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Amazon & Open Services Innovation

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Dr. Henry Chesbrough is the Program Director for the UC Berkeley Executive Education program, Corporate Business Model Innovation. He is a professor at the Haas Business School and executive director for The Center for Open Innovation. An internationally acclaimed author, Dr. Chesbrough's open innovation concept was first introduced in his award-winning book, “Open Innovation: The New Imperative for Creating and Profiting from Technology.” Chesbrough spoke with ExecEd about Amazon and open services innovation.



ExecEd: How about Amazon? How would that be a good example of this?

Henry Chesbrough: Amazon does at least two wonderful things that are relevant to services innovation and open service innovation. One is if you go on the Amazon site and shop as I do, as I suspect everybody listening to this also does, you'll see there's lots of input and lots of feedback, not just from Amazon, not just from the manufacturer of what you're buying, but from other customers that have used it or other commentators who have reviewed it. So as a consumer, you get a lot of information, but Amazon doesn't have to pay for that. They get it essentially for free. We get more information; we make better purchase choice without having it cost Amazon anything. So that's very cool.

The other thing Amazon does that has become a new growth and more profit for the company is the same infrastructure they use to process all these transactions that they handle, they've bundled that and made that a service, Amazon Web Services. Like the GE engine where you can get power by the hour, in Amazon Web Services, you only pay for the server capacity that you use. The rest is on Amazon. You only pay as a consumer of that for what you need yourself. This has been a real growth accelerator for Amazon. Again, it's a great value for companies because you only pay for what you need, and everybody wins, and it shows how Amazon is staying a step ahead of all the competitors in online retailing.