Companies Should Never Close The Door To User Innovation

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You may have heard the claim that the product business model is broken. Whether that’s accurate or not, according to MIT Professor and IT consultant Marshall Van Alstyne, Internet companies can learn quite a bit from the failures of particular product companies.

’In four short years, BlackBerry has gone from half of the market to 2 percent. That’s hard to do,’ Van Alstyne said.

Van Alstyne, who has consulted for Microsoft and Cisco, pointed out other companies who ’got it wrong’ by ignoring the ’network effect’ that grows business.

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’Apple was too proprietary and too closed in the 1980s and '90s, they got crushed. They were down to less than 4 percent in the desktop market space,’ Van Alstyne said.

He was referring to Microsoft opening its ecosystem to encourage innovation among developers. Van Alstyne said whether a company is product-focused or platform/services-focused, closing the door to user innovation is a big mistake.

’This is endemic in the Internet market space,’ he said.

’The critical element of network effect is that the value created by users is created for other users. This creates a feedback so you get more users in the system creating value for each other -- it tends to spiral,’ he said.

In the growing peer-to-peer market, this type of operation is only natural. Uber and Airbnb have based their entire company organization around it. But the same principles can be applied to any platform/Internet services solution provider.