Ecosystem Design Michael Held APEX2012

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Presentation on Ecosystems, how they work and how businesses can make use of them as part of the Learning Journey session at APEX conference 2012. Watch the talk at https://www.youtube.com/watch?v=jRQC6yUQiIA

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  • My professional interest in ECOSYSTEMS started in 2006, triggered by two events:#1 Digital content, content accessibility, interoperability, control … became big topics in CE. Users needed help to bridge the gap between the old world of physical connectors, physical media and multiple remote controls to the new world of CONNECTIVITY. Design in Philips was driving this as ONE ecosystem design across multiple business groups.We failed as in most cases Design was merely decoration but not how the stuff really worked and connected. Product platforms and architectures didn’t work together, external partners didn’t provide content consistently across devices, there was no simple way of interacting with multiple of our devices at the same time … in short: the whole was less than the sum of its parts.
  • #2 the Nike & Philips partnership that started in 2002 and was our attempt in bringing technology, entertainment and sport closer together, or better: make technology more emotionalended in late 2005.
  • but just a few months later Nike teamed up with Apple on Nike+ for iPod. What happened?http://www.current.com.au/2006/05/24/article//UAOLSOLYTF.html
  • 1. Start:They sell Hardware and Accessories obviously to make money, BUT: the new hardware is merely sensors connecting to already existing hardware > iPods and running shoes2. Connected:iTunes already existed and was the perfect Trojan Horse because it helped speed up adoption and many users already knew how to use it (even PC). Via iTunes they started to sell curated content for runners, made playlists for running available, delivered podcasts for working out … in addition a small plug-in allows for web-upload of data to the Nike+ portal.3. Sharing: The Nike+ portal provides instant access to new and historic data. It provides maps of your run if GPS data points are available, puts your runs in context of previous runs, allows you to set goals … there is a Nike+ community and you can compete against each other, participate in small and big, local, regional or even global challenges. Runners can also instantly share their runs and achievements with others and your friends in existing social networks. FULLY CONNECTED to allow SHARING & COMMUNICATION
  • 1. Start:They sell Hardware and Accessories obviously to make money, BUT: the new hardware is merely sensors connecting to already existing hardware > iPods and running shoes2. Connected:iTunes already existed and was the perfect Trojan Horse because it helped speed up adoption and many users already knew how to use it (even PC). Via iTunes they started to sell curated content for runners, made playlists for running available, delivered podcasts for working out … in addition a small plug-in allows for web-upload of data to the Nike+ portal.3. Sharing: The Nike+ portal provides instant access to new and historic data. It provides maps of your run if GPS data points are available, puts your runs in context of previous runs, allows you to set goals … there is a Nike+ community and you can compete against each other, participate in small and big, local, regional or even global challenges. Runners can also instantly share their runs and achievements with others and your friends in existing social networks. FULLY CONNECTED to allow SHARING & COMMUNICATION
  • 1. Start:They sell Hardware and Accessories obviously to make money, BUT: the new hardware is merely sensors connecting to already existing hardware > iPods and running shoes2. Connected:iTunes already existed and was the perfect Trojan Horse because it helped speed up adoption and many users already knew how to use it (even PC). Via iTunes they started to sell curated content for runners, made playlists for running available, delivered podcasts for working out … in addition a small plug-in allows for web-upload of data to the Nike+ portal.3. Sharing: The Nike+ portal provides instant access to new and historic data. It provides maps of your run if GPS data points are available, puts your runs in context of previous runs, allows you to set goals … there is a Nike+ community and you can compete against each other, participate in small and big, local, regional or even global challenges. Runners can also instantly share their runs and achievements with others and your friends in existing social networks. FULLY CONNECTED to allow SHARING & COMMUNICATION
  • Or visualized differently> Nike+ as a platform was enabled by iTunes = connected via clearly defined interfaces, some closed some open (today Nike+ is its own platform with multiple ways to connect, iTunes is not needed anymore)
  • So I looked into iTunes more closely. In 2005 BMW launched its first in-car iPod interface and Apple announced other brands would follow soonAlso in 2005 Apple added TV ShowsIn May 2006 Apple announced its partnership with Nike In September 2006 Apple announced the AppleTV as a hobby (on sale from March 2007 onwards) and started selling moviesIn January 2007 Apple unveiled the iPhone (on sale from June 2007 onwards)Within 1.5years iTunes started to enable a massive entertainment Ecosystem > Cars, TVs, shoes, ‘phones’ … were part of it. The digital Hub strategy was truly coming alive.
