New Competitive Game
 How to Develop Strong Business Models
  & Lever Business Ecosystems to Gain
               Advantage...
Agenda

      As senior leaders and founders - you are responsible for the
      strategy of your business - to design the...
Introduction

          Upon Completion of this segment you will know:
                 •    why business model decision i...
Why A Discussion on Choosing
Business Models?
          • As or more important than product
             – may undermine y...
What Business Models Exist?
                                  Applications/                   •   customization
          ...
Business Models Compete

                                                                                   • Commoditize ...
Market offers and business models
are two sides of same coin
          •    Market offer (offer) defines:             •    ...
Business model is key part of business
plan, but does not replace it

          Business plan             A.   Executive s...
A useful starting point


          Is your company mainly about:
          • Products?
          • Services?
          • ...
3 interlocking elements of a business model

           Starting from a job to be done, a problem, or an
              unm...
Great business models

           • Both create and capture value
           • Can change the basis for competition in a s...
Element 1: Stakeholder value propositions

           Customer value proposition (CVP) addresses
           a)   a target ...
Element 2: Profit formula
(an explanation, not a spreadsheet)
       Do the numbers work to produce attractive profits?

   ...
Element 3: Key resources and processes

  What capabilities are needed to deliver the stakeholder
    value propositions a...
Who profits from innovation?
Classic model, adapted from Teece (1986), Pisano (2006)

                                     ...
Complementary Assets (incomplete)

       •   Brand name and company image
       •   Supply chain logistics
       •   Di...
Commercialization strategy for start-ups
Adapted from Gans & Stern (2003); refinement and extension of Teece (1986)

      ...
Strength of business model (Strength)
    Strength = W1 x Significance + W2 x Customer value + W3 x Partner value + W4 x P...
Calculate business model strength then
act to improve it
             Factor    Target statement                          ...
Notes
     •     Assign weights to reflect the importance of each factor for your
           opportunity
            – Weig...
Strengthen a business model
by increasing:

1. Significance                    Importance of getting job done,
            ...
References and further reading
    The three-factor framework: value propositions, profit formula, resources and
          ...
Why Must We Choose A Business Model
                                New Value …. Experience




        Scale - Knowledge ...
Why Talk About Ecosystems
                1. Willingness to pay - opportunity cost = Value
                2. Appropriate ...
Need to Co-Create with Customers

           • Leveraging ecosystems to engage customers
              – co-discover new c...
What is An Ecosystem?




                                                                           NOAA Technical Memora...
Characteristics of Strong Ecosystem


     Focus
     • vision and ideas                   Ecosystem                      ...
What is a Business Ecosystem?

    High                           • Blocks change
                         Dominator • Abs...
Role of a Keystone

                                                                        Architectural
     Productivit...
Role of Niche Players


    Drive sustained innovation                            Select sustainable niche &
             ...
What Makes a Good Niche Player

 •     Attributes                                         IBM
        – agility           ...
Dominant Players


           • Innovators dilemma attributes
             – large size and market power
                 ...
Applying Ecosystem to your Business
                                                            B. Rules
                 ...
Ecosystem Health Metrics
           The dimensions used to measure business ecosystem health are:


             • Diversi...
Ecosystem Health Metrics(cont’d)

           Robustness measured as change in membership numbers and
           diversity ...
Co-Evolution vs Collaboration?
                                    Traditional Collaboration                          CoEv...
Difference between an
 Ecosystem & Developer community

              Attribute               Ecosystem                   ...
Ecosystem Uniqueness


           • focus on monetization vs creation/innovation
           • relationships more important...
Ecosystem Design
    •      There are eight core aspects to ecosystem design:
            – Vision, leadership and governa...
Global Ecosystems In Action


           Ecosystem           Anchor                Keystone                      Type

   ...
What Is Eclipse*
   Member Based Open Source Ecosystem


                                                                 ...
Considered a Successful Ecosystem
    • >200 members
    • 175 members deliver solutions
      based on offerings
    • >1...
Eclipse: What Makes it Successful?
    • disruptions create significant opportunity
       – e.g. 2.27M developers now on E...
Apple Ecosystem Relationships

                                                              Accessories
            Custo...
Apple Applications Store




    • 10,000 Applications
    • 1,000,000,000 downloads in 9 months
    • huge development co...
Microsoft and Ecosystems
               Then                                                         Now


               ...
And Therefore ....?

