Building the Right Ecosystem for Innovation
As companies grapple with uncertainty and change, they must collaborate in new ways with unlikely partners.
When markets become disrupted by new technologies and competitors, many legacy companies struggle to keep up. They are often simply ill-prepared to develop new products and services in the midst of the uncertainty. Rather than attempting to go it alone in such circumstances, some companies reach out to partners with an eye toward building a broader ecosystem that will boost their competitive strength. But what types of ecosystems will work best in a dynamic environment?
Perhaps the most common forms of ecosystems are centralized, where the company functions as the “hub.” These tend to work well in stable environments where the key issues have already been worked out. In Amazon.com Inc.’s ecosystem for ebooks, for example, the online retailer works with the maker of its Kindle tablets and an array of book publishers but keeps the respective partners separate from one another.
However, in many settings today, the requirements are fluid and the objectives less defined. What’s needed, therefore, isn’t a broker or intermediary to link the various partners but an orchestrator who can find connections among different partners and encourage them to work directly with one another to identify new or nascent opportunities. Rather than building a centralized ecosystem, the orchestrator’s job is to create what we call an adaptive ecosystem, where partners develop significant projects or innovations together.1 For companies, this requires both imagination and flexibility.
Driving Innovation
In our most recent research on how organizations generate value from their corporate alliances and partnerships, we’ve studied how certain companies, including Samsung, Mastercard, Lowe’s, and Cisco Systems, have used adaptive ecosystems to define new offerings (see “About the Research”). Unlike traditional, centralized ecosystems, which tend to rely on partners that have fairly obvious tie-ins to the existing business model (as Amazon had with the Kindle maker and book publishers), companies using adaptive ecosystems frequently work with partners with less conventional capabilities.2 For this reason, we refer to them as “uncommon partners.” (See “Centralized vs. Adaptive Ecosystem Strategies.”)
References
1. We build on R. Adner’s definition of an ecosystem as a set of relationships involving multiple partners to deliver value to customers. See R. Adner, “Ecosystem as Structure: An Actionable Construct for Strategy,” Journal of Management 43, no. 1 (January 2017): 39-58. Although Adner thinks of relationships primarily as interdependencies between makers of complements, we think of relationships as alliances, joint ventures, or shorter-term collaborations, irrespective of whether they exist between competitors, suppliers, makers of substitutes, or the makers of complements.
2. In the academic research on interorganizational relationships, a close parallel to a centralized ecosystem is a hub-and-spoke network comprising a broker that works with unconnected partners and benefits from internalizing their knowledge. The academic term for this brokerage strategy is “tertius gaudens” (see R. Burt, “Structural Holes: The Social Structure of Competition”). This line of research emphasizes brokerage advantage in the environment when an innovation doesn’t require simultaneous mobilization of resources from multiple