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Innovation
                                                                ecosystems




•   Why look at ecosystems?

•  ...
Innovation theory has concentrated on challenges for innovator




                                                       ...
In reality, a lot of succesful leap-frog innovations are ecosystem
innovations




  Parts                                ...
Neglecting the ecosystem may dramatically liimit the innovation success



                                             Mi...
Some companies are changing their view on the outside world




           Linear model                                Net...
Example: Pharma company‘s Key Opinion Leader ecosystem



                                                     Reduce comp...
Example: Google for „innovation ecosystem“




                         HLP HIRZEL LEDER & PARTNER   7
Potential ecosystem goals



  Share needs systematically
       Don't talk about the end-product application, but you tal...
Ecoystem strategies



  Strategic       Car company in search of new battery technology?
   intent
                  Deve...
THE EXTENDED VALUE CHAIN
PERSPECTIVE



            HLP HIRZEL LEDER & PARTNER   10
Ecosystem in a high-tech industry (Lithography)
- Looking at tier 1 players that drive innovation -



      Component    ...
Correlation between ecosystem innovation risk and the time-to-market
strategy (Case study: Lithography)


                ...
THE NETWORK STRUCTURE
PERSPECTIVE



           HLP HIRZEL LEDER & PARTNER   13
Open Innovation ecosystem at Deutsche Telekom



               Stage          Trend
                              radar
 ...
Two generic structures for organizing external co-innovators



                             Organizing external co-
     ...
Characteristics of the two generic models




        Collaborative community                                   Competitiv...
THE INNOVATION RISK MANAGEMENT
PERSPECTIVE



            HLP HIRZEL LEDER & PARTNER   17
Dealing with risk in innovation ecosystems



                                 Complement challenge

                 High...
Ecosystem of innovation service providers



  Strategy consulting organizations, Technology service providers, Product
  ...
THE ECOSYSTEM MANAGEMENT
PERSPECTIVE



           HLP HIRZEL LEDER & PARTNER   20
Best Practice: Typical Co-Innovation Process of Established Platform
Providers




                          HLP HIRZEL LE...
Best Practice: Co-Innovation Process & Common Control
  Mechanisms




Legend:
   [a]    Market Regulative Control: Consum...
About …


Frank Mattes
www.open-innovators.com



  More than 15 years of experience in
  managing projects and innovation...
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Innovation ecosystems