       • participation in ecosystem is a strategic decision
       • motivated by business performanc...
Building a CEA Ecosystem ...                                                                                              ...
Why Communications Enablement
.....embedded Telecom as an Example

                                                       ...
Capability Set
  Communications                                                                               IT Applicati...
!"#$%&!'(                 OneCoral CEA Leverage
                                           Mode of



oral cea
           ...
!"#$%&!'(             Value Proposition
                                       Coral CEA
                 Value Elements  ...
How to Leverage an Ecosystem
   (Strategically Driven)

           • Participate - active engagement / membership
        ...
Your Investment

           • provide visible support
           • align to vision & dominant design
              – enhan...
Investing in the Health


           Strengthen
             – Diversity: Join, contribute, participate
             – Pro...
References

      1. Moore, James F. (2006) Business Ecosystems and the View from the Firm, The
         Antitrust Bulleti...
Moment of truth
    •      Select a market offer
    •      Describe business model of market offer selected, i.e., provid...
Notes
     •     Assign weights to reflect the importance of each factor for your
           opportunity
            – Weig...
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Day 1 Afternoon - Lever Business Ecosystems Carbone Muegge

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Day 1 Afternoon - Lever Business Ecosystems Carbone Muegge

  1. 1. New Competitive Game How to Develop Strong Business Models & Lever Business Ecosystems to Gain Advantage Peter Carbone Steven Muegge July 2009 Made available under Creative Commons License Lead to Win
  2. 2. Agenda As senior leaders and founders - you are responsible for the strategy of your business - to design the business to compete: • product vision • customer segments • go-to-market strategy • business model This section covers some of these: • business ecosystem model for commercialization • open source and API’s as strategic assets • some new go-to-market tools • ways and means to gain advantage? Slide 2 July 28, 2009 Made available under Creative Commons License Lead to Win
  3. 3. Introduction Upon Completion of this segment you will know: • why business model decision is strategically important • about business models, market offers & customer value • assess business model strength • what a business ecosystem is/how to leverage • what you need to invest to get what you want • what you need to invest to make the ecosystem healthier You will be able to: • select and articulate an appropriate business model at an early stage • strengthen your company’s business model • lever ecosystems for competitive advantage • address larger opportunities than you could address alone Slide 3 July 28, 2009 Made available under Creative Commons License Lead to Win
  4. 4. Why A Discussion on Choosing Business Models? • As or more important than product – may undermine your value proposition (e.g. Google/ Microsoft) – may change industry structure (e.g. eMail) – may be the basis for competition (e.g. Google vs infrastructure) • Often default to familiar product model – only known way to commercialize – easy to understand Slide 4 July 28, 2009 Made available under Creative Commons License Lead to Win
  5. 5. What Business Models Exist? Applications/ • customization • componentization Solutions • speed to deliver functionality Domestic • innovation - sophistication Global Value Creation Appropriate Value Supply Chain Management Business ecosystems Control Value Delivery Innovation Commercialization Product Services • supply chain • leverage key people • IPR control • scope of offer • standards/volume • standards/volume • simplification • normalization Slide 5 July 28, 2009 Made available under Creative Commons License Lead to Win
  6. 6. Business Models Compete • Commoditize Competition Turnkey • Change strategic alliances Solutions • Disruptive value propositions • Change value focus Devices Service Portals Customer Network S/W Platforms Platforms Slide 6 July 28, 2009 Made available under Creative Commons License Lead to Win
  7. 7. Market offers and business models are two sides of same coin • Market offer (offer) defines: • Business model is a clear – What is purchased concise narrative of “how the – Rights over what is business works”: purchased – Importance of getting a job – How buyers purchase done, solving a problem or satisfying a need • Offers: – Value delivered to – Get jobs done for customers and other key customers stakeholders – Solve problems – Explanation of attractive – Satisfy needs that profits customers have – Control over or access to key resources and processes required to deliver value Companies need to come up with great market offers which have great business models; great offers are not enough Slide 7 July 28, 2009 Made available under Creative Commons License Lead to Win
