New Competitive Game
    How to Lever Ecosystems to Gain
              Advantage



Peter Carbone
May 2009

              ...
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:
                 •     what a business ecosystem is...
Why Do We Need Something New/Different
                                New Value …. Experience




        Scale - Knowled...
Why Ecosystems for Commercialization ...
 Our Challenge as A Small Country
    World Economic                Economist
   ...
The Business Models Have Changed
          Domestic

          Value Creation

          Supply Chain Management

        ...
Scope of Value Chain Driving Commercialization
Requires System Approach to Maximize Flow from Idea to Cash



            ...
Effectiveness of Commercialization Models

    Challenge is to address need for scale, agility, cost effectiveness
    and...
Why Talk About Ecosystems
               1. Willingness to pay - opportunity cost = Value
               2. Appropriate va...
Need to Co-Create with Customers
           • Leveraging ecosystems to engage
             customers
              – co-di...
What is An Ecosystem?




                                                                                          NOAA T...
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
                 ...
Ecosystem Dynamics
                                                            B. Rules
                        A. Players...
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
            Custom...
Apple Applications Store




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


               I...
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 Appli...
!quot;#$%&!'(                OneCoral CEA Leverage
                                          Mode of



oral cea
         ...
!quot;#$%&!'(             Value Proposition
                                       Coral CEA
                 Value Elemen...
!quot;#$%&!'(                          Status &CEA
                                                    Coral Membership
  ...
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...
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Day 2 Morning - Ecosystems (Carbone)

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Day 2 Morning - Ecosystems (Carbone)