  • A blueprint for a basic Ecosystem connection > defined boundaries to let in a defined variety of content, deal with it on one seamless platform and broadcast it to a defined variety of output renderers / receivers.
  • A blueprint for a basic Ecosystem connection > defined boundaries to let in a defined variety of content, deal with it on one seamless platform and broadcast it to a defined variety of output renderers / receivers.
  • I looked into Ecosystem literature to see what smart people had to say about them. Ecosystems change with time. The basic components of an ecosystem can remain the same, butit is the rate of exchange of materials between components and the size of the components that change. An EcosystemCurrency is driving growth of and within an ecosystem. For Apple that is Entertainment, started with Music, then Movies/TV shows/Podcasts … then they added Sport, Gaming …
  • with the demotion of iTunes and the emphasize on iCloud they extended their Ecosystem reach to ALL DATA, way beyond Entertainment.
  • Ecosystems are mediumsfor increase, are facilitators and enablers. They provide a network for transactions, communication and sharing between their parts. Boundaries define the scope and manage the flow and supply of energy (currency) inside and from outside into the system. These boundaries are somewhat flexible and reactive towards the systems needs.Apple initially only defined few boundaries: USB>30-pin data exchange, file formats that can be imported and played back, store offer was limited … over time this expanded dramatically.
  • First there was only an iTunes store. With iOS they added ‘Apps’ which can more or less become and do anything a computer can do, are always connected to the web or in many cases to powerful cloud services that enable a lot more than what a pocket computer can do. They basically provide
  • Its all about aligned goalsIn Bernd Heinrich's book, Bumblebee Economics, the bumblebee hive is described as a living system with one singular goal: To gather enough energy to ensure the survival of the bumblebee's genetic information. A business ecosystem can be viewed as a system where the relationships established across different industries are mutually beneficial in order to become self-sustaining. This is clearly the case for Silicon Valley with the entrepreneurial industry, the venture capital industry needed to fund the entrepreneurial industry, and Stanford University, supplying the human capital needed to develop innovative/creative ideas and technologies. The goal of this ecosystem is to generate entrepreneurial ventures. Once an ecosystem is established, and is able to take first-mover advantage, it becomes very difficult for other regions to emulate. The region exhibits network effects and is able to establish lock-in since the switching costs associated with moving to another region are prohibitive. The collective costs of many moving out of the region (i.e. if another region tried to incentivize a large move) would be prohibitive. Thus current members have a clear incentive to remain, and new would-be entrepreneurs, venture capitalists and students interested in this industry have a significant incentive to relocate to this region.
  • Apples Developer program has the same goals: EntrepreneurialVenture CapitalDeveloping and nurturing talentInnovation: new technologies, new services, new business modelsLow barrier of entry > democratic
  • Currency > Energy flowing through and withinBoundaries are ‘somewhat’ closed > managed entry/exiMutually beneficial > Positive symbiotic relationships & shared goalsSelf-sustaining > Free flow of energy among meaningful diversity
  • Ecosystems evolve.In 1962 Everett Rogers book ‘The Diffusion of Innovations’ identified ecosystems as enablers for innovations to become successful. It was one of the first comprehensive studies of the innovation process. Innovations get adopted over time (maybe not as evenly distributed as the Bell curve suggests though).Rogers … pointed out that many innovations are slow to see adoption not for lack of appeal but for lack of an appropriate ecosystem. Those die early and quick. iTunes grew over-time, built up as an ecosystem = disruptive ideas start within existing ecosystems and affects them over time = makes it easy to get these innovations accepted.