  8. 8. Business model is key part of business plan, but does not replace it Business plan A. Executive summary B. Business profile C. Business environment analysis D. Market offers E. Market plan F. Business model G. Operations H. Financial statement forecasts I. Financing requirements J. Financial statements K. Appendices Slide 8 July 28, 2009 Made available under Creative Commons License Lead to Win
  9. 9. A useful starting point Is your company mainly about: • Products? • Services? • Applications? In other words, what do your customers pay for, and what do they get for free? But great business models go deeper than the product / service / application distinction. Slide 9 July 28, 2009 Made available under Creative Commons License Lead to Win
  10. 10. 3 interlocking elements of a business model Starting from a job to be done, a problem, or an unmet need that matters to stakeholders 1. Stakeholder value propositions (SVPs) 2. Profit formula 3. Key resources and processes Slide 10 July 28, 2009 Made available under Creative Commons License Lead to Win
  11. 11. Great business models • Both create and capture value • Can change the basis for competition in a space – What we used to compete over is now taken as given – What was once lucrative becomes a commodity • Evolve over time • Are able to take advantage of opportunities Slide 11 July 28, 2009 Made available under Creative Commons License Lead to Win
  12. 12. Element 1: Stakeholder value propositions Customer value proposition (CVP) addresses a) a target customer b) …with a job needing to be done c) …that can be satisfied by an offer Barriers for customers: insufficient wealth, access, skill, time… Value = benefits from what is purchased, emotional benefits, rights over what is purchased, and how buyers purchase, – financial and non-financial burdens Other key stakeholders also need value propositions: • Complementers, critical suppliers, channel and distribution partners, investors, ... Slide 12 July 28, 2009 Made available under Creative Commons License Lead to Win
  13. 13. Element 2: Profit formula (an explanation, not a spreadsheet) Do the numbers work to produce attractive profits? • Revenue – What is the offer? How are you paid? Prices? Volumes? • Cost structure – What does it cost to produce and deliver the offer? • Margin model – High or low margins? Volumes? Position relative to competition? • Resource velocity to achieve operations targets – Lead times, throughput, inventory turn-over, asset utilization… Tip 1: To get started, it may be effective to work backwards from target profits, then iterate through cost, price and volume. Tip 2: It may help to compare against the best alternative. Slide 13 July 28, 2009 Made available under Creative Commons License Lead to Win
  14. 14. Element 3: Key resources and processes What capabilities are needed to deliver the stakeholder value propositions according to the profit formula? • Resources – People, technology, equipment, information, relationships, brand… – Investment – Channel to the customer (How will you sell “it”?) • Processes – Design, product development, manufacturing, marketing, training, IT – Rules and metrics • Commercialization strategy – How will you capture the value created by innovation? – How will you collaborate with others? Slide 14 July 28, 2009 Made available under Creative Commons License Lead to Win
  15. 15. Who profits from innovation? Classic model, adapted from Teece (1986), Pisano (2006) Complementary Assets Freely available Tightly controlled Intellectual Property Appropriability Difficult to Complementary Regime Weak capture value asset holders (IPR) from innovation capture most value Low-cost imitators soon enter De jure control (entrenched in law): patents, copyrights, Innovator Value capture standards, etc. De facto control Strong captures most determined by (in practice): technology value power alliances characteristics, secrecy, tacit knowledge, etc. Other considerations: • Stage of product/industry lifecycle (is there a dominant design?) • Asset specificity (generic, specialized, or co-specialized?) • Mode of access to complementary assets (internalize, partial ownership, contracting, partnerships, business ecosystems) Slide 15 July 28, 2009 Made available under Creative Commons License Lead to Win
  16. 16. Complementary Assets (incomplete) • Brand name and company image • Supply chain logistics • Distribution and sales channels • Customer service and support • Specialized manufacturing capabilities • Deep financial pockets • Peripheral products • Switching costs • Political, regulatory and customer knowledge • Critical real estate or institutional associations • Control over raw materials or key components • … Slide 16 July 28, 2009 Made available under Creative Commons License Lead to Win