  1. 1. New Competitive Game How to Lever Ecosystems to Gain Advantage Peter Carbone May 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 What does ecosystem based commercialization mean? 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 May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win
  3. 3. Introduction Upon Completion of this segment you will know: • what a business ecosystem is • what you can get out of an ecosystem • 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: • lever ecosystems for competitive advantage • address larger opportunities than you could address alone • lever open source for business advantage • lever open APIs (e.g. google maps) Slide 3 May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win
  4. 4. Why Do We Need Something New/Different New Value …. Experience Scale - Knowledge economy Superpowers Rapid, Disruptive Innovation Need: Agility + Innovation + Scale + Cost effectiveness Slide May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win
  5. 5. Why Ecosystems for Commercialization ... Our Challenge as A Small Country World Economic Economist Forum (GC Index) (2007 ICT Index Score) Conference Board (report card) Switzerland 1 United States 77.4 Finland 2 72.7 Economy B (11) Japan Sweden 3 South Korea 67.2 Innovation D (14) Denmark 4 United Kingdom 67.1 Environment D (14) Singapore USA Japan 5 6 7 Australia Taiwan Sweden 66.5 65.8 65.4 … Education & Skills Health A (3) B (8) Society B (10) Germany 8 Denmark 64.9 Netherlands 9 Canada 64.6 Consequences Canada 16 Switzerland 63.5 • Global competitors disruptive market entry • Faster commoditization of products/solutions • Difficulty in attracting new investment • Scale increasingly important Slide 5 May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win
  6. 6. The Business Models Have Changed Domestic Value Creation Supply Chain Management Control Global Tex Tex Appropriate Value Innovation Business ecosystems Value Delivery Commercialization Slide 6 May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win
  7. 7. Scope of Value Chain Driving Commercialization Requires System Approach to Maximize Flow from Idea to Cash Measure flow, capacity and value derived. Create Qualify Invest • IPR • Marketing • Business Systems Manage • Startups • Business dev • Tools • Cost reduction • University ideas • Partnering • Sales • Outsourcing • Patents • GTM • Legal • Support • … • Seed Investment • Organization support • … Supply Nurture Grow Scale Slide 7 May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win
  8. 8. Effectiveness of Commercialization Models Challenge is to address need for scale, agility, cost effectiveness and innovation Supply Chain Technology Transfer Network Clusters Eco-System • Focus on gaps • Focus on research • Pick a domain (& • Create dominant design winner) • Invest to Manage • Invest to transition • Invest in health & dependencies • Invest to grow manage relationships • Commercialization • Self – adjusting • Commercialization • Static (relationships) competencies • Strength from scale, competencies • Difficult to scale • Market pull diversity • Market pull • Each component must • Go-to-market • Independent of • Go-to-market succeed component instance Challenged (cost Challenged (cost Challenged (scale and New model effectiveness) effectiveness) agility) Slide 8 May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win
  9. 9. 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 9 May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win
  10. 10. 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 10 May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win
  11. 11. What is An Ecosystem? NOAA Technical Memorandum Slide 11 May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win
  12. 12. 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 12 May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win
  13. 13. 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 May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win
  14. 14. 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 14 May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win
  15. 15. 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 15 May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win
  16. 16. 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 16 May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win
  17. 17. 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) Grow at the expense of ecosystem players Slide 17 May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win
  18. 18. Ecosystem Dynamics B. Rules A. Players Choose C. Links to other environments ecosystem • Added value Choose role • Tactics Identify players E. Changes Customers Customers Users and Business Competitors Complementers Keystone Orchestrators By standers Problem makers Suppliers D. Outcomes Slide 18 May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win
  19. 19. 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 19 May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win
  20. 20. 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 20 May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win
  21. 21. 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 21 May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win
  22. 22. 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 22 May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win
  23. 23. Ecosystem Uniqueness • focus on monetization vs creation/innovation • relationships more important than technology • rewards performance not collaboration Slide 23 May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win
  24. 24. 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 24 May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win
  25. 25. 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 25 May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win
  26. 26. 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 26 May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win
  27. 27. 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 27 May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win
  28. 28. 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 28 May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win
  29. 29. Apple Ecosystem Relationships Accessories Customers Platform iPhone Distribution Education iTunes Apple Customers Applications Games Music Slide 29 May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win
  30. 30. 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 30 May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win
  31. 31. 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 31 May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win
  32. 32. 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 32 May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win
  33. 33. Building a CEA Ecosystem ... !quot;#$%&!'( Investment • Catalyst • Magnifier of investment 2. Attract members & business (Business development) Keystone 1. Lower technology barriers (sandbox) coral cea 5. Build capacity & talent (Knowledge & Dissemination) ICT cor Collaboration & co-creation Health Energy Finance 4. support implementation (commercialization) Oil & Gas Education Domestic International Value • Companies COR A • Skilled jobs Results Results • Talent 3. Fill gaps process, • Products/services technology, skills • Revenue growth (entrepreneurial) • Leadership Member companies Customers Customers International members Customers Customers Customers Customers Slide May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win 33
  34. 34. Why Communications Enablement .....embedded Telecom as an Example Customer Service Communications Enabled Application • Integrated set of IT and Communications technology components • Provides communications capability to an IT application • Reliant upon communications technology to accomplish objectives Customer Quality Satisfaction Healthcare Safety and Security Slide 34 May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win 18
  35. 35. Capability Set Communications IT Applications Building Blocks Building Blocks Subscriber Call Presence Location Purchasing Profile History E-Mail Fulfillment Click-to- Conf- Order Text-Chat Video Imaging SAP Call erencing Entry Voice Sharing Web Billing Energy Any Comms Healthcare Mgmt Vertical New Tools to create new value * from Nortel public presentation Slide 35 May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win
  36. 36. !quot;#$%&!'( OneCoral CEA Leverage Mode of oral cea coral cea !quot;#$%&!'( COR A L C E A Slide 36 May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win
  37. 37. !quot;#$%&!'( 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 !quot;#$%&!'( software modules, and processes) to: • build their own market offers using • Decrease time-to-cash • Strengthen specialization core services and products with a • Increase credibility and brand value standard infrastructure environment • co-evolve complementary • Reduce risk of defining and exploiting components, products and opportunities solutions • Strengthen collaboration with other • explore and advance technology ecosystem members A L C E A COR • showcase their CEAs • Harness global innovation into • Lead projects, commercialization profitable new market offers services, and training and educational programs that support a global leadership position in CEAs • Research initiatives Slide 37 May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win
  38. 38. !quot;#$%&!'( Status &CEA Coral Membership • Sandbox Under construction • June 2009 formal launch Member Class Criteria Associate Organizations that participate in, and show support for the Coral CEA coral cea !quot;#$%&!'( coral cea view Coral CEA’s assets as an important part of their ecosystem Commercial Organizations that corporate and product strategy and offer products and services based on, or with, these assets. These organizations want to participate in the development of the Coral CEA ecosystem. Strategic Organizations that rely heavily on Coral CEA’s Sandbox as a platform for Consumers their internal development projects and/or act strategically building products and services built on, or with, the Sandbox. These COR A L C E A to influence and participate in the development of the organizations wish Coral CEA ecosystem. Strategic Organizations that view Coral CEA as a strategic platform and are Developers investing developer and other resources to further develop the foundation platform’s technology. Individual Individuals that are the core developers of the Coral CEA projects and can commit changes to project source code. www.coralcea.com Slide 38 May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win
  39. 39. 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 39 May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win
  40. 40. 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 40 May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win
  41. 41. Investing in the Health Strengthen – Diversity: Join, contribute, participate – Productivity: Contribute, collaborate, compete – Robustness: Persistence, scale Slide 41 May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win
  42. 42. 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 42 May 20, 2009 Peter Carbone - Made available under Creative Commons License Lead to Win

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