Post on 18-Mar-2022
Introduction to Innovation Ecosystems
Student MaterialManuel Lorenzo Hernández
Head of Technology & Innovation, Ericsson España S.A.E-mail: manuel.lorenzo@ericsson.com
Last updated: 13 April 2010
Introduction to Innovation Ecosystems - Student Material M.Lorenzo 2010-04-132 (62)
Outline
Introduction
Motivation
Dynamics of Innovation Ecosystems
Strategy in Innovation Ecosystems
Q&A
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Introduction
Can you give examples of Innovation Ecosystems?––––
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IntroductionInnovation Ecosystem is a term used for different concepts, namely:
1. A geographical area of high innovation density– Silicon Valley– Kista circa 2000– MIT Innovation Ecosystem, Cambridge and other few Science & Technology Parks– …
2. The external network of actors cooperating in innovation with a given firm (or a given firm’s business unit, solution or technology)
– IBM’s Innovation Ecosystem– Microsoft Developer Network– Java Community– …
3. The web of all relevant innovating actors making up the value chain (or value network) of a firm’s (or and industry’s) innovation initiative
– Microsoft Business Ecosystem– Bi-lateral and multi-lateral innovation consortia and business alliances– Some standardization fora– …
4. A network of loosely coupled business actors with differing interests, but bound together in a collective whole, therefore sharing a common fate with one another
– Business ecosystems such as those of IT as a whole, e-commerce, Bio-Engineering, Mobiles, …– Industry/Vertical Innovation Clusters and Associations– …
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Introduction Examples: Silicon Valley
In 1950 Stanford University (Palo-Alto, California) had some financial problems. Fred Terman tried to solve the problems by leasing part of the university's land to high-tech companies for 99 years. This was Silicon Valley's starting point.
Silicon Valley is an area that is located on the San Francisco, California, peninsula, radiates from Stanford University betweenthe cities of San Francisco and San Jose (the 'capital' of Silicon Valley).
Silicon Valley is home to world famous companies such as HP, Intel, Sun, Google, Yahoo!, eBay, Cisco, Apple Computers , Adobe and many, many more.
Now about 4,000 IT-related companies located along Highway 101 from San Francisco to San Jose generate approximately $200 billions in IT-related revenue annually
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Introduction Examples: Ericsson Spain Innovation Ecosystem
SpanishUniversity
Ericsson Spain
LocalPartner
Customers
Innovation &Business Partners
Scan,Support,Partner,
…
Ericsson’sCustomers
VC
Share Innovation Strategy,Joint Innovation Initiatives
Scan,Knowledge Transfers,
Innovation Cells
Investment,Governance
Ericsson
InternationalUniversities& ResearchInstitutions
LocalGovernment
Business
Introduction to Innovation Ecosystems - Student Material M.Lorenzo 2010-04-137 (62)
Introduction Examples: Microsoft Business Ecosystem
A few data about MS Ecosystem:40,000 Employees2,000 Employees fully dedicated
to supporting developers
5,000,000 Developers20,000 Companies using MS70,000 Applications based on MS
20% of SW providers marketcapitalization2% of Computer Science market
capitalization
Microsoft
ISVs(3,800+)
Devel.Services
Companies(5,000+)
TopVAR
(2,000+)
SystemIntegrators(7,700+)
Trainers(2,700+)
CampusResellers(4,700+)
Small/Specialty(2,200+)
Source: Iansity & Levien (2004) – The Keystone Advantage
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Introduction
F
External Innovation Network
Innovation Value Chain
Overall Innovation Ecosystem
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Introduction
What characterizes Innovation Ecosystems?––––
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Introduction
Innovation Ecosystems are characterized by:
– Diversity and Specialization
– Interdependencies
– Integration
– Cooperation
– Shared Fate
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Motivation
What are the reasons and expected benefits ofentering / belonging to an Innovation Ecosystem?
––––
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Motivation Innovating around the transfer / collaboration
Picture from: Tim Jones – www.innovationleaders.org
• For an R&D-intensive corporation it is not only about Outside-in• Transfer/Collaboration Models & Ecosystems make the difference
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In an Innovation Ecosystem all contributing parties can:Validate their Strategy in advanceCreate higher value for their customers and customers’ customersSecure the right timing for launching new solutionsFocus their efforts on higher probability innovations
Motivation Co-innovation
Innovation ecosystems allow companies to create value thatno one firm could have created alone
Innovation Ecosystems enable collaborative arrangements through which firms combine their individual
offers into a coherent, customer- facing solution
InterdependenciesNetworked CustomersCooperation & IntegrationRisk
Inspired in Adner (2006) – Matching your innovation strategy to your innovation ecosystem
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Motivation
What to do in the new Economy:Compete or cooperate?