  • Ecosystems evolve.In 1962 Everett Rogers book ‘The Diffusion of Innovations’ identified ecosystems as enablers for innovations to become successful. It was one of the first comprehensive studies of the innovation process. Innovations get adopted over time (maybe not as evenly distributed as the Bell curve suggests though).Rogers … pointed out that many innovations are slow to see adoption not for lack of appeal but for lack of an appropriate ecosystem. Those die early and quick. iTunes grew over-time, built up as an ecosystem = disruptive ideas start within existing ecosystems and affects them over time = makes it easy to get these innovations accepted.
  • This can be well observed by the development of playback solutions for music:In the beginning there was Radio for most people. It was simply a speaker with a built in receiver = Music or news that didn’t really stop.The introduction of the LP format helped Vinyl to take off and sales of record player skyrocketed. Radio was still popular in places where Vinyls were no good (like in cars) but was often relegated to a background/ambient music level by then (also because the TV became popular).The Philips Compact Cassette tape standard was open sourced in the 1960s (free for all) and soon allowed users to take their music to places, record own mixes and share music easier with others. In 1979 Philips and Sony introduced the Compact Disc (and started to license it in 1982) improving sound quality dramatically. In 2001 this all started to change with the introduction of the iPod, the move to PCs accelerated. Today the fastest growing audio systems stream music wirelessly from the Internet, like Sonos or Philips just announced wireless HiFi music system.
  • Each of these started with fairly low quality or niche use and had to work its way up.The Compact Cassette was meant for voice recordings but advances in noise cancelation and tape improvements made use for music recordings feasible. Easy recording was its killer feature.The Compact Disc was originally developed to store and playback sound recordings only, but the format was later adapted for storage of data, rewritable media,VCD, PhotoCD, DVD and now even BluRay (one could argue). MP3 was created as a lossy format to reduce the amount of data per song often resulting in low quality. Today we have lossless formats.MP3s paved the way for online streaming of content > lossless streaming?
  • It is clear that we have always simply wanted to listen to music. The available/popular/favored distribution media formats are driving hardware sales so this is a big deal for a CE company.
  • DSotMhad been the best selling LP in the late 60s and today is still #2 of all times best seling albums.When CD sales took off in the mid ’80s, Dark Side of the Moon dominated the CD sales charts for years, affirming the new format ready for mass adoption.When Apple launched iTunes Plus music tracks, mp3’s without DRM restrictions,in 2007 Dark Side of the Moon quickly rose to #1. A 350% increase in sales was reached in the week after the launch of iTunes Plus. Each ecosystem is driven by the content/energy/currency flow based on users activities reflecting their needs and goals within the various contexts of use. But ecosystems also have a history and users have expectations. Digital sales were treated as 1 to 1 replacement for CD sales while attempting to make them copy proof which CDs were not by that time (and before cassettes were deemed good enough for copies).
  • The Keystone Advantage In the first parts of the book ‘The Keystone Advantage’ authors Marco Iansiti and Roy Levien use the powerful example of biological ecosystems to show how companies can leverage complex emerging business networks for long-term success. A keystone “acts to improve the overall health of the ecosystem and, in doing so, benefits the sustained performance of the firm.”
  • The book’s title refers to “keystone species”, which proactively maintain the healthy functioning of their entire ecosystem for a simple reason: their own survival depends on it. These firms, rather than focusing primarily on their internal capabilities, emphasize the collective properties of the business networks in which they participate, and treat these more like organic ecosystems than traditional supply chain partnersA keystone “acts to improve the overall health of the ecosystem and, in doing so, benefits the sustained performance of the firm.”A classic dominator, “acts to integrate vertically or horizontally to directly control and own a large proportion of a network,” capturing most of the value created by the network and leaving little opportunity for the emergence of a meaningful ecosystem. A niche player is leveraging the assets of other firms and by doing so can focus on a narrowly and clearly defined business segment. Although the book is just 8 years old I believe its hard to find these clear categories today. There are still some similarities but companies ecosystem strategies are a lot more complex today than they were in the 90s or the early 2000s. They cited Enron and Apple as dominators and Microsoft and Wallmart as Keystones. Enron’s dominator strategy didn’t work out and Microsoft has to fight hard for its keystone position in consumer ecosystems.
