Open Innovation: Yahoo! and Netflix

Yahoo! Yahoo! has been practicing for some time now what Henry Chesbrough calls Open Innovation and Eric Von Hippel refers to as democratizing innovation. Following the Open Innovation paradigm, Yahoo! acquires companies that have innovative products and services that can improve Yahoo! services offering (examples of this are both Flickr and Jumpcut) instead of developing all the products internally. Moreover, Yahoo! launched some time ago Yahoo! Developer Network, which allows any developer to use Yahoo! contents and services to produce new applications. Additionally, not only has Yahoo! announced that they will open the source code of Yahoo! Mail before the end of the year, but they have also held the Yahoo! Hack Day organized by Yahoo! Developer Network. During this event more than 400 people were invited to visit their premises and 54 hacker teams entered a 24-hour competition to develop applications based on Yahoo! services and contents (further information regarding this event can be found in blogs such as Techcrunch, Skype Journal or GigaOM).

NetflixAnother example of Open Innovation is online DVD rent service Netflix which will award $1 million to whoever manages to improve the accuracy of their film recommendation system CinematchSM at least 10%. This is also another example of Open Innovation, because they are looking for the best solution they can get, no matter where it comes from. Moreover, and following the Open Innovation paradigm, they are not asking for an exclusive license of the solution, but instead they want a non-exclusive license and they encourage the winners to to commercialize the product, selling licenses to other companies. Further details regarding this contest can be found in the web page Netflix Prize.

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