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Sunday, May 13, 2007

Virtual Communities & Successful Disruptive Innovation

Defying conventions and set procedures isn’t a job and making unconventional initiatives to be demonstrably successful is no easy job. Google is known for its voluntary program. eBay has constituted a disruptive innovation team. Its leader Mancini and his team are going after their task quite admirably, judging by what seems to have been achieved. As Mancini sees it, his job is to identify "things that take the company forward the next 10, 20 years." He knows such brainstorms can come from outside as well as inside company walls-which is why he oversees the eBay Developers Program. The earlier approach is to make auctions easier and more profitable for eBay's customers, and more people will bid, buy, and sell-meaning lots more revenue for eBay, which takes a cut from every auction.

The outcome measures are quite significant indeed:
Traditionally , eBay used to charge developers, Mancini’s team got rid of ed those fees to the developer. Since eBay got rid of the fees, the number of third-party developers, just 300 back then, has soared more than a hundredfold. That indie force has created 4,200 programs, far more than eBay could have built itself. And the apps accounted for about a quarter of eBay's 2.4 billion listings last year. This means 45,000 software developers are thinking of ways to make it easier to use eBay - that's nearly four times the number of actual employees and a lot more brainpower applied to the challenge of fueling eBay's growth. The developers are not doing some reporting or enhancement functionalities. Among other things, their tools adjust sellers' pricing, manage inventory, and tailor eBay to every imaginable niche market.
eBay undertakes responsibility to help the add-ons reach its community and actively promotes the products and leverages the virtual community to steer creative disruption into areas that eBay is most eager to explore, such as social networking. What a powerful example of showcasing success by going against the tradition and developing far better solution through purposeful collaboration – often, a commercial agreement brings all these together .
Geoffrey Moore recently wrote "The more established your company, the less likely it is a type for you to specialize in. Alternatives include application innovation, product innovation, platform innovation, line extension innovation, design innovation, marketing innovation, experiential innovation, value engineering innovation, integration innovation, process innovation, value migration innovation, and acquisition innovation. This last one, in particular, is usually an established enterprise's best bet for dealing with disruption". I do think that there are some pointers available here for Yahoo in it’s quest to change the rule of the game to compete against Google. Sharad,(whom I met with the US last week in the US) taking over as the CEO of Yahoo’s emerging markets team clearly has an enviable and a challenging job ahead. There’s a powerful lesson for open source friends as well here.

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