CORPORATE ENTREPRENEURSHIP AND BUSINESS MODEL INNOVATION
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MGT731_05_Ecosystems_scu11.pptBusiness model ecosystems: beyond industries and clusters
MGT731 Corporate Entrepreneurship and Business Model Innovation
Course Coordinator: Dr Robert Ogulin
Course Facilitator: Prof Uwe Schulz PhD
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Content of Today
- Open Innovation
- Business Ecosystems
- Wicked Problems
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Leveraging and learning from and with others
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Open Innovation
Open Innovation
Companies harnessing external ideas while leveraging their in-house R&D outside their current operations.
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Source: Henry W. Chesbrough (2003) The Era of Open Innovation, MIT Sloan Review
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Open Innovation Re-enforces a Fundamental Change in Business Model Strategies
New approach to strategy - “open strategy.”
A convergence of competencies attributable to
Individuals, companies, supply chains
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Communities, networks and ecosystems
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Co-creation
and their implications for competitive advantage (see workshop 1)
Value Creation and Capture in Open Networks
- Knowledge: both the breadth and depth of aggregate knowledge can outstrip the knowledge endowment of an individual contributor.
- Linux: https://www.youtube.com/watch?v=yVpbFMhOAwE
- Ecosystem: open coordination leads to consensus building around issues such as technology standards that permit whole business ecosystems to flourish.
- IBM’s decision to open up its personal computer (PC) architecture
- Open Innovation: the role of innovation communities and ecosystems is in fringe businesses, e.g. snowboard, windsurfing, and skateboarding.
- However corporations have been slower to adopt.
The Open Innovation Revolution
- Open innovation – “a firm is not solely reliant upon its own innovative resources for new technology, product, or business development purposes. Rather, the firm accesses, acquires and shares critical inputs to innovation from and with outside sources.”
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The Open Innovation Revolution
Four reasons companies are increasingly choosing to pursue open innovation models:
1.) Importing new ideas is a good way to multiply the building blocks of innovation
2.) Exporting ideas is a good way to raise cash and keep talent
3.) Exporting ideas gives companies a way to measure an innovation’s real value and to ascertain whether further investment is warranted
4.) Exporting and importing ideas helps companies clarify what they do best
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Open Innovation Enabled, and Accelerated, by
- Internet as a global information-sharing network;
- Networked enterprises
- Social technologies
- Digitisable, knowledge-based products and services, e.g.
- Crowdfunding
- Crowdsourcing
- Analytics going through ever increasing volumes of data being generated, processed, and stored by a wide range of enterprises.
Open Innovation Process
Case example: Samsung
- In contrast to Apple, Samsung is more active and open about their efforts on building their external innovation capabilities. The below snippets are from an interview with Vice-President of Samsung’s Open Innovation Center, Marc Shedroff, in which the journalist would like to find out more about the ways Samsung wants to innovate like a startup.
- “OIC has four legs to it, and it’s sort of the continuum of how you would partner with talented entrepreneurs. The first is a partnerships team — think of commercial partnerships between us and a third party. The second is a ventures group, that is, R&D investments in startups. The third is an M&A team; we think there’s an opportunity to acquire small teams, fit them into Samsung, and have them build products as part of the company. The fourth involves accelerators, which we have opened in Palo Alto and New York City.”
- “We can take a group of five or six people per team and give them the benefits of a small company, which is autonomy, nimbleness, and the freedom to build the product they want without going through the approval process. Then we give them the benefits of a big company, which provides financial support, extensive distribution, and other resources. After all, we sell 450 million phones a year and 50 million TVs. The end result, we hope, will be game-changing software products that can connect all of our devices.”
- Companies can target different kind of “value pools” i.e. groups of external partners for their open innovation efforts. This includes suppliers, universities, consumers/users and startups.
- The latter has become the hottest area of collaboration for many industries and this example of Samsung is just one of many in which companies work to develop better co-innovation capabilities with startups and SME’s.
