True stability results when presumed order and presumed disorder are balanced. A truly stable system expects the unexpected, is prepared to be disrupted and waits to be transformed.
Tom Robbins, American novelist
In today’s Information Age, connectedness is something we can’t survive without. Thanks to technology, we’re all connected more than we were ever before.
And although it might seem obvious, the same holds true for organizations. As markets expand and barriers to communication fall, collaboration takes new and exciting forms to reflect these changes. Exemplified by the move from demanding, contract-based strategic alliances in the 1970s to the loose ecosystems of co-created value today, business innovation is becoming less of a solo act and more of a group performance.
To survive and prosper in highly competitive contexts and markets, firms must learn to share ideas, initiate, and react to change, and build dynamic capabilities in the process. In a nutshell, firms must be able to seed and nurture partner ecosystems of shared value.
Here, we explore what open innovation ecosystems are and how to build and manage them to bring value to your organization through co-creation.
In an open innovation ecosystem of shared value, customers, competitors, collaborators, complementors, and all other categories function as one well-oiled machine. Everyone provides input, and everyone derives value. Every member is simultaneously a giver and a receiver of resources and knowledge. Suppliers and customers coincide.
Open innovation ecosystems typically have a shared vision and shared enterprise, helping each other to create value and pursuing jointly formulated strategies and goals.
Researchers Stephen Vargo and Robert Lusch define ecosystems in "The SAGE Handbook of Service-Dominant Logic" as “relatively self-contained, self-adjusting systems of resource-integrating actors connected by shared institutional arrangements and mutual value creation through service exchange”.
According to academic and the author of "The Wide Lens: What Successful Innovators See that Others Miss" Ron Adner, ecosystems have a long-term orientation, are partly self-adjusting, and make complex interdependencies between various types of partners, including end customers, explicit.
Ecosystems are typically characterized by:
The absence of a formal authority
Strong dependencies among members
A common set of goals and objectives
Building an open innovation ecosystem of shared value is, in essence, building and managing individual cultures, structures, processes and metrics, and then securing the synergies between them (across organizations and people).
Sounds straightforward, doesn’t it? Let’s take a closer look to find out.
Before starting to build an ecosystem, you need to find out whether this innovation model is right for your organization.
Start by asking yourself:
Can you achieve your objectives alone?
If answering these questions confirms that an ecosystem would help you achieve your goals, it’s time to get building.
We divide the process of building an innovation ecosystem into four main stages:
“Does our organization nurture the values that are most conductive to joint value creation? How do our customers relate to these values?”
This process starts with understanding what culture is – both in itself as well as in the industry and/or context in which your firm functions.
An effective culture of co-creation should be open and collaborative toward its customers and other open innovation partners. This type of culture keeps the entrepreneurial and intrapreneurial spirit alive.
To self-assess your innovation culture, download our scorecard here.
Organizational structure, or the “anatomy of an organization” as it’s sometimes called, is the second element of the framework. Structure consists of all formal reporting relationships and their sub-components, including, but not limited to, the number of levels in your hierarchy, managers’ and supervisors’ span of control, and cross-departmental communication Essentially, organizational structure comprises everything related to your departments and functions.
Reengineering a firm’s structure to support ecosystems of shared value is an inherently difficult task. Deep structural change typically starts small via informal coordination activities that cut across existing product and functional silos. In this scenario, well-trained and well-incentivized members of staff not only manage complex collaborator relationships but also take accountability for their actions.
The key here is to ensure a structure that allows ideas to be spun in and out of the firm as necessary.
For value co-creation to take place, however, these business processes must be taken one step further.
For example, you should encourage two-way communication with your customers as well as other collaborators in your ecosystem. Similarly, your performance management process must facilitate learning from all parties. Just like the structural changes, process changes also involve a step-by-step approach.
First, you can develop or buy IT systems of varying complexities to automate parts of your ecosystem’s value co-creation process. Next, you can map your processes to better understand the possibilities for creating new value. Finally, you can audit your processes internally, making sure they are aligned to your value co-creating mission.
Building an ecosystem is the first part of the process. The key question then becomes how to ensure that it works as effectively as possible to deliver the results you’re expecting and create value for the whole partner ecosystem.
Download our white paper "Building and Managing an Open Innovation Ecosystem of Shared Value" to discover how to build and manage an open innovation ecosystem.
And because there’s no better way than to learn from experience, we’ve included five compelling case studies from companies like Fujitsu and Burberry, who are successfully implementing ecosystems today.
You’ll also find a self-assessment questionnaire in the paper to help you assess how an open innovation ecosystem could benefit your organization.