Innovation Ecosystems – What is the buzz?
Business executives are desperate for the ability to see around corners and spot the approaching forces that could disrupt their businesses or give them an innovation advantage over their peers. They are in search of game-changing new ideas. Many companies are broadening their quest for growth-driving innovation beyond their internal R&D efforts and M&A activities to look at strategic partnerships, business incubation and venturing. By using such tools companies are able to gain a holistic view for growth opportunities outside of their core. But the idea is growing further having collaborations with multiple stakeholders who come together to form innovation ecosystems that enhance the end-to-end value creation opportunity with business model innovation exercises and scaling up the successful ones.
Innovation is rarely the product of lone inventors. More often, it emerges from the interactions of members of a community or ecosystem, who extend and build on one another’s ideas. Communal innovation entails a deep conflict, however. By freely sharing ideas, members of an ecosystem can collectively create more value through innovation. Yet the open exchange of ideas can make it harder to protect intellectual property and potentially dampens incentives to innovate. Legal intellectual-property protection, such as patents or copyrights, mitigates this tension in many industries but doesn’t work in all settings. Simple rules can protect intellectual property in situations where legal remedies don’t apply.
How are Innovation Ecosystems different from traditional partnerships?
A traditional partnership is typically a means to outsource a task and value creation depends on higher efficiency & better planning. Innovation ecosystem is focused on a mutually agreed on outcome, where multiple stakeholders mobilize around a common goal by each one contributing with their core skills. The value creation clearly comes from innovation. The joint framing of the problem and its solution in a traditional partnership is typically challenged with mistrust and quest for financial gains. The innovation ecosystem focuses on collective framing of the problem and design of smart holistic solutions.
Sustainability of solutions in a typical partnership depends on the white elephant and short-term financing. The financial sustainability of innovation ecosystem approach is derived from innovative business models. The new business models might include innovative financing, efficient cost structure, and new sources of revenue. The outcome of a traditional partnership is bogged down by inefficiencies in poor execution. The innovation ecosystem approach is bolstered with data-based decision making. The innovation outcome might include creative partnerships that extend scarce resources, innovative activities with lower cost from feasibility perspective and targeted customer, through innovative channels and relationships for best customer-experience.
Innovation can mean many different things to different stakeholders. Organizations without a clear definition tend to dilute their focus and lack accountability for outcomes, hindering good results. By contrast, an unambiguous definition with a clearly articulated purpose helps create an innovation culture, organizational alignment, and ownership—becoming, in effect, a compass that ensures everyone is moving in the same direction.
Ask right question through every stage of implementing innovation ecosystem
When implementing the ecosystem approach, several areas must be addressed at each stage along the journey. These areas help organizations define priorities, identify appropriate partners, design the most appropriate model, build the partnership, and measure its impact.
Stage 1 – Identify priorities & design principles
A thorough analysis of all factors must be carried out to establish a clear understanding of existing gaps and needs. With this information in hand, all stakeholders must work together to align on priorities. The problems to be addressed must be broad enough to invite innovative solutions but targeted enough to be actionable. Identify potential solutions and their constraints. A specific set of key performance indicators should be defined upfront. Consensus must be drawn on what constitutes success.
Stage 2 – Map the innovation ecosystem
Identify potential partners, allies and kinds of barriers posed by others. Map the landscape clearly with level of capabilities and interest each of the partners might bring to the table. Analyze the information to understand the various forces that might be at play. Every opportunity and threat must be identified. Large and inclusive discussion forums can build consensus, but they can also dilute the message and delay decision-making. Small committees, on the other hand, may expedite decisions but limit buy-in from the larger community. A neutral organization can be brought in as a mediator to help frame the debate, unite disparate interests, and create consensus.
Stage 3 – Design the ecosystem model
Innovation can come from different sources – offerings, processes, organization, technology, and business model. Depending on the type of innovation, next we must design the capabilities, structure, accountability, governance and culture for the ecosystem. Optimize the contribution of every partner in the model. Design also performance management and feedback loops with forward looking risk mitigation. Once the model has been designed, a roadmap for scale-up must also be defined.
Stage 4 – Enroll and activate partners
All partners must be deeply accountable for success. They must be willing and able sponsor and manage every aspect of the innovation identified and assigned. Alignment of the partner leaders must be palpable, visible and maintained. Designing and launching effective, long-lasting partnerships can be a big challenge. Successful partnerships are built on strong agreements with clear commitments from all parties, clauses to address non-compliance, and clear exit strategies and incentives for partners. By ensuring high levels of transparency from the outset, avoiding the ‘process trap’ of long, drawn-out negotiations and bureaucratic hurdles, and building in clear incentives for the partners to contribute, partnerships can hit the ground running.
Stage 5 – Implement, run and track outcome
The implementation will follow similar methodologies as that for a transformation program. It must have clear governance & PMO to ensure execution certainty, leadership alignment and team engagement. All the stakeholders must be engaged, issues must be effectively escalated and resolved, difficult conversations addressed and high-performing teaming must be cultivated. To track progress and measure outcomes, partners should create a dedicated and impartial project management unit. This unit is responsible for the program implementation, including a rigorous data analysis to ensure that costs are in check, milestones are being met, and the program is achieving its goals. Every effort should be made to gather impact data, and emerging mobile technologies offer a wide range of options for data analysis. Having said that, there are some extremely valuable interventions—like prevention and education programs—that do not readily lend themselves to data analysis. These efforts are entirely worthwhile and should not be excluded simply because they are difficult to assess.
Innovation ecosystem requires mindset shift for success
When the ecosystem has clear accountability, structure, processes, roles, and capabilities that are aligned to specific objectives, common approach, and meaningful purpose with commitment, a unique culture will emerge. However, specific critical few behaviors from design-thinking, agile, lean startup & storytelling principles can enhance the performance of these ecosystems. By mobilizing and coordinating a large and diverse community of stakeholders, the ecosystem model paves the way for companies to take advantage of high-impact, mutually reinforcing innovations that are cost-effective and scalable.
The nature of the relationships within the innovation ecosystem is unique to each organization and kind of partnerships. It begins with understanding key objectives of the partnership in the ecosystem and careful consideration of the individual factors and the desired outcomes of the relationship. The ecosystem culture must be that of fast-paced, ongoing cycle of experimentation and “safe failure” needed to hone breakthrough innovations.
Several companies have found success by designing and implementing innovation ecosystems with external partners such as academic institutions, technology experts, government agencies, industry innovators (e.g., Startups), high value consultants, researchers and customers, as well as competitors. Through these partnerships, these companies are creating an ecosystem that brings the expertise, experience, technology and facilities they need to leapfrog ideas, products, business models and, in a number of cases, talent. Telecom, media & entertainment, financial services, and healthcare industries are leading the charge in implementing such innovation ecosystems.
By pursuing external ideation, these companies also benefit from the unique, customer-focused perspectives their collaborators offer. This will enable companies to leverage research and data to understand evolving customer demands – both corporate customers and consumers – and the impact of mega trends. External ideation also affords opportunities to understand how corporate customers and others within the industry are innovating change to their business models to capture market opportunity and increase operational efficiencies. Ecosystem leaders will be companies with both vision and influence that—while accepting they will continue to compete for their fair share of the pie—will be able to align the system around them toward some common and mutually beneficial goals.