Blog Allagi Open Innovation

by Henry Chesbrough

Question by Jaime Scatena (Camargo Correa)

The Real Estate market, due to its very specific characteristics, is a very hard environment for the proposal of product innovation initiatives. I am not saying that it is a impossible thing! I would like to ask for suggestions of Open Innovation models that could be implemented in this segment. 

My answer

It could be said that we have had too much open innovation in this segment! Securitization of mortgages enabled bundling and remarketing of them, backed by analyst ratings of investment quality that proved too optimistic, and insured by companies who didn’t have nearly enough reserves to support the mortgages when they got into trouble. So some caution is in order here. We will need extensive regulation to return these markets to normal. Having said that, there are some innovative business models. Some are trying to level the information playing field between brokers, buyers and sellers, so that everyone has good information on recent transactions and valuation. That will make for more efficient markets over time. Some are experimenting with shared appreciation mortgages, and reverse mortgages, which are useful solutions for certain groups of consumers (though not for others). In the commercial side, real estate investment trusts offer a way for a company to avoid having to own and manage its own real estate.