  • Unless a keystone finds a way of increasing Ecosystem Productivity > growth, it will fail to attract or retain members. Apple is clearly becoming more of a keystone player, they must if they want to continue to grow. Google is not as open anymore as it used to be but legacy Android as a platform is still free for all and growing fast.So keystone players don't promote the health of others for altruistic reasons; they do it because it's a great strategy and ensures their own survival and prosperity..
  • They do so by creating value within the ecosystem and by sharing this value with other participants. Unless a keystone finds a way of doing this efficiently, it will fail to attract or retain members. But few organizations can be or should even attempt to be a "keystone" or "dominator" company. But you can increase ecosystem productivity by:Helping others to connect, simplifying the task of connecting to others within the system. making the creation of new products by third parties more efficient. enhance ecosystem robustness by consistently incorporating technological innovations and by providing a reliable point of reference that helps participants respond to new and uncertain conditions. encourage ecosystem niche creation by offering innovative technologies to a variety of third-party organizations. A keystones removal will lead to the catastrophic collapse of the entire system.
  • How to judge the value of an ecosystem? There are a few key metrics in my view:Ease of connecting to large amounts of content is often the value for consumers.The number of connections. When can investments be recaptured. When is the ecosystem large and robust enough to sustain new innovation? The network effect is crucial at the beginning and in judging returns. The diversity of elements and opportunities to experiment with mutations/evolve the ecosystem elements in favor of your own capabilities and value chains … is relevant for Ecosystem longevity.
  • From Belkin: WeMoWhat is WeMo?“WeMo is a family of simple, ingenious products that allow you to control home electronics from anywhere. Turn them on or off, trigger them with motion, even put them on a schedule.WeMo lives on your smartphone and uses your home WiFi and mobile internet. Setting up and using it is a snap. WeMo truly is your home at your fingertips.”
  • WeMo is a family of simple, ingenious products that allow you to control home electronics from anywhere. Turn them on or off, trigger them with motion, even put them on a schedule.WeMo lives on your smartphone and uses your home WiFi and mobile internet. Setting up and using it is a snap. WeMo truly is your home at your fingertips.
  • But, WeMo is not just a few products you interact with via an App. They are also connected to IFTTT = an online service that lets you create powerful connections with one simple statement/logic. They provide lots of basic ingredients for everybody to work with. By combining them via IFTTT users create recipes.
  • WeMo devices can be triggers as well as actions > over 100 today.
  • The mainly used ingreadients are:Triggers: Temperature/Weather, Mention/Mail/SMS, Schedule, MotionActions: Turn stuff On/Off, send notifications, store logsExamples
  • The mainly used ingreadients are:Triggers: Temperature/Weather, Mention/Mail/SMS, Schedule, MotionActions: Turn stuff On/Off, send notifications, store logsExamples
  • Over the last weeks I thought a bit what this could all mean for the airline industry. But without industry experience this seems a bit pretentious. So I thought about a few simple examples that could make a huge difference for me, for how I experience your ecosystem.
  • I WANT TO CONNECT but my airline doesn’t!What cruel person invented e-tickets?I always key in flight details into my calendar so I get alerted, have details with me at all times and my wife can access them as well. For airlines it would be easy to send me a standards compliant invite for my flights. I can then choose to edit them or even delete and this could be optional when confirming my booking …Lets hope the rumors are true and you are all getting on board with something like Apples Passbook or similar soon.