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Case example: Procter and Gamble
“The biggest decision we made was to move to an open innovation platform,” Lafley says. “The problem at P&G in 2000 was not that we weren’t inventive. The problem with us was that we weren’t turning that invention into innovation that created customers, that benefitted customers, that created value for customers or a better experience for customers, and that’s all I wanted to do.
Watch the video and discuss: What did P&G do to move to an open innovation environment?
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Beyond Companies, Industries: Exploring Emerging Business Model Ecosystems
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Definitions
Business Ecosystems are dynamic and co-evolving communities of diverse actors who create and capture new value through increasingly sophisticated models of both collaboration and competition.
Ecosystems enable and encourage the participation of a diverse range of (large and small) organizations, and often individuals, who together can create, scale, and serve markets beyond the capabilities of any single organization.
Participating actors interact and co-create in increasingly sophisticated ways that would historically have been hard to formally coordinate in a “top-down” manner, by deploying technologies and tools of connectivity and collaboration that are still proliferating and disseminating.
Participants—often including customers—are bonded by some combination of shared interests, purpose, and values.
Adapted from: http://dupress.com/articles/business-ecosystems-come-of-age-business-trends/
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http://dupress.com/articles/business-ecosystems-come-of-age-business-trends/
Business Ecosystems - an Opportunity for Creating New Competitive Advantage?
Businesses are moving beyond traditional industry silos and coalescing into richly networked ecosystems, creating new opportunities for innovation alongside new challenges for many incumbent enterprises.
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Business Ecosystems - an Opportunity for Creating New Competitive Advantage
Successful businesses are those that evolve rapidly and effectively. Yet innovative businesses can’t evolve in a vacuum.
- They must attract resources e.g. capital, partners, suppliers, and customers to create cooperative networks. . . .
- Companies not a member of a single industry anymore, but rather part of a business ecosystem that crosses a variety of industries.
- Companies in business ecosystems co-evolve new capabilities
- Work cooperatively and competitively to support new products and services that satisfy customer needs.
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http://dupress.com/articles/business-ecosystems-come-of-age-business-trends/
Some view the rise of ecosystems as an opportunity for creating powerful new competitive advantage.
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Business Ecosystems: The next Opportunity in Corporate Innovation?
http://dupress.com/articles/business-ecosystems-come-of-age-business-trends/
Food for Thought
- A distinctive characteristic of many ecosystems is that they form to achieve something together that lies beyond the effective scope and capabilities of any individual actor (or even group of broadly similar actors)
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E.g. Apple Inc. explicitly conceived its products and services as an ecosystem that would provide customers with a seamless experience; Facebook recognized the emphasis it had to place on deliberately building its “developer ecosystem”; some analysts no longer see technology and media competition as simply between firms, but among ecosystems of firms operating in loose alliance.5
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Case in Point: Automotive industry to mobility ecosystems?
- Automobile industry that has enhanced lives around the world. However, it is possible to imagine the emergence of a very different ecosystem to satisfy the desire for fast, affordable, safe, and convenient personal mobility, e.g.
- significantly reduce the appeal of privately owned cars,
- emergence of “autonomous vehicles” or self-driving cars (Google perhaps helping lead the way?).
- car-sharing might in turn become more attractive (as cars gain the ability to deliver themselves to your door).
- For some cities, according to former General Motors R&D chief Lawrence Burns, “about 80 percent fewer shared, coordinated vehicles would be needed than personally owned vehicles to provide the same level of mobility, with less investment.”
- New “mobility ecosystems” might coalesce around the automobile industry, and include city planners, technology and energy players, public transportation providers, regulators, infrastructure and construction players, insurance companies, and peer-to-peer networks—collaborating, adapting, and responding to one another’s moves, and once again transforming and improving our lives.
Adapted from: http://dupress.com/articles/business-ecosystems-come-of-age-business-trends/
Platforms and the Sharing Economy – New Trends?
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Blurring of Boundaries – Opportunity or Threat?
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A New Reality for Corporate Sustainability?
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Are Business Ecosystems the Answer to Tackling Wicked Problems?
Complex Social Problems
- Wicked problem“ describes a problem that is difficult or impossible to solve because of incomplete, contradictory, and changing requirements that are often difficult to recognize.