  17. 17. Commercialization strategy for start-ups Adapted from Gans & Stern (2003); refinement and extension of Teece (1986) Complementary Asset Environment Do incumbent complementary assets contribute to the value proposition (VP) of the innovation? Does not contribute to VP Contributes to VP Attacker’s Reputation-based Excludability Non- advantage ideas trading Environment Excludable • Invest in complementary assets • Start-up viability depends on Can start-up • Compete with incumbents in the “market for ideas” innovation preclude niche markets effective development by an incumbent? Greenfield Ideas factory Excludable competition • Value will be distributed based • Contract with incumbents on technology leadership • Depends on bargaining power Innovation overturns the Innovation reinforces the incumbent’s asset value incumbent’s asset value Slide 17 July 28, 2009 Made available under Creative Commons License Lead to Win
  18. 18. Strength of business model (Strength) Strength = W1 x Significance + W2 x Customer value + W3 x Partner value + W4 x Profit + W5 x Leverage + W6 x Intellectual property Significance = How important job to be done, problem to be solved, or need to be filled is to target customers Customer value = How much better BU’s offer is at delivering value on the elements that matter most to target customers compared with the next best alternative offer Partner value = How much better company’s go to market model is at delivering value on the elements that matter most to channel partners and complementors compared with the next best alternative go to market model Profit = How likely it is that market offer will achieve the desired revenue growth and profits over the next three years Leverage = How much better company is at leveraging key resources, processes and norms required to deliver value to customers and partners compared with the strongest competitor Intellectual How well company can protect its intellectual property for which customers or property = other licensees are willing to pay W1, W2 , … W6 = Weights that reflect relative importance and range from 0 to 9 Slide 18 July 28, 2009 Made available under Creative Commons License Lead to Win
  19. 19. Calculate business model strength then act to improve it Factor Target statement Weight Score Strength (0 to 9) 1=strongly disagree, (Weight x Score) 7=strongly agree Significance Target customers are convinced that it is very important to solve the problem, fill the unsatisfied need, or get the job done 8 5 40 Customer value Our offer delivers more value on the three elements that matter most 6 3 18 to our customers when compared to the best alternative offer Partner Our go-to-market model delivers more value on the three elements value that matter most to our channel partners and complementors when 6 4 24 compared to the best alternative go-to-market model Profit The company is likely to achieve its desired revenue growth and 7 5 35 profits over the next three years Leverage Our company can lever the key resources and processes required to deliver value to customers and partners much better than our 3 2 6 strongest competitor IP Our company can protect its IP for which customers are willing to 3 3 9 pay much better than our strongest competitor Sum = 33 132 Business model strength = 57.1% 132 [ (33)(7) ] Slide 19 July 28, 2009 Made available under Creative Commons License Lead to Win
  20. 20. Notes • Assign weights to reflect the importance of each factor for your opportunity – Weights can range from 0 to 9 (0 = not important at all, 9 = very important) – Rule of thumb: start with equal weights of 5 for all factors, then increase or decrease as appropriate for each factor • Assign scores according to agreement with target statements – Scores can range from 1 to 7 (1 = strongly disagree, 7 = strongly agree) • Compute strength for each factor (weight x score); sum the columns • Compute business strength as the sum of the strength column divided by the maximum possible value (sum of weights x 7 maximum score) • Rule of thumb for a strong business model: – Each score 6 or better – Business model strength > 85% • Objective is to strengthen business model, not argue about absolute score Slide 20 July 28, 2009 Made available under Creative Commons License Lead to Win
  21. 21. Strengthen a business model by increasing: 1. Significance Importance of getting job done, solving problem or satisfying need 2. Customer value Value delivered to stakeholders 3. Partner value 4. Profit Likely to deliver attractive profits 5. Leverage Control over or access to key 6. Intellectual property resources and processes required to deliver value Slide 21 July 28, 2009 Made available under Creative Commons License Lead to Win
