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Have you ever struggled to explain where you are, get a package delivered to a wrong address, or have a taxi taken you to the wrong address? This is an occurrence in everyone’s daily lives. How do you describe where you are, or how do you explain it when the addresses are unclear? What3Words aligns with your struggles and believes that the addressing system can be, and should be better.

How does it work?

What3Words found that the current addressing system isn’t suitable for everyday needs. Street addresses can be incorrect, ambiguous, or even non-existent. Businesses and homes are located nowhere near a zip code. And a large chunk of the world doesn’t even have an address. What3Words came up with a solution to this problem by dividing the world in a grid of thee square meters, each with its own unique three word address. If you need a package delivered in the slums, you’re looking for your friends at a festival, or you need medical aid in the middle of the Sahara, What3Words can guide you there. With worldwide partners as UNICEF (medical aid), Mercedes (navigation), and Domino’s (off the grid pizza delivery) is What3Words becoming ready to conquer the world. The below video shows what it’s all about.

Business Model

What3Words believes in a better addressing system worldwide, and therefore provides its algorithm through an API to everyone that is willing to use it. However, how does this provide joint profitability? What3Words mainly acts as a service provider, a platform where businesses and non-profit organizations can utilize their API to provide a better service to individuals. Lives can be saved by locating people faster, but also businesses experience an increase in value through this new addressing system. One example is a pilot study at global logistics and transportation company Aramex who tested the system with 100 deliveries in Dubai, comparing both the old system and the 3 word addresses. They found that the deliveries with 3 word addresses were 42% faster and reduced the total distance travelled by 22%, proving the profitability of the system in this segment (What3Words n.d.). However, how is What3Words profiting as their API is up for grasps? Firstly, What3Words basically crowdsources the application of its system, lowering its own innovation costs (Bockstedt et al. 2016). Governments, organizations, individuals, everyone can contribute to the application of 3 word addresses. Secondly, What3Words generates revenue by offering its API for free but charging for high volume usage (Henderson 2017).

The switching costs of the 3 word addressing system are currently influenced by only two alternatives. Individuals either return to their old addressing system, or secondly, switch to regular GPS coordinates. However, does What3Words suffer from these alternatives when its addressing system is already adopted? This system is developed as such to be comprehensive, easy to use, and to fill the gaps that other systems leave. The old addressing systems are incomplete, ambiguous, or even non-existent, and GPS coordinates are difficult to communicate. Once adopted it is expected that the switching costs of this system are high as alternatives cannot live up to the same standard.

When evaluating the institutional arrangements it can be seen that What3Words adopted cleaver restrictions. By providing an open API it can limit the customization possibilities of its technology to such extend that users act within boundaries that not harm the purpose, or the company. Furthermore, What3Words provides flexibilities to organizations by providing personalized pricing mechanisms that never transfer any ownership of the technology. As discussed earlier there is a free tier for low volume use of the API, and a payed tier for high volume usage, but on top of that offers the organization also special arrangements for qualifying non-profit organizations Henderson (2017). The institutional environment, on the other hand, does not has an answer to this system, as there are no restrictions being placed nation – or worldwide yet.

Great stuff! Why not use it?

Saving lives, never missing out on a delivery, and always getting where you want to be. Is this reality, or is this too good to be true? Although many practical implications already have proven its value (e.g. Aramex delivery pilot) and many businesses started leveraging 3 word addresses, there still are some concerns to the applicability of the system. One of the main concerns is that the 3 word addresses only provide you with an horizontal location, but does not specify the height at for example a multi-storey building. Another downside is the randomness of the word combination. Knowing where you are now doesn’t help you in getting somewhere else.

To conclude it seems that What3Words has a system in hand that could truly benefit the world. Those locations that lack reliable addressing systems, possess remote locations, or encounter a natural hazard seem to be well suited, however, the system may not be as applicable to all.

References:

Bockstedt, J., Druehl, C. and Mishra, A. (2016) ‘Heterogeneous Submission Behavior and its Implications for Success in Innovation Contests with Public Submissions’. Production and Operations Management, 25(7): 1157-1176.

Carson S. J., D. T. (1999). Understanding Institutional Designs Within Marketing Value Systems. Journal of Marketing Vol 63, 115-130.

Henderson (2017) ‘ How does what3words create revenue?’ Accessed on 10 March 2018 on https://support.what3words.com/hc/en-us/articles/207065989-How-does-what3words-create-revenue-

What3Words (n.d.) ‘ Simpler, faster, better: 3 word addresses take on Dubai’s street addresses in Aramex delivery challenge’. Accessed on 10 March 2018 on https://what3words.com/partner/aramex-delivery-challenge/

Video:

What3Words (n.d.) ‘About’. Accessed on 10 March 2018 on https://what3words.com/about/.