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Innovation ecosystems

  1. 1. Innovation ecosystems • Why look at ecosystems? • How can ecosystems be identified? • What could be goals and strategies in ecosystem management? • How can innovation ecosystems be managed? October 2010 HLP HIRZEL LEDER & PARTNER
  2. 2. Innovation theory has concentrated on challenges for innovator • Funnel Design / manage- • Stage Gate ment int. process • Portfolio management • … • Co-ideation / Crowdsouring Challenges for Extension of • Co-creation innovator cognitive frame • Lead user concepts • R&D-driven Open Innovation • Crossing the chasm Influencing cus- • Key Account Marketing tomers / channels • Innovation communication HLP HIRZEL LEDER & PARTNER 2
  3. 3. In reality, a lot of succesful leap-frog innovations are ecosystem innovations Parts Parts Assemblies Music labels Airlines Publisher Airports / Equipment manufacturer Mobile carriers Regulators Software developpers Training Simulators … … HLP HIRZEL LEDER & PARTNER 3
  4. 4. Neglecting the ecosystem may dramatically liimit the innovation success Michelin introduced the first run-flat tyre (PAX) in 1997 Less than 1% of replacement tire sales in the U.S. in 2005 A Michelin study released in 2008 found that only 3 percent of drivers Car manufacturers worldwide want run-flat tires. Dealers More and more car manufacturers Repair shops (exception: BMW) refrain from offering run-flats as standard fitting … HLP HIRZEL LEDER & PARTNER 4
  5. 5. Some companies are changing their view on the outside world Linear model Networked model / ecosystem HLP HIRZEL LEDER & PARTNER 5
  6. 6. Example: Pharma company‘s Key Opinion Leader ecosystem Reduce complexity Positioning Monitor competive threats Competitive moves Uncovering / forstering new partners HLP HIRZEL LEDER & PARTNER 6
  7. 7. Example: Google for „innovation ecosystem“ HLP HIRZEL LEDER & PARTNER 7
  8. 8. Potential ecosystem goals Share needs systematically Don't talk about the end-product application, but you talk about the science problem you're trying to solve P&G’s experience: Put your name on it and you get twice the response rate Build a network of weak ties Become first port-of-call in your industry Build business empathy HLP HIRZEL LEDER & PARTNER 8
  9. 9. Ecoystem strategies Strategic Car company in search of new battery technology? intent Develop existing invent-it-myself innovation model? Look for game-changer? … Idea nets? Ecosystem Solution nets? Cost innovation networks? Cross-industry innovation nets? HLP HIRZEL LEDER & PARTNER 9
  10. 10. THE EXTENDED VALUE CHAIN PERSPECTIVE HLP HIRZEL LEDER & PARTNER 10
  11. 11. Ecosystem in a high-tech industry (Lithography) - Looking at tier 1 players that drive innovation - Component Complementor Supplier Focal firm Customer Component Complementor Supplier Optics Mask Lithography Semiconductor Energy source Resist HLP HIRZEL LEDER & PARTNER 11
  12. 12. Correlation between ecosystem innovation risk and the time-to-market strategy (Case study: Lithography) Mean market share Generation Ecosystem innovation challenge Proximity Projection G-Line I-Line DUV 248 DUV 193 Pioneers Early Followers Late Followers Component Complement HLP HIRZEL LEDER & PARTNER 12
  13. 13. THE NETWORK STRUCTURE PERSPECTIVE HLP HIRZEL LEDER & PARTNER 13
  14. 14. Open Innovation ecosystem at Deutsche Telekom Stage Trend radar Foresight Ideation workshops Executive forums Customer integration Corporate Venturing Endowed Consortia Research uni chairs research Internet platform Develop- ment Joint deve- lopments Strategic alliances Commer- cialization Test Spin outs market Resource requirements HLP HIRZEL LEDER & PARTNER 14
  15. 15. Two generic structures for organizing external co-innovators Organizing external co- innovators Collaborative community Competitive market HLP HIRZEL LEDER & PARTNER 15
  16. 16. Characteristics of the two generic models Collaborative community Competitive market • Complementary products, mix-and- • Substitutable complementary match offerings, co-production products • Informal governance, norm-based • Formal governance, rule-based interactions interactions, contractually oriented • External co-innovators: Primarily co- • External co-innovators: Primarily operational relationships competitive relationships • Extrinsic plus intrinsic motivators • Profit motivator • Value capture by platform owner • Value capture by platform owner through enhanced demand for the through direct contracting and platform licensing HLP HIRZEL LEDER & PARTNER 16
  17. 17. THE INNOVATION RISK MANAGEMENT PERSPECTIVE HLP HIRZEL LEDER & PARTNER 17
  18. 18. Dealing with risk in innovation ecosystems Complement challenge High Hard eCars drives Production Production Ramp-up risk + Ramp-up risk Adoption risk Component challenge New eBooks shampoo Internal Adoption risk challenges Low Low High HLP HIRZEL LEDER & PARTNER 18
  19. 19. Ecosystem of innovation service providers Strategy consulting organizations, Technology service providers, Product management firms, Outsourced product development firms, other niche service providers (including training program, design firms, and others) Key to excellence in 1980 – 2000: Process excellence (GE, DELL; WalMart) Key to exccellence in 2000 – 2020: Innovation excellence (Apple, Google, P&G) This ecosystem of providers will be an increasingly important part of a comprehensive innovation strategy. It will be up to very knowledgeable and “connected” individuals within companies to help manage the diverse players, and connect suppliers to the right role, at the right point in the innovation process. Opportunity for Onnovation / Sourcing professionals who want to play a more strategic role in their organizations. HLP HIRZEL LEDER & PARTNER 19
  20. 20. THE ECOSYSTEM MANAGEMENT PERSPECTIVE HLP HIRZEL LEDER & PARTNER 20
  21. 21. Best Practice: Typical Co-Innovation Process of Established Platform Providers HLP HIRZEL LEDER & PARTNER 21
  22. 22. Best Practice: Co-Innovation Process & Common Control Mechanisms Legend: [a] Market Regulative Control: Consumer-based service verification and auditing; [b] Co-regulative Control: Guiding principles of service development, providing development rules or tools for coherent and observable service supply; [c] Restrictive Control: Platform access regulations; [d] Sanctional Control: Coercive action up the exclusion of services or complementors; [e] Motivational Control: Development support, community building, funding, etc.; [f] Informative Control: Information about consumer behavior, platform evolution, value creation opportunities. HLP HIRZEL LEDER & PARTNER 22
  23. 23. About … Frank Mattes www.open-innovators.com More than 15 years of experience in managing projects and innovation Worked for medium-sized national consulting companies as well as for The Boston Consulting Group Worked at C-level for an IT and a Professional Services company Author of several books and articles Currently working at www.hlp- online.de HLP HIRZEL LEDER & PARTNER 23

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