcast Search influenced by changes INSIDE the Intermediary – should not be seen as static!

  5. THE TWO SIDED MARKET OF AN OI INTERMEDIARY Adapted from: Piller, F.T., From technology market places to problem places. Quebec Seeks Solutions. Quebec City, Canada, December 14, 2010

  6. NINESIGMA IN TWO-SIDED MARKET Proposal Proposal Innovation Seekers (Clients) NineSigma OI Global Innovation Community Contract RFP Transfer Agreement (IP) $ $ • Client contract fees changed • Project selection step introduced • Solution Provider evaluation introduced

  7. EVOLUTION OF THE TECHNOLOGY SEARCH PROCESS AT NINESIGMA 2000 2005 2006-present

  8. DATA EXTRACTION & ANALYSIS OVERVIEW

  9. TREND IN TRANSACTION FEE VOLUME VS OVERALL REVENUE

  10. INDICATIVE EFFECT OF PROJECT SELECTION STEP OF ONE CLIENT Introduced project selection

  11. Increase in average number of proposals per search INTRODUCTION OF PROJECT SELECTION

  12. SOLUTION PROVIDER EVALUATION SUPPORT PROCESS

  13. EFFECT OF SOLUTION PROVIDER EVALUATION STEP ON PROJECT SUCCESS AS ONE CLIENT Introduced evaluation support

  14. BUSINESS MODEL CHANGES & IMPACT ON ALL SIDES

  15. RESULTS HIGHLIGHTS

  16. LEARNINGS • Service/Process changes are relevant to both research on two-sided markets as well as success with Broadcast Search. • OI Intermediaries are not static, due to pressures both external AND internal they tend to evolve, and with them the entire business model. • Findings may not be representative for other OI Intermediaries, especially for those who do not practice Broadcast Search.

  17. KEY REFERENCES • Boudreau, K. J., Lakhani K. R., How to manage outside innovation. MIT Sloan Management Review, 50: 69-76, 2009 • Chesbrough, H.W. A better way to innovate. Harvard Business Review, July 2003 • Chesbrough, H.W., Open Innovation: The New Imperative for Creating and Profiting from Technology. Harvard Business School Press, 2003 • Eisenmann, T., Parker, G., Van Alstyne, M.W., Strategies for two-sided markets. Harvard Business Review, 92-101, October 2006 • Jeppesen, L.B., Lakhani, K.R., Marginality and problem solving effectiveness in broadcast search. Organization Science, 21:5, 1016-1033, 2010

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