Innovation tournaments are an important tool of organizations today to tackle important innovation challenges. One of these examples is Netflix, who rewarded $1 million to the winner of their innovation tournament for improved movie recommendations. However, many managers struggle with the question how, and if, to influence the outcomes of these open innovation settings by providing in-process feedback. The study of Wooten & Ulrich (2017) aims to address this managerial challenge by investigating the effects of feedback on the participation and the outcome of innovation tournaments. (Wooten & Ulrich, 2017)

To investigate these effects are six field experiments conducted among two real-life online contest platforms. Each of the six field experiments performs a contest in search for a new company logo, is open to all participants, is unblind (all ideas and feedback are visible to all participants), and allows for multiple entry of participants. In each contest are the participants randomly selected to three different in-process feedback treatments. Consumers received either no feedback, ‘random’ feedback (feedback is not associated to the idea submitted), and direct feedback based on the submission made. The quality of each submitted idea is judged by a panel of consumers that fall within the stated target group. (Wooten & Ulrich, 2017)

One of the results that the researchers found was that contest participation can be boosted with in-process feedback, especially when the feedback is directed. However, the result indicated that this boost was little with respect to engaging new participants and mainly increased the number of entries. This boost in participation can be explained by increased engagement, as participants may feel more connected to the process. (Wooten & Ulrich, 2017)

The other results measured the outcomes of the contests and were evaluated in two ways, either on the quality of the ideas, or the variance in quality among the ideas. In line with Hildebrand, Herrmann & Landwehr (2013) either feedback provided resulted in idea generation that tends to move towards the average, resulting in less variance of quality. In addition, they found that the quality of ideas varied less in their second entry when a first submission was already of high quality. The quality measurement, however, did turned out to be affected by the type of feedback treatment that was used. The directed feedback treatment proved to be beneficial for the next ideas submitted, where random feedback actually resulted in a negative effect for subsequent submissions. This effect was to be expected as Alexy, Criscuolo & Salter (2011) indicated that signalling information (of which feedback can be seen as such) can ensure that incoming ideas are of higher fit, and therefore might be judged as higher quality. (Wooten & Ulrich, 2017)

The question remains what do these result imply for the management community. As indicated earlier are managers struggling how, and if, to influence their innovation contests. This study provides valuable information to these managers on how they can support their specified targets. For example Alexi et al (2011) identified that some organizations use open innovation mainly to increase engagement, but do not focus on the outcomes of it due to the evaluation costs. This study provides valuable information that feedback increases the participation regardless of the feedback that is provided. This would mean that organizations can invest relatively little in providing feedback, as it can be meaningless, and still boost the participation to the contest. On the other hand this study is showing as well that if an organization is willing to invest time and effort, it can increase the quality of ideas by providing actual directed feedback to the ideas. (Wooten & Ulrich, 2017)

Although these results could be beneficial to organizations, manager should be aware of the weaknesses of this study. One of these weaknesses that this study experiences is that it measures solely the effects of daily feedback, and therefore didn’t incorporate different timeframes. Studies in other fields, such as retargeting adds, identified that customers did turn out to be sensitive to timeframes in which a response was received (Moriguchi et al., 2016). Future research should investigate if this applies in the field of innovation contests as well, but until that point should managers be cautious in choosing their feedback timeframes. Furthermore, the star rating feedback can be seen as a too simplistic method of providing feedback. It provides the advantages that results can be easily compared and that there is no ambiguity in the meaning of the feedback. The generalizability, however, is at stake for more technical contest in which the feedback actually is required to be more in-depth to give a sense of direction. Nevertheless, these weaknesses do not hamper the practical implications but should be used as a note of caution. (Wooten & Ulrich, 2017)

References:

Alexy, O., Criscuolo, P., & Salter, A. (2011). No soliciting: strategies for managing unsolicited innovative ideas. California Management Review, 54(3), 116-139.

Hildebrand, C., Häubl, G., Herrmann, A. and Landwehr, J.R. (2013). When social media can be bad for you: Community feedback stifles consumer creativity and reduces satisfaction with self-designed products. Information Systems Research, 24(1), 14-29.

Moriguchi, Takeshi and Xiong, Guiyang and Luo, Xueming (2016). Retargeting Ads for Shopping Cart Recovery: Evidence from Online Field Experiments.

Wooten, J. O., & Ulrich, K. T. (2017). Idea generation and the role of feedback: Evidence from field experiments with innovation tournaments. Production and Operations Management, 26(1), 80-99.

Image retrieved from:

Markets insider (2017). Netflix lost the biggest Emmy to Hulu – but its customers couldn’t care less (NFLX), Retrieved fromhttp://markets.businessinsider.com/news/stocks/netflix-stock-price-emmy-2017-lost-to-hulu-but-its-customers-couldnt-care-less-2017-9-1002379405, 15-02-2018.