  • I WANT TO CONNECT but my airline doesn’t!What cruel person invented e-tickets?I always key in flight details into my calendar so I get alerted, have details with me at all times and my wife can access them as well. For airlines it would be easy to send me a standards compliant invite for my flights. I can then choose to edit them or even delete and this could be optional when confirming my booking …Lets hope the rumors are true and you are all getting on board with something like Apples Passbook or similar soon.
  • Just because I am confined to a narrow tube I am not willing to accept being disconnected, I am still in this world.Online survey WSJ 2012:492 American adults who have flown in the past year40% did not turn their phones off during takeoff and landing more than 7% left Wi-Fi and cellular communications functions active2% have been actively using their phones when they weren't supposed to.FAAThe iPad is currently the only tablet approved by the FAA as an Electronic Flight Bag, and American Airlines is the first commercial carrier with FAA approval to use the iPad in all phases of flight, the company highlighted this week in a press release.
  • The airline industry always was a service industry selling experiences and always had to operate within a complex network of partners.You don’t have to do everything yourself.Ecosystems enable value beyond your own products/services.Synergies between devices/services/partners are easier to realize.Success in an ecosystem is harder to copy because of your relationships you can control a larger amount of the currency flowing through it.
  • Ecosystem strategy requires not only a single minded goal but often a single instance for defining strategy and making decisions. Platform evolution and continuous improvements are expected today. Its all about open APIs so companies, their users and others can connect where it creates value.
  • Ecosystem Design Michael Held APEX2012

    1. Ecosystem DesignMichael HeldDirector Design ManagementPhilips Lifestyle Entertainment Hong Kong
    2. IntroductionHow I got hereBackgroundWhat I learned along the wayEcosystems in BusinessWhat smart people sayApplicationExamples and ToolsThoughtsAirline Experience
    3. Philips Consumer Electronics 2006
    4. Philips Nike
    5. Apple & Nike Ecosystem 2006
    6. Background
    7. Apple & Nike Ecosystem Elements 2006Hardware AccessoryExpected to Expected to make make more money, money, Nike Apple strength strength
    8. Apple & Nike Ecosystem Elements 2006 DataHardware Accessory Software TransferExpected to Expected to iTunes and Existing make make more iPod OS interfaces money, money, Nike already could be Apple strength existed used strength
    9. Apple & Nike Ecosystem Elements 2006 Data DataHardware Accessory Software Community Sharing Transfer AccessExpected to Expected to iTunes and Existing Nike+ web The Nike+ Instantly make make more iPod OS interfaces portal runner share your money, money, Nike already could be community runs & Apple strength existed used Challenges achievement strength
    10. Apple & Nike Ecosystem Elements 2006 LINK LINK
    11. Apple iTunes Software Ecosystem 2007
    12. Apple Ecosystem Analysis One Platform to seamlessly manage,Variety of Variety of ACCESS aggregate, BROADCAST content receivers create & edit, subscribe & publish from via to
    13. Apple Ecosystem Analysis One Platform Protocols, to seamlessly Protocols, Applications, manage, Applications,Variety of Variety of Standards, ACCESS aggregate, Standards, BROADCAST content receivers Connectors, create & edit, Connectors, OS subscribe OS & publish from via to
    14. Ecosystems are dynamic entities
    15. iTunes > iCloud
    16. Boundaries are „somewhat closed‟
    17. iTunes Store + App Store + … +
    18. Ecosystems are mutually beneficial
    19. Ecosystems summed up- Currency > Energy flowing through and within- Boundaries are „somewhat‟ closed > managed entry/exit- Mutually beneficial > Positive symbiotic relationships & shared goals- Self-sustaining > Free flow of energy among meaningful diversity
    20. Ecosystems in Business
    21. Ecosystem evolution Adoption rateAdoption Early Early Late EoL Innovators Adopters Majority Majority Laggards Time Based on Everett Rogers book ‘The Diffusion of Innovations’ (1962)
    22. Ecosystem evolution Adoption rateAdoption Early Early sudden death Early Late EoL Innovators Adopters Majority Majority Laggards Time Based on Everett Rogers book ‘The Diffusion of Innovations’ (1962)