  22. 22. References and further reading The three-factor framework: value propositions, profit formula, resources and processes Johnson, M.W., Christensen, C.M. & Kagermann, H. 2008. Reinventing your business model. Harvard Business Review, December: 50-56. Anderson, J.C., Narus, J.A. & Van Rossum, W. 2006. Customer value propositions in business markets. Harvard Business Review. March: 90-99. Other useful business model frameworks Chesbrough, H. 2006. Open Innovation, Boston, MA: Harvard Business School Press. Cusumano, M.A. 2004. The Business of Software, New York: Free Press. Magretta, J. 2002. Why business models matter. Harvard Business Review, May: 86-92. Profiting from innovation; commercialization strategy Gans, J.S., & Stern, S. 2003. The product market and the market for "ideas": commercialization strategies for technology entrepreneurs. Research Policy, 32: 333-350. Pisano, G.P. 2006. Profiting from innovation and the intellectual property revolution. Research Policy, 35: 1122-1130. Teece, D.J. 1986. Profiting from technological innovation: implications for integration, collaboration, licensing, and public policy. Research Policy, 15: 285-305. Slide 22 July 28, 2009 Made available under Creative Commons License Lead to Win
  23. 23. Why Must We Choose A Business Model New Value …. Experience Scale - Knowledge economy Superpowers Rapid, Disruptive Innovation Need: Agility + Innovation + Scale + Cost effectiveness Slide July 28, 2009 Made available under Creative Commons License Lead to Win
  24. 24. Why Talk About Ecosystems 1. Willingness to pay - opportunity cost = Value 2. Appropriate value vs. create the value Reduce/Share Risk Increase Capability • lower market entry barriers • reduces barriers to entry • facilitates customers engagement • access to specialized skills • diversity provides resilience & early • move faster (both response time & adaptation) indication of changes • fills gaps in capability Reduce Cost • reduces regional impacts - • share infrastructure (increase global access & intelligence variable over fixed) • offsets small size • shared market development • harness innovation & capabilities globally Makes you More Competitive Slide 24 July 28, 2009 Made available under Creative Commons License Lead to Win
  25. 25. Need to Co-Create with Customers • Leveraging ecosystems to engage customers – co-discover new concepts – customization or extensions – access to specialized resources – co-develop solutions – all of the above – all but customization • create pull for value proposition • bring new opportunities to table • provide context for solutions Slide 25 July 28, 2009 Made available under Creative Commons License Lead to Win
  26. 26. What is An Ecosystem? NOAA Technical Memorandum Slide 26 July 28, 2009 Made available under Creative Commons License Lead to Win
  27. 27. Characteristics of Strong Ecosystem Focus • vision and ideas Ecosystem Anchor • volunteering/sharing Apple personal computing • trading & transacting • co-evolution Unix interoperability Java portability Web 2.0 modularity Auto transportation Not about efficiency but rather diverse, dispersed modular clusters Slide 27 July 28, 2009 Made available under Creative Commons License Lead to Win
  28. 28. What is a Business Ecosystem? High • Blocks change Dominator • Absorbs innovation Stable Resistance Environmental • Productivity Condition • Stability Keystone • Creates niches Niche Low Unstable • Slow • Agile • Static Resilience • Innovative • Independent Requires alignment around vision and development to perform Slide July 28, 2009 Made available under Creative Commons License Lead to Win
  29. 29. Role of a Keystone Architectural Productivity of the ecosystem Control – vision & focus • Dominant design – relationships – engagement to solve problems External Operations • Attract members Stability • Sustain value – prevent/fill gaps • Attract customers – provide ‘air cover’ Drive innovation Create ‘niches’ (innovation) • Create new value – sustain value • Connect to adjacent systems Slide 29 July 28, 2009 Made available under Creative Commons License Lead to Win
  30. 30. Role of Niche Players Drive sustained innovation Select sustainable niche & focus (e.g Quicken) – focus on value creation – contribute to variety Lever services from keystone Provide complementary assets • concentrate on enhancing the niche value • collaborate vs compete • align to dominant design • value-add Position product as extension Invest in interactions of system vs standalone • collaborate Tradeoff risk & negotiation power against productivity Slide 30 July 28, 2009 Made available under Creative Commons License Lead to Win
  31. 31. What Makes a Good Niche Player • Attributes IBM – agility • context = vertical solutions – speed & breadth of innovation • challenge = cost structure & volume – contribution to health • customization of vertical – partnering ability solutions • Getting deployed • breakthrough ideas – easy of interaction Nortel – fit to solution • context = vertical solutions • Staying deployed • challenge = cost & capability – deliver • platforms for vertical solutions – stay ahead • diversity - number and breadth of partner products Slide 31 July 28, 2009 Made available under Creative Commons License Lead to Win