- The term "wicked" is used to denote resistance to resolution, rather than evil. Moreover, because of complex interdependencies, the effort to solve one aspect of a wicked problem may reveal or create other problems.
- Wicked” problems can't be solved, but they can be tamed.
Camillus, J. C. (2008). Strategy as a Wicked Problem. Harvard Business Review, 86(5), 98-106.
Conventional vs Wicked Business Problems
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Mcmillan, Charles & Overall, Jeffrey 2016, ‘Wicked problems: turning strategic management upside down’ Journal of Business Strategy, vol. 37, no. 1, pp. 34–43
Are Business Ecosystems the Answer to Tackling Wicked Problems? Case Example
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Water Solution Ecosystem
Using Information Technology for Taming Wicked Problems and for Creating Innovative Business Models
Value web:
- Collection of independend firms using highly synchronized IT to coordinate value chains to produce products or services collectively
- More customer driven, less linear operation than traditional value chain
- Include use of:
- Network economics
- Virtual company model
- Business ecosystems
Explain that a value web extends beyond the boundaries of an individual firm and represents the coordination of value chains across multiple independent firms. A value web is flexible and adapts to changes in supply and demand and changing market conditions.
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For Example: How to Tackle a Wicked Problem?
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- How will digital disruption precisely affect my industry and business?
- How fast will it happen?
- What are the essential next actions needed to redefine my company’s role in the digital world of tomorrow?
https://www2.deloitte.com/content/dam/Deloitte/de/Documents/technology/Survival%20through%20Digital%20Leadership_safe.pdf
Using Information Technology for Taming Wicked Problems and for Creating Innovative Business Models
- In the emerging, fully digital firm
- Significant business relationships are digitally enabled and mediated
- Core business processes are accomplished through digital networks
- Key corporate assets are managed digitally
- Digital firms offer greater flexibility in organization and management
- Time shifting, space shifting
Time shifting and space shifting are connected to globalization. You could ask students to explain why a digital firm is more likely to benefit from globalization than a traditional firm. One answer is that by allowing business to be conducted at any time (time shifting) and any place (space shifting), digital firms are ideally suited for global operations which take place in remote locations and very different time zones.
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The Customers’ New Role In Innovative Business Models: Co-creation
Discuss and Explore: People and Machines: Partners in Innovation?
- “The greatest impact of intelligent technologies won’t be from eliminating jobs but from changing what people do and driving innovation deeper into the business”.
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Barro, S. & Davenport, T.H. 2019, "People and Machines: Partners in Innovation", MIT Sloan Management Review, vol. 60, no. 4, pp. 22-28.
Summary
- This session has shown that Open innovation is a necessity to tap into key resources and capabilities of business partners in order to achieve business success.
- Open innovation is increasingly evident in business ecosystems, where organisations (business and non-business) collaborate to achieve transformational changes.
- Open innovation and business ecosystems may be an approach to better respond to wicked problems, i.e. manage in a very unpredictable and uncertain world.
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Businesses are moving beyond traditional industry silos and coalescing into richly networked ecosystems, creating new opportunities for innovation alongside new challenges for many incumbent enterprises.
*
Some view the rise of ecosystems as an opportunity for creating powerful new competitive advantage.
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E.g. Apple Inc. explicitly conceived its products and services as an ecosystem that would provide customers with a seamless experience; Facebook recognized the emphasis it had to place on deliberately building its “developer ecosystem”; some analysts no longer see technology and media competition as simply between firms, but among ecosystems of firms operating in loose alliance.5
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Explain that a value web extends beyond the boundaries of an individual firm and represents the coordination of value chains across multiple independent firms. A value web is flexible and adapts to changes in supply and demand and changing market conditions.
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Time shifting and space shifting are connected to globalization. You could ask students to explain why a digital firm is more likely to benefit from globalization than a traditional firm. One answer is that by allowing business to be conducted at any time (time shifting) and any place (space shifting), digital firms are ideally suited for global operations which take place in remote locations and very different time zones.
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