––––
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Motivation The new Economy: Competition & Shared Fate
There is a central difference between the old and the new economies:– The old industrial economy was driven by economies of scale;– The new information economy is driven by economics of networks
The real competition is not between individual players but between business networks
Shared Fate in Ecosystems:– The health and performance of each firm in the ecosystem is dependant on
the health and performance of the whole ecosystem– Business ecosystems (organized according to patterns of biological systems
and natural ecosystems) enjoy:More robustness in the face of external shocksCapability for creation of novelty, linked with the specialization of networks membersHeterogeneous infrastructure with different firms adopting differentroles
Source: Iansity & Levien (2004) – The Keystone Advantage
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Dynamics
Setup
Opportunities
Risks
Sustainability
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Dynamics Setup
REQUIREDTIME
COLLABORATIVEARRANGEMENTS
TYPES OF MEMBERS
• Geographical Areas of High Innovation: 6+ years• External Innovation Network: 3+ years• Value Chain for a given innovation: 1+ years
• Networked Innovation Projects• Standardization Fora• Strategic Alliances• Business Agreements• …
• Business Actors in the innovation value chain• Standardization Fora & Regulatory Agents• Universities and Research Institutes• Financial Institutions• Communities and Associations• …
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Dynamics: Opportunities (Example)
SpanishUniversity
Ericsson Spain
LocalPartner
Customers
Innovation &Business Partners
Scan,Support,Partner,
…
Ericsson’sCustomers
VC
Share Innovation Strategy,Joint Innovation Initiatives
Scan,Knowledge Transfers,
Innovation Cells
Investment,Governance
Ericsson
InternationalUniversities& ResearchInstitutions
LocalGovernment
Business
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Dynamics: Opportunities
What games can be played in the example ecosystemintroduced above?
–––––
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Dynamics: Opportunities (I)
SpanishUniversity
Ericsson Spain
LocalPartner
Customers
Innovation &Business Partners
Scan,Support,Partner,
…
Ericsson’sCustomers
VC
Share Innovation Strategy,Joint Innovation Initiatives
Scan,Knowledge Transfers,
Innovation Cells
Investment,Governance
Ericsson
InternationalUniversities& ResearchInstitutions
LocalGovernment
1
2
334
Business
1. New Knowledge/Technology generated by local University2. Identification and Spin in of University Knowledge/Technology3. Validation of business model in the local Innovation Ecosystem4. Productization of New Products and Services
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Dynamics: Opportunities (II)
SpanishUniversity
Ericsson Spain
LocalPartner
Customers
Innovation &Business Partners
Scan,Support,Partner,
…
Ericsson’sCustomers
VC
Share Innovation Strategy,Joint Innovation Initiatives
Scan,Knowledge Transfers,
Innovation Cells
Investment,Governance
Ericsson
InternationalUniversities& ResearchInstitutions
LocalGovernment
2
314
Business
1. New Technology/Business Concepts being developed by Ericsson available for innovation trials 2. Identification of start ups and established business partners involved in a feasible business model3. Launch of an Innovation trial with a partner customer4. Productization of New Products and Services
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Dynamics: Opportunities (III)
SpanishUniversity
Ericsson Spain
LocalPartner
Customers
Innovation &Business Partners
Scan,Support,Partner,
…
Ericsson’sCustomers
VC
Share Innovation Strategy,Joint Innovation Initiatives
Scan,Knowledge Transfers,
Innovation Cells
Investment,Governance
Ericsson
InternationalUniversities& ResearchInstitutions
LocalGovernment
2
12
4
Business
1. New Innovation Opportunity identified by a partner Customer2. Scan of technologies and partners supporting the scenarios3. Launch of an Innovation trial with a partner customer and a business partner4. Supply of New Products by a partner company (with or without Ericsson mediation)
2
3
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Dynamics Risks
What risks do Innovation Ecosystems pose on theirmembers’ productivity and innovation?
––––
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Dynamics Risks: Interdependencies, Adoption & Integration
Interdependence Risk– Example:
Probabilities of Project Success at each co-innovating firm in the ecosystem = { 90%, 90%, 90%, 60%, 90%}Project Success probability?Project Success probability = 39%
– Conclusion:Interdependence Risk = Product of each party’s risk
Time-To-market– Example:
Integration Delays at each co-innovating firm in the ecosystem = { 9 month, 12 month, 9 month}Time-to-Market?Time-to-Market = 30 month
– Conclusion:Time-to-Market = Sum of each party’s delay
Souce: Adner (2006) – Matching your innovation strategy to your innovation ecosystem
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Dynamics Sustainability
How do members of an Innovation Ecosystemcontribute to its health and performance?