  32. 32. Dominant Players • Innovators dilemma attributes – large size and market power • can’t change very fast • culture of ownership & control • fear open source/meritocracy – don’t encourage diversity - the Borg • block changes (market power) • Absorbs change (acquisition) – some examples (Microsoft, SAP, Nortel) Grow at the expense of ecosystem players Slide 32 July 28, 2009 Made available under Creative Commons License Lead to Win
  33. 33. Applying Ecosystem to your Business B. Rules A. Players Choose C. Links to other environments ecosystem • Added value Choose role • Tactics Identify players E. Changes Customers Customers Users and beneficiaries Business Competitors Complementers Unit Keystone Orchestrators By standers Problem makers Suppliers D. Outcomes Slide 33 July 28, 2009 Made available under Creative Commons License Lead to Win
  34. 34. Ecosystem Health Metrics The dimensions used to measure business ecosystem health are: • Diversity measured as heterogeneity of members; • heterogeneity of products and services; and • heterogeneity of interactions (internal and external) • value creation • Productivity measured as economic productivity of individual members and rate of product and service releases • sustained translation effort to productive work • improvement over time • innovation & lower cost (new products, shared assets) Slide 34 July 28, 2009 Made available under Creative Commons License Lead to Win
  35. 35. Ecosystem Health Metrics(cont’d) Robustness measured as change in membership numbers and diversity during times of stress and change in productivity during times of stress • survival rate • persistence of structure • predictability of structure • limited obsolescence • continuity of user experience • Commitment measured as income of the keystone; number of members whose main purpose is to enhance ecosystem; and number of products and services introduced to enhance community Slide 35 July 28, 2009 Made available under Creative Commons License Lead to Win
  36. 36. Co-Evolution vs Collaboration? Traditional Collaboration CoEvolution Form of Fixed links among static Shifting webs among evolving Collaboration business businesses Objective Efficiency & economy of scope Growth, agility, and economies of scope Internal Dynamics Collaborate Collaborate & compete Focus Content of collaboration Content & number of collaborative links Corporate Role Drive collaboration Set collaborative context Business role Execute collaboration Drive & execute collaboration Incentive Varied Self interest Business metrics Performance against budget, Performance against competitors in preceding year, sister BU growth, share, profits adapted from K Eisenhardt Slide 36 July 28, 2009 Made available under Creative Commons License Lead to Win
  37. 37. Difference between an Ecosystem & Developer community Attribute Ecosystem Developer Community Focus Partner Community Supply Chain (members, customers) Power Collaboration, speed, Ownership, control innovation Market power Meritocracy Leadership Keystone Dominant Player (values) (health of community) (health of itself) Scale Proportional to Proportional to size of members dominant company (push (pull marketing) marketing) Responsiveness Pace of members Pace of dominant player Value independent, distributed Self contained Examples Eclipse (open source) Microsoft Apple SAP Slide 37 July 28, 2009 Made available under Creative Commons License Lead to Win
  38. 38. Ecosystem Uniqueness • focus on monetization vs creation/innovation • relationships more important than technology • rewards performance not collaboration Slide 38 July 28, 2009 Made available under Creative Commons License Lead to Win
  39. 39. Ecosystem Design • There are eight core aspects to ecosystem design: – Vision, leadership and governance – Platform foundation – Niche architecture – Intellectual property regime – Global reach mechanism – Deal flow orchestration mechanism – Health improvement mechanism – Outreach • Innovation leads to contribution – companies need innovation for themselves – innovate around common, shared building blocks/platforms not value added • Keystone role is critical – must evolve the platform - maintain value proposition to members - look after them – must sell the value - promote membership Slide 39 July 28, 2009 Made available under Creative Commons License Lead to Win
  40. 40. Global Ecosystems In Action Ecosystem Anchor Keystone Type Eclipse Product Non-Profit Open Source Apple Service Commercial Proprietary Microsoft Product Commercial Proprietary Coral CEA Process Non-Profit Open Slide 40 July 28, 2009 Made available under Creative Commons License Lead to Win
  41. 41. What Is Eclipse* Member Based Open Source Ecosystem • Licensing model for sharing co- evolved innovation • Project model for coordinating investments & activities • Governance model to ensure a level playing field for all Your Value participants • Technical architecture for the Shared Platform platform • Technologies • Architectures, designs and assets used to build market offers • Components, products and services • Legal and licensing framework • Processes * from Eclipse Foundation Slide 41 July 28, 2009 Made available under Creative Commons License Lead to Win
