Open vs. Closed Innovation: A Model of Discovery and Divergence

Esteve  Almirall; Ramon  Casadesus-Masanell

Article | Academy of Management Review | January 2010

Open vs. Closed Innovation: A Model of Discovery and Divergence

by Esteve Almirall and Ramon Casadesus-Masanell

Abstract

When is open innovation superior to closed innovation? Through a formal simulation model, we show that an open approach to innovation allows the firm to discover combinations of product features that would be hard to envision under integration. However, when partners have divergent goals, open innovation restricts the firm's ability to establish the product's technological trajectory. The resolution of the trade-off between the benefits of discovery and the costs of divergence determines the best approach to innovation.

Keywords: Innovation and Invention; Partners and Partnerships; Goals and Objectives; Cost vs Benefits; Integration; Product;

Format: Print

21 pages

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Citation:

Almirall, Esteve, and Ramon Casadesus-Masanell. "Open vs. Closed Innovation: A Model of Discovery and Divergence." Academy of Management Review 35, no. 1 (January 2010): 27–47.

We examine two episodes of strategic interaction in the U.K. betting industry: (i) Betfair (an entrant multi-sided platform or MSP) vs. Flutter (also an MSP), and (ii) Betfair vs. traditional bookmakers. We find that although Betfair was an underfunded second mover in the betting exchange space, it was able to attract punters at a much faster rate than the better-funded first mover, Flutter. Moreover, while Betfair and traditional bookmakers competed aggressively for market share, they also developed a highly complementary relationship that favored all parties. We discuss implications for research in the economics and management of MSPs. Specifically, we argue that the literature would benefit from work that endogenizes platform design and that considers the possible competitive and cooperative interactions between the business models of traditional incumbents and those of potential innovative MSP entrants.

Case | HBS Case Collection | November 2018

Sportradar (A): From Data to Storytelling

Ramon Casadesus-Masanell, Karen Elterman and Oliver Gassmann

In 2013, the Swiss sports data company Sportradar debated whether to expand from its core business of data provision to bookmakers into sports media products. Sports data was becoming a commodity, and in the future, sports leagues might reduce their dependence on third-party data feeds such as Sportradar’s, prefering to develop data services in-house. Thus, CEO Carsten Koerl believed the company needed to branch into sports media, not just supplying data to companies, but finding ways to tell stories about that data. However, Sportradar's core business was thriving, whereas a recent attempt to branch out into video player tracking systems had proved a costly failure. The team weighed the pros and cons of various media ventures, including online sports betting minigames, a social media site, and streaming of sports content.

Keywords: sports data; data; sport; Sportradar; football; soccer; gambling; betting; betting markets; statistics; odds; live data; bookmakers; Betradar; visualization; integrity; Monitoring; gaming; streaming; 2013; St.Gallen; algorithm; mathematical modeling; Carsten Koerl; Betandwin; Bwin; wagering; probability; Sports; Data and Data Sets; Mathematical Methods; Games, Gaming, and Gambling; Transition; Strategy; Media; Sports Industry; Technology Industry; Information Technology Industry; Media and Broadcasting Industry; Europe; Switzerland; Asia; Austria; Germany; England;

Citation:

Casadesus-Masanell, Ramon, Karen Elterman, and Oliver Gassmann. "Sportradar (A): From Data to Storytelling." Harvard Business School Case 719-429, November 2018. View Details

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Open vs. Closed Innovation: A Model of Discovery and Divergence

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