This document discusses the importance of ecosystem thinking for innovation success. It uses the example of Nokia's failed 3G phone launch to show how the company did not understand co-innovation risks. Nokia invested heavily in being first to market with a 3G phone, but other partners like software developers did not release supporting innovations quickly enough. As a result, users had a "Ferrari without roads" since the phone's full capabilities could not be utilized without other complementary innovations. The lesson is that an innovation's success depends on the entire ecosystem, not just the product itself, and companies must consider how to foster cooperation across networks of partners.

1. A tree is beautiful...

2. ...but a tree cannot thrive without the forest.

3. Innovators and designers have a lot to learn from how ecosystems
work, or even the most beautiful products will fail.
Don’t just take my word for it:

4. “No matter your situation, your success
depends not just on your own efforts but
on the ability, willingness, and likelihood
that the partners that make up your
innovation ecosystem succeed as well.”
Ron Adner, The Wide Lens

5. So it’s clear that the context is as important as the idea. Here’s an
example of an innovative product that failed to read the landscape.

6. NOKIA:
this example has been adapted from The Wide Lens (2012)

7. Mobile phone users in Western Europe
In 1999 there were 700 million mobile phone users across the globe;
70% of adults in Western Europe already had a mobile phone. How
could a company like Nokia persuade users to purchase the next
handset in a saturated market?

8. The industry consensus was that 3G was the solution. 3G offered
much more than just telephone calls on the move; it could offer
a new lifestyle.

9. 3G promised to be an advancement that enabled everyone to win...
Telecom
operators make
more money
Handset makers
sell new devices
Customers
enjoy browsing
the web
Governments
sell 3G rights
Content
partners (BBC,
CNN, ESPN, etc)
sell streaming
3G
50
50
50
50
50
50
£££

10. ...and Nokia invested heavily to be at the forefront. In 2002 they
launched the world’s first 3G-capable phone. They believed that they
had won first-mover advantage.

11. Two years earlier, Nokia had confidently predicted that the 3G market
would be 300 million people strong by 2002. But they were radically
wrong. It wasn’t until 2008 that the 300 million figure was reached.
Actual 2002 Figures
3G user predictions for 2002
*Each person represents 2 million

12. Their mistake? They did not understand the co-innovation risk.
404
NOKIA

13. The success of a 3G phone, with all of its fantastic new capabilities,
depended on the commercialisation of other new innovations by
unfamiliar partners.

14. The handset might have been terrific, but users needed software to
make the most that 3G could offer. And Nokia didn’t make software.

15. Back in the race to 2G there was a familiar winning formula:
create a good product, in time, to spec, ahead of your rival.
But with 3G, success depended on handset makers to work in tandem
within an innovation network.

16. Those other innovators didn’t keep pace, leading one observer to say,
“the 6650 was a Ferrari in a world without roads”
(Ron Adner)

17. By 2007 the paradigm had changed. The launch of the iPhone set a
new standard that Nokia couldn’t compete with. The greatest selling
point of Apple’s product was arguably the software ecosystem.
Here’s what the then-Nokia CEO Steve Elop said at the time:
13:37 48%

18. "...there is intense heat coming from our
competitors, more rapidly than we ever
expected. Apple disrupted the market by
redefining the smartphone and attracting
developers to a closed, but very powerful
ecosystem."
Steve Elop, Nokia

19. We can imagine other smart ideas that could suffer from a similar lack
of ecosystem thinking. For example:

20. electric vehicles will never take off in a city that doesn’t have enough
charging points,

21. homeowners might be reluctant to install solar panels if they cannot
sell excess energy to the grid,

22. and a car manufacturer could not operate a successful
remanufacturing facility for its engines unless it had the
cooperation of a network of garages.

23. In all cases, the key appears to be cooperation, communication
and an ability to spot a mutual opportunity. Information, ideas and
materials flow through the whole system.

24. In other words, an innovation system has to mimic the ecosystem of,
say, a forest. Forests thrive through dynamic flows of information,
energy and nutrients.

25. ...and the tree cannot thrive without the forest.
CAFÉ

26. This slideshow was produced by the Ellen MacArthur Foundation.
Find out more about their work on the circular economy
at ellenmacarthurfoundation.org