  42. 42. Considered a Successful Ecosystem • >200 members • 175 members deliver solutions based on offerings • >1595 enhancements from members • 7 well established niches • basis for 3rd party training & consulting services • 10 global distributors • market leadership • 18M LoC from 23 open source projects in Jun 08 • 800,000 downloads a month Slide 42 July 28, 2009 Made available under Creative Commons License Lead to Win
  43. 43. Eclipse: What Makes it Successful? • disruptions create significant opportunity – e.g. 2.27M developers now on Eclipse & competitive field reduced to 2 (Microsoft) • coordinate and co-evolves innovation • drives alignment of vision • focus on business value, participation, open, modularity • build healthy, profitable ecosystem – drives innovation via projects, attracts committers – vendor neutral, fosters adoption, large, diverse membership – finds growth opportunities, increases niches & connects them • strong trust relationship from vendor neutral • standards based interfaces and components • 10 employees in Ottawa drive 917 committers; 100k dev in Ontario alone; 180+ companies Slide 43 July 28, 2009 Made available under Creative Commons License Lead to Win
  44. 44. Apple Ecosystem Relationships Accessories Customers Platform iPhone Distribution Education iTunes Apple Customers Applications Games Music Slide 44 July 28, 2009 Made available under Creative Commons License Lead to Win
  45. 45. Apple Applications Store • 10,000 Applications • 1,000,000,000 downloads in 9 months • huge development community • spread global very rapidly Shows growth, ability to harness, win for all Slide 45 July 28, 2009 Made available under Creative Commons License Lead to Win
  46. 46. Microsoft and Ecosystems Then Now IBM Dominator + Keystone Hardware Telecom Internet OS Office Niche ... Open Proprietary Nurture ecosystem Flexible Control + Public interfaces Collaborative Acquisitive Resistance -> Resilience • developer productivity, help from community Both models • H/W & Driver developer community • Office developer community - get help you need • developer community • partner ecosystem Slide 46 July 28, 2009 Made available under Creative Commons License Lead to Win
  47. 47. And Therefore ....? • participation in ecosystem is a strategic decision • motivated by business performance • behaviour is different than developer community - need to incent change • may be best way to be nurtured - new technology, new species • successful relationships cannot be a force fit • powerful tool if used correctly • beware - the complexity defies management Slide 47 July 28, 2009 Made available under Creative Commons License Lead to Win
  48. 48. Building a CEA Ecosystem ... !"#$%&!'( Investment • Catalyst • Magnifier of investment 2. Attract members & business (Business development) Keystone 1. Lower technology barriers (sandbox) coral cea 5. Build capacity & talent (Knowledge & Dissemination) ICT cor Collaboration & co-creation Health Energy Finance 4. support implementation (commercialization) Oil & Gas Education Domestic International Value • Companies COR A • Skilled jobs Results Results • Talent 3. Fill gaps process, • Products/services technology, skills • Revenue growth (entrepreneurial) • Leadership Member companies Customers Customers International members Customers Customers Customers Customers Slide July 28, 2009 Made available under Creative Commons License Lead to Win 48
  49. 49. Why Communications Enablement .....embedded Telecom as an Example Customer Service Communications Enabled Application • Integrated set of IT and Communications technology components • Provides communications capability to an IT application • Reliant upon communications technology to accomplish objectives Customer Quality Satisfaction Healthcare Safety and Security Slide 49 July 28, 2009 Made available under Creative Commons License Lead to Win 18
  50. 50. Capability Set Communications IT Applications Building Blocks Building Blocks Subscriber Call Presence Location Purchasing Profile History E-Mail Fulfillment Click-to- Conf- Order Text-Chat Video Imaging SAP Call erencing Entry Voice Sharing Web Billing Energy Any Comms Healthcare Mgmt Vertical New Tools to create new value * from Nortel public presentation Slide 50 July 28, 2009 Made available under Creative Commons License Lead to Win
  51. 51. !"#$%&!'( OneCoral CEA Leverage Mode of oral cea coral cea !"#$%&!'( COR A L C E A Slide 51 July 28, 2009 Made available under Creative Commons License Lead to Win