––––
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Dynamics Sustainability: Ecosystem Health
Source: Iansity & Levien (2004) – The Keystone Advantage
PRODUCTIVITY
ROBUSTNESS
DIVERSITY
• Return on Invested Capital• Growth over time• Innovation Delivery
• Survival Rate• Persistence of Ecosystem structure• Predictability• Limited Obsolescence• Continuity
• Growth in firm variety• Growth in product and technology variety
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Dynamics Summary
Establishment of Innovation Ecosystems is a costly, complex and long process
Innovation opportunities inside a reliable Innovation Ecosystem are one or even two orders of magnitude superior
to those traditional approaches
In networked innovation initiatives, interdependence risks (rather than threats) do exist and need to be managed
Robustness, productivity and diversity of the ecosystem is key for the health and performance of all its members
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Strategy
Strategy matching
Competition in the Ecosystem
Cooperation in the Ecosystem
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Strategy Matching Innovation Strategy to Innovation Ecosystem
Successful innovation requires tracking your partners and potential adopters as closely as you track your own development process
Souce: Adner (2006) – Matching your innovation strategy to your innovation ecosystem
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Strategy Competition
Where to compete?––
When to compete?––
How to compete?
– Which is the most important place in a value chain?
– Which is the most important role in an innovation ecosystem?
– How much usage is needed of internal and external capabilities?
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Strategy Competition & Cooperation
Low High
Low
Hig
h
DominatorsOccupy several nodes in the ecosystem
Create most of the value by themselves and for themselves
KeystonesLimited physical presence in the ecosystem,
acting as a hub connecting many playersCreate and share value with the ecosystem
Niche PlayersSmall specialized players, however constituting
the bulk of the ecosystemCapture most of the value from the ecosystem
and create specialized value
Value created for the Ecosystem
Val
ue c
aptu
red
from
the
Eco
syst
em
Keystone
Niche Player
Dominator
Source: Iansity & Levien (2004) – The Keystone Advantage
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Strategy Competition & Cooperation
How can /should you use Intellectual property in OpenInnovation Ecosystems scenarios?
–––––
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Strategy Cooperation with University
What role can the University play in InnovationEcosystems?
–––––
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Cooperation between University and Industry is keyto compete in the knowledge-based economy
Strategy: Cooperation with University
Training
New Knowledge
KnowledgeDiffussion
UNIVERSITY
Competition
Innovation
Business Growth
INDUSTRY
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Strategy: Cooperation with University
Activate research and innovation areas of high potential (and risk)
Increase the generation and transfer of new knowledge and IPR
Strengthen the role of local University as a cross-industry hub
Promote mutual knowledge and mobility
Identify and agree long-term cooperation agreements
Support the creation and growth of university spin-offs
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Strategy Summary
Firms operating in innovation ecosystem need to understand their dynamics and craft innovation strategies that fit in it
Cooperation and competition are two sides of the same coin in innovation ecosystems since fate is shared among all its
members
Licensing of physical, intellectual and financial goods is key for the innovation ecosystem. IP enables adequate and fair co-
opetition in the ecosystem
The role of Universities and other sources of new knowledge, is essential for long term innovation and sustainability of
business ecosystems
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References
Adner, R. (2006). Match your Innovation Strategy to your InnovationEcosystem, Harvard Business ReviewIansiti, M. & Levien, R. (2004). The Keystone Advantage: What the NewDynamics of Business mean for Strategy, Innovation and Sustainability, Harvard Business School PressChesbrough, H. (2003). Open Innovation: The new imperative for creating and profiting from technology. Harvard Business School PressDavila, T. (2003). Making innovation work. Wharton School PublishingChristensen, C. (1997).The Innovator’s dilemma. Collins Business EssentialsLanto, J. (2007) Ensuring growth in Telecom Ecosystems, http://www.ericsson.com/solutions/news/2007/q4/20071205_telecom.shtmlLeclerc, M.(2007) Swimming with the sharks, Ericsson Business Review2007/3, http://www.ericsson.com/ericsson/corpinfo/publications/ericsson_business_review/pdf/307/swimming_whith_sharks.pdfWitzeman et al. (2006) Sourcing External Technology for Innovation, http://www.strategicalliance.com/articles/SourcingExternal.htm#Copyright Strategic Alliance