Opportunities and Challenges of Innovation Ecosystems
We recently had the pleasure of speaking with Greg Bernarda about ways in which companies can act in an ecosystem to achieve innovation. Greg is an advisor, speaker, and strategy & innovation consultant. He is also the co-author of the best-selling book: “Value Proposition Design”.
Here’s a summary of what we learned during the interview.
What we mean by ecosystems
Ecosystems surround us in everyday life. Think about nature, where plants and animals cooperate to preserve an environment with thriving life. Ecosystem thinking shapes the way we build villages and cities. In business, ecosystems emerge from the collaboration among diverse companies who provide an innovative product or service.
Companies can innovate at three levels: 1) product; 2) business model; 3) ecosystem. The ecosystem-level does not only require changing the product and the company, but also the sector as a whole. It is an act of leadership at the systemic level.
Why are ecosystems relevant to business?
We live in an increasingly digitized and interconnected world. Companies can no longer innovate along predefined verticals. A systems approach enables the identification of new ways to create value for existing and new customers. For this reason, the question of how to create new ecosystems or how to plug into an ecosystem is more and more relevant.
How to design your ecosystem
Greg walked us through several inspiring examples of companies who adopted an ecosystem mindset to become leading innovators in their sector. The examples illuminate a series of design principles guiding the creation of new ecosystems.
Think like a mayor
Ecosystem leaders need to abandon a CEO mindset in favor of a mayor mindset. Thinking like a mayor means embracing bigger causes and taking on responsibilities that do not usually fall under a CEO’s responsibility area. Among mayors’ responsibilities, we see:
- Designing for performance of the entire ecosystem;
- Taking care/ Building new infrastructure;
- Helping other stakeholders transition into the new ecosystem;
- Be up for delayed gratification, it takes time to build an ecosystem and to reap the rewards.
The role of mayor can be taken by one leader, or it can be shared among several individuals and organizations. In the case of the Chinese e-commerce platform Taobao, Jack Ma clearly acted as the ecosystem leader, orchestrating resources and creating initiatives that would foster the participation of complementary actors into the ecosystem. Collaborations on sensitive topics, such as data management, usually see multi-party governance across corporates, academia, and governments.
Provide a compelling vision
Having a strong guiding vision is a powerful way to trigger the mind-shift from CEO to mayor. A compelling vision is often tied to the pursuit of a societal mission. Take the example of Elon Musk, his goal of an electric economy provided a framework for the creation of a new ecosystem. The Tesla car was only a small piece of this ecosystem, but it provided an incentive for other players, such as Daimler and Panasonic, to join the mission. Most importantly, the vision needs to provide enough evidence that, if realized, everyone will benefit.
Set the boundaries of your ecosystem
Not everyone needs to be part of each ecosystem. Ecosystem leaders need to carefully evaluate where to set boundaries of the ecosystem. To begin with, ecosystem players need to be aligned with the societal vision promoted by the ecosystem. Besides alignment with the vision, leaders need to assess the actual willingness, readiness, and capability of embracing the ecosystem strategy in full. Interestingly, the best ecosystem players may not be well-known, established organizations, but newer, more agile players that can embrace a new strategic horizon in a shorter time span.
Take a step-based approach
While ecosystem leaders may be driven by a strong motivation, the development of a new ecosystem is a slow process. Therefore, it is important that they support potential ecosystem players in making the transition to join the ecosystem. There are three ways in which ecosystem leaders can offer such support:
- Subsidizing → Creating monetary incentives for ecosystem players, such as Amazon convincing offering publishers to join the e-book / Kindle ecosystem by passing their share of the profit to them.
- Enabling → Providing infrastructures to accelerate ecosystem growth, such as Intel creating free standards like PCI or Tesla sharing their patents with competitors.
- Upskilling → Educating on skills that are valuable to join the ecosystem, such as Alibaba University for micro-entrepreneurs.
Conclusion
It is a bigger responsibility to work on changing the system as a whole
Adopting an ecosystem mindset entails going beyond business survival goals and embrace a societal mission. It is a far bigger responsibility towards stakeholders and it requires continuous adjustments guided by a long-term perspective and collaborative approach.
We appreciated learning about the opportunities and challenges of innovation ecosystems. Thank you for taking the time to share your insights and experience with us, Greg!