  52. 52. !"#$%&!'( Value Proposition Coral CEA Value Elements Assets • Reduce pre-sales, go-to-market and • Orchestrator, customer and large development costs company opportunities and deal flows • Leverage members to deliver more • State of the art platform (architectures, oral ceacomprehensive value propositions coral cea !"#$%&!'( software modules, and processes) to: • build their own market offers using • Decrease time-to-cash • Strengthen specialization core services and products with a • Increase credibility and brand value standard infrastructure environment • co-evolve complementary • Reduce risk of defining and exploiting components, products and opportunities solutions • Strengthen collaboration with other • explore and advance technology ecosystem members A L C E A COR • showcase their CEAs • Harness global innovation into • Lead projects, commercialization profitable new market offers services, and training and educational programs that support a global leadership position in CEAs • Research initiatives Slide 52 July 28, 2009 Made available under Creative Commons License Lead to Win
  53. 53. How to Leverage an Ecosystem (Strategically Driven) • Participate - active engagement / membership – meet & form strong relationships – discuss real issues • Embrace the culture – reciprocal commitments - share – reward performance not collaboration – brainstorm for best ideas • Focus – realistic analysis of cost/benefit – recognize that you learn as you go – cut stale links • Get incentives right – self interest – business performance Slide 53 July 28, 2009 Made available under Creative Commons License Lead to Win
  54. 54. Your Investment • provide visible support • align to vision & dominant design – enhance the system – share intelligence • contribute tools to enhance capability – reduction in overall cycle time – enable 3rd parties – open licensing of assets • enhance overall richness of ecosystem – bring opportunities – bring friends Slide 54 July 28, 2009 Made available under Creative Commons License Lead to Win
  55. 55. Investing in the Health Strengthen – Diversity: Join, contribute, participate – Productivity: Contribute, collaborate, compete – Robustness: Persistence, scale Slide 55 July 28, 2009 Made available under Creative Commons License Lead to Win
  56. 56. References 1. Moore, James F. (2006) Business Ecosystems and the View from the Firm, The Antitrust Bulletin, Vol 51, No. 1/Spring 2006. Draft of this paper is at: http:// cyber.law.harvard.edu/blogs/gems/jim/MooreBusinessecosystemsandth.pdf 2. Iansiti, Marco and Roy Levien (2004) The Keystone Advantage: What the New Dynamics of Business Ecosystems Mean for Strategy, Innovation, and Sustainability: http://www.amazon.com/gp/product/1591393078/ ref=pd_ecc_rvi_3/102-7940474-2044159?%5Fencoding=UTF8 3. James F. Moore (1996) The Death of Competition: Leadership and Strategy in the Age of Business Ecosystems. HarperCollins Publishers, Inc. New York. NY. 4. Peltoniemi, Mirva (2006) Preliminary theoretical framework for the study of business ecosystems, Complexity & Organization, issue 1, 10-19. 5. Eclipse Foundation : www.eclipse.org 6. Iansiti, Marco and Roy Levien (2004) Keystones and Dominators: Framing Operating and Technology Strategy in a Business Ecosystem: http:// www.keystonestrategy.com/pdf/EcosystemStrategy.pfd 7. Bailetti, Tony (2009) Business Ecosystems: A new form of organizing creative individuals worldwide. Carleton University Speaker Series Slide 56 July 28, 2009 Made available under Creative Commons License Lead to Win
  57. 57. Moment of truth • Select a market offer • Describe business model of market offer selected, i.e., provide narrative that defines: – Importance of getting job done, solving problem or satisfying need – Value delivered to customers and other key stakeholders – Explanation of attractive profits – Control over or access to key resources and processes to deliver value • Describe customer value in terms of: – Benefits from what is purchased – Benefits from rights over assets purchased – Benefits from how buyers purchase – Emotional benefits – Financial and non-financial burdens • Compute the strength of the business model and identify ways to improve it Slide 57 July 28, 2009 Made available under Creative Commons License Lead to Win
  58. 58. Notes • Assign weights to reflect the importance of each factor for your opportunity – Weights can range from 0 to 9 (0 = not important at all, 9 = very important) – Rule of thumb: start with equal weights of 5 for all factors, then increase or decrease as appropriate for each factor • Assign scores according to agreement with target statements – Scores can range from 1 to 7 (1 = strongly disagree, 7 = strongly agree) • Compute strength for each factor (weight x score); sum the columns • Compute business strength as the sum of the strength column divided by the maximum possible value (sum of weights x 7 maximum score) • Rule of thumb for a strong business model: – Each score 6 or better – Business model strength > 85% • Objective is to strengthen business model, not argue about absolute score Slide 58 July 28, 2009 Made available under Creative Commons License Lead to Win
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