Dynamics of Open Innovation
7.4 Applying OCE Model .1 Who Can Use OCE Model?
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turn into producers of apps and then go on to consume more apps. Namely, it is a positive feedback loop in which economies of network coincide with economies of scale on both the demand and supply sides. Apple’s iTunes, iBook, and Passbook also have such features of an open business model platform. In the case where firms reach a dominant design through evolution by use of an open business model plat- form, they have a very solid evolutionary quality even though this may not cause rapid growth like that based on economies of scale (based on supply). Its positive feedback loop is made relatively stable relatively by economies of network (demand), and considerable self-supply occurs simultaneously as some consumers become producers as well. In the positive feedback loop of an open business model platform, consumers turn into suppliers and supply diverse products that are not comparable with those produced due to economies of scope. Consequently, the existence of the long tail phenomenon means that the aggregated quantity of diverse products supplied is greater than that provided by large-scale suppliers. Examples include sales of various T-shirts by Threadless, various book sales by Amazon, and sales of diverse music products by iTunes.
Activation of SNS in forms such as YouTube, Facebook, Twitter, and KakaoTalk activates various new types of positive feedback loops, on both the supply and demand sides. As a typical example, the song “Gangnam Style” by “Psy” collected a massive amount of views through YouTube. Consumers of the song turn into “pro- ducers” who put copies of the music video on their own websites. Through the music video, the song rode on a positive feedback loop. In the end, Psy’s music video broke the 500 million mark on YouTube in just 91 days, and the song was ranked second on the US Billboard chart. Through activation of SNS, there is rap- idly increasing potential for creative open innovation by individuals or firms to be powered by positive feedback loops such that they reach a position of dominant design in a very short time.
7.4 Applying OCE Model
In addition to firms, governments or social entrepreneurs can use the OCE model when they choose or build up government policy or social services because govern- ment policy or social services are a kind of open connection between technology or knowledge, and society, which is an expansion of the market. From the OCE model perspective, policy agents or social entrepreneurs can forecast or analyze the effects of their policies and social products from a microperspective. The OCE model is thus useful for government and social entrepreneurs together.
7.4.2 How Can We Use the OCE Model?
From concept model building to concrete reality simulation, the OCE model can be used diversely.
First, when any firm builds a new innovation strategy, it can use the OCE model as a concept modeling tool for its new innovation strategy.
Second, consulting groups can make several advanced OCE models that can anticipate the results of choosing different open innovation strategies. For this, sev- eral simulation methods such as system dynamics or agent-based modeling can be used.
Third, when researchers or agents evaluate any open innovation strategy or pol- icy after the event, they can use OCE model as an evaluation or analyzing tool. For this, they can use the OCE model from the low level as a thinking experiment tool, through the middle level as a system dynamics model, to the high level as agent- based modeling.
Research Question
1. Consider any open innovation strategy, and apply it the OCE model as a concept model or thinking experiment.
2. Select any open innovation case and apply and analyze it with the OCE Model.
3. Build your own OCE simulation model for your firm or your future start-up, and apply it.
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