    23. Music playback evolution
    24. Ecosystem evolutionPerformance Time Based on Clayton Christiansen’s book ‘The Innovators Dilemma’ (1997)
    25. Music distribution evolution
    26. The Dark Side of the Moon How to observe Ecosystem evolution?
    27. The KeystoneAdvantage A keystone “acts to improve the overall health of the ecosystem and, in doing so, benefits the sustained performance of the firm.”
    28. Becoming a valuable Ecosystem player“A companys choice of ecosystem strategy is governed primarily by thekind of company it is or aims to be.” Keystone Dominator Niche
    29. Increasing Ecosystem Productivity by #1 Create value within the ecosystem
    30. Increasing Ecosystem Productivity by #2 Share the value with other participants in the ecosystem.
    31. Ecosystem Value? Amount of Content? Metcalfes law? Biodiversity? Currency Network effect Mutations
    32. Application
    33. Belkin WeMo
    34. Belkin WeMo1. Save time by scheduling2. Take care while away, remote access/control3. Less to worry about, less to forget4. Automate as much or as little as you want
    35. Belkin WeMo <> IFTTT Protocols, Protocols, Applications, Applications, Triggers Standards, IF THIS Standards, THEN THAT Actions Connectors, Connectors, OS OS
    36. Belkin WeMo IFTTT recipes
    37. Belkin WeMo IFTTT recipes
    38. Belkin WeMo IFTTT recipes
    39. Thoughts
    40. Buying tickets now
    41. Buying tickets soon (hopefully)
    42. In flight
    43. Good news
    44. What I learnedFocus on the passenger. Make services optional but provide basicconnectivity (unlike many hotels).In a networked world distributed decision making rarely works.Platform evolution and continuous improvements are expected today.Collaboration has never been more important.There are no standalone products anymore, only experiences.People don’t buy systems.
    45. THANK YOU! michael.held@philips.com @onlineheld
    46. Sources: - http://www.officialcharts.com/chart-news/the-uks-first- official-streaming-chart-has-arrived-1385/Books - http://atomictoasters.com- The Keystone Advantage - http://kwmustlouis.wordpress.com- Diffusion of Innovations - http://www.poetpainter.com/thoughts/article/ia-- Bumblebee Economoics summit-2009-the-fundamentals-of-experience-design- - John Dighton ‘Ecology of Soil Organisms’Online - http://www.androidpolice.com/2012/08/21/samsung- galaxy-note-10-1-review-an-embarrassing-lazy-- https://en.wikipedia.org arrogant-money-grab/- http://www.current.com.au/2006/05/24/article//UAOLS - http://www.learnthat.com/define/view.asp?id=302 OLYTF.html- http://www.visualcomplexity.com/vc/project_details.cf m?index=152&id=152&domain Twitter- http://www.learnthat.com/define/view.asp?id=302 - Gartenberg https://twitter.com/Gartenberg/statuses/24334830381- http://hbswk.hbs.edu/item/3967.html 3672961- www.theverge.com - Carolina Milanesi- http://www.asymco.com https://twitter.com/caro_milanesi/statuses/243354965- http://ifttt.com 853233152- http://www.belkin.com/wemo/ - Benedict Evans- http://evolution.berkeley.edu/evosite/relevance/IIIC2C https://twitter.com/BenedictEvans/status/2381772499 urrency.shtml 94620929- http://www.nhm.ac.uk/research- - Dustin Curtis http://dcurt.is/twitters-graph curation/research/projects/worldmap/diversity/index.ht - Glenn Fleishman ml https://twitter.com/GlennF/status/2450475069023395- http://www.friday.com/bbum/2007/06/20/dark-side-of- 85 the-moon-the-porn-of-audio-media/

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