Open Innovation is a new way of sourcing better idea and solutions from out of company. Some companies like P&G saves their R&D cost dramatically every year by adapting open innovation. In fact, Mobile AppStore is based on open innovation by itself because store operators like Apple just provide environment and applications are developed by outer developers. But when we look into this situation, developing application itself requires another sort of open innovation because developing application is usually complex works with high cost.

The Open Innovation Model for Mobile AppStores can be designed by two factors. One is the objective of Open Innovation in the viewpoint of AppStores or application publishers. Those are application / idea sourcing for direct benefit to the company and community building for indirect benefit in the long term perspective. Another is the value for developers like lowering opportunity cost such as developing and maintenance cost, and building team to enable sharing the risk and revenue when making heavily invested commercial applications.

AppStore lowered the distribution cost and set-up cost to developers, but there remains developing cost and opportunity cost to be bounded to specific platform. So, AppStore operator and platform providers should give some incentive to motivate the developers. Developers want to build a strong team with project by project and want to lower the opportunity cost by revenue sharing model with collaboration activity. Developers as a small entities want to mitigate the overall cost and risk, and to maximize to generate the revenue when developing application for specific platform and AppStores. In the perspective of Open Innovation, that is another problem solver to meet the market’s unmet needs.

1) Outsource: Developers can minimize initial cost to make applications when AppStore or publisher buy the application with expense of dedication.

2) Resource Align: If the main constraint of developing application is not just money, AppStore or publisher can share or provide resource of their own to the developers.

3) Fund Matching: Developing application is a project itself. So project financing can be raised to assist building applications and sharing the revenue after sales.

4) Team Matching: AppStores did not invoke this type of team building activity openly, but they support many developer communities to stimulate the team building outside.

About the profit model, direct profit is a profit made directly from the open innovation in AppStores. They are App Sale Revenue, Transaction Fee, Matching Commission and H/S (Handset) Sales Revenue.

In-direct profit is a profit mad indirectly from the open innovation in AppStores. They are Data Revenue, Platform Fee, Advertising Revenue and Market Recognition.

When we applied the three major players to Open Innovation Model of AppStore, there are first and second wave of approach in South Korea. The first wave is to establish the education center which contributes the growth of developers and service designers in the viewpoint of ecosystem. The second wave is to inject a fund to the start-ups and support building the strong team for individual developers.

The strong intention to grow the mobile ecosystem in South Korea comes from two facts. One is the late recognition triggered by Apple iPhone that South Korea is not the world best mobile contents company anymore. The Korean government and major network operators reviewed previous closed mobile ecosystem controlled by network operator and try to build the new ecosystem as an alternative. Another is that South Korea’s local market is not large enough to compete with global payers like Apple, so to induce developers’ mind and lessen their opportunity cost to choose AppStore in Korea rather than global AppStores are important.

The profit model for Open Innovation mainly resides on the App Sales and Market Recognition. But it has a potential to extend to the other profit models easily. The market recognition is somewhat driven by the Korean Government, but AppStore operators have to compete with relatively competitive advantage to others. The mind share of developers is essential to do an AppStore business. So market recognition from developers is very important.

AppStore operators and Korea government eagerly try to grow the mobile ecosystem in South Korea. At first, AppStore operators make content providers to develop application to their AppStores with the expense of development fund. No company can inject money forever to the AppStore business, so making the mobile ecosystem that can circulate between AppStore operators and developers is critical.

Now AppStore operators support mobile ecosystem with education center and matching hub for fund and team. But from the viewpoint of developers, it is a still problem of lock-in whether loose or tight. So to give persistent incentives to the developers, the AppStore operators should generate their own innovation to the speed of global competitors.

That is the matter of Inside-Out Open Innovation and SK Telecom started to provide its own service platform APIs to developers. But just opening the service platform is not enough because what to open and how much to open are always critical problem to solve when opening the platform. It has to open its result of innovation. That is the key to the community related with AppStores.

In South Korea, major AppStore operators move onto make another AppStore, K-WAC (Korea Wholesale App Community). That is the Korean localized version of WAC, led by GSMA. In the bird’s eye view, K-WAC can act as a Matching Hub of Open Innovation Model because developers, designers and funders can meet in that community regardless which AppStore to enter. But it is possible K-WAC cannot have position of Matching Hub, but web application sourcing sites. To grow the true mobile ecosystem, Matching Hub like function should exists in the market rather than K-WAC as a common platform test-bed.

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