Will Zoom’s success continue after the pandemic?

23

September

2020

4/5 (1)

The outbreak of the COVID-19 pandemic in March 2020 has led to incredible challenges for the global economy, public health care systems and societies as a whole. While the crisis has caused many globally operating firms such as Virgin Atlantic or Hertz to file for bankruptcy (Clifford & Wahba 2020), not all companies have in fact suffered from the pandemic. One astonishing example is the video conferencing company Zoom, that has experienced an unprecedented growth within the last two quarters (Evans 2020). Ironically, in an interview back in 2017, Zoom’s CEO Eric Yuan mentioned that he did not want the firm to grow too fast but rather focus on increasing customer satisfaction (Tonneson 2020). However, due to the massive shift from employee’s physical to virtual presence, Zoom did not have the time to slowly grow its business. For instance, Zoom’s daily users skyrocketed from just 10 million in December 2019 to 200 million in March 2020 (Evans 2020). Additionally, the year-to-year revenue for the first quarter of 2020 increased by 169% (Beauford 2020) – growth figures most other companies can only dream about. So, what exactly is it that Zoom does better than its competition?

 

Success factors of Zoom

When analyzing Zoom’s video conferencing service, several competitive advantages can be identified. First of all, Zoom allowed its free users to host 40-minute video calls which could be easily restarted after the time limit (Tonneson 2020). In order to further benefit from a growing user base in the long-term, Zoom later lifted the time limit during the pandemic (Hern 2020). At the beginning of the outbreak, Zoom struggled with scaling and security (Beauford 2020). Security lapses allowed malicious users to join a meeting and show explicit images which quickly raised privacy concerns (Evans 2020). However, Zoom demonstrated an incredibly fast market respondance and soon after launched an adjusted version with increased security (Beauford 2020). Besides free services and security, Zoom dominates competitors with respect to video quality and functionality (Tonneson 2020). For example, Zoom allows larger meetings, customizable backgrounds and a ‘breakout room’ option to split participants into smaller groups (Tonneson 2020). From my own experience studying at RSM, the latter function is particularly valuable when discussing case studies in smaller groups during lectures.

 

Looking into the future

One important question remains: Will the rapid success of Zoom continue even after the pandemic? According to several analysts, Zoom’s momentum will remain even after lifted lockdown regulations, because the service has established itself as the video conferencing standard in many companies (Haider & Rasay 2020). Moreover, many companies find that their employees prefer to work more from home (Hern 2020). As long as high levels of productivity are ensured, employers could be incentivized to allow their employees to work from home, as overhead cost (e.g. rent and utilities) will be reduced (Haider & Rasay 2020). Hence, if the trend of working from home will continue even after the pandemic, Zoom is in a pole position to grow even further. What is your forecast? Do you think that Zoom is able to build on its past success?

 

References:

Clifford, L., Wahba, P. 2020, ‘A running list of companies that have filed for bankruptcy during the coronavirus pandemic’, Fortune, viewed 16 September 2020, <https://fortune.com/2020/08/04/companies-filing-bankruptcy-2020-due-to-covid-list-filed-chapter-11-coronavirus-pandemic/>.

Evans, D. 2020, ‘How Zoom became so popular during social distancing’, CNBC, viewed 16 September 2020, <https://www.cnbc.com/2020/04/03/how-zoom-rose-to-the-top-during-the-coronavirus-pandemic.html>.

Tonneson, S. 2020, ‘Zoom Becomes Video Conferencing Leader During COVID-19. Why?’, ZoomInfo, viewed 16 September 2020, <https://blog.zoominfo.com/zoom-video-growth-coronavirus/>.

Beauford, M. 2020, ‘ COVID-19’s Transformed Zoom into a Powerhouse’, UC Today, viewed 16 September 2020, <https://www.uctoday.com/collaboration/video-conferencing/covid-19s-transformed-zoom-into-a-powerhouse/>.

Haider, A., Rasay, S. J. 2020, ‘Zoom’s massive growth amid COVID-19 set to continue after pandemic, analysts say’, S&P Global, viewed 16 September 2020,  <https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/zoom-s-massive-growth-amid-covid-19-set-to-continue-after-pandemic-analysts-say-58907516>.

Hern, A. 2020, ‘Covid19 could cause permanent shift towards home working’, The Guardian, viewed 16 September 2020, <http://www.miamidadetpo.org/library/2020-03-13-uk-covid19-could-cause-permanent-shift-towards-home-working.pdf>.

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How does Open Innovation help companies to innovate?

12

September

2020

5/5 (1)

Since its foundation in 2010, the collaborative platform OpenIdeo has developed into one of the world’s largest Open Innovation spaces with close to 24,000 ideas generated from participants located in more than 195 countries (OpenIdeo 2020). How does the platform essentially work and how does it create and capture value?

 

OpenIdeo’s business model

OpenIdeo creates value by connecting firms seeking new ideas to their problems with a large number of innovators, who are looking to create change and partner up with sponsors that have the resources and capabilities to turn their concepts into reality.

Utilizing the design thinking methodology, creative minds respond to a challenge or question raised by a sponsor organization (OpenIdeo 2020). The platform then captures value by receiving financial support from the sponsors participating in the respective challenge.

According to Sawhney, Prandelli and Verona (2003) who classified virtual innovation intermediaries, OpenIdeo is an Innovation Marketplace Operator, because it connects sellers of intellectual property with potential buyers. When looking at OpenIdeo’s business model, the question remains why companies with often large R&D departments and expenditures are seeking to collaborate with individuals outside their firm boundaries.

 

The concept of Open Innovation

Henry Chesbrough (2003) was one of the first researchers to discover a fundamental shift away from the Closed Innovation model in which a company generates, develops and commercializes ideas inside the boundaries of its organisation.

The rationale for this trend is that companies started realising that a large proportion of desirable knowledge lied outside their company and that external R&D can create significant value if combined with internal ideas (Chesbrough 2003). This concept is referred to as Open Innovation.

West and Sims (2016) have elaborated on two types of collaboration outside firm boundaries, specifically communities and crowds. Virtual communities, that are commonly found due to huge technological advancements in the past can be defined as consolidation of individuals or organisations that unites a common goal regardless of geographic attributes (West & Sims 2016). In such communities, governance is typically informal, and the innovators primarily have cooperative relationships among one another (Boudreau & Lakhani 2009).

At OpenIdeo, this form of Open Innovation is found in the so-called “Alliances”, where innovators can form partnerships and work towards a common objective without a third-party company being involved in the interactions. Besides communities, OpenIdeo also engages crowds via crowdsourcing, a process in which an institution or company reaches out to a group of individuals and proposes the voluntary undertaking of a task (West & Sims 2016).

 

Remaining thoughts

Although the concept of Open Innovation is not new, many companies still appear to be reserved when it comes to sharing their personal challenges with individuals outside the firm.

However, I believe that stepping forward and sharing your business needs with bright talent can yield tremendous potential for your firm.

First and foremost, it is impossible to hire all of the world’s smartest minds at your company. Additionally, when described on a high-level, a business challenge can be formulated in a way that no sensitive information is transmitted to competitors. With respect to R&D expenditures, sponsoring a challenge on OpenIdeo implies much lower R&D cost per headcount and should be considered before increasing your internal human resources.

What is your take on this? Do the potential benefits from Open Innovation justify the risks of exposing your intellectual property and inflating your R&D costs? I am looking forward to your thoughts.

 

References

 

Boudreau, K., Lakhani, K. 2013, ‘Using the Crowd as an Innovation Partner’, Harvard Business Review, pp. 62-69.

Chesbrough, H.W. 2003, ‘The Era of Open Innovation’, MIT Sloan Management Review, pp.35-41.

OpenIdeo 2020, Homepage, viewed 12 September 2020, <https://www.openideo.com/>.

Sawhney, M., Prandelli, E., Verona, G. 2003, ‘The Power of Innomediation’, MIT Sloan Management Review, pp.77-82.

West, J., Sims, J. 2016, ‘How Firms Leverage Crowds and Communities for Open Innovation’, Forthcoming in Allan Afuah, Christopher L. Tucci and Gianluigi Viscusi (eds), Creating and Capturing Value through Crowdsourcing, Available at SSRN: https://ssrn.com/abstract=2823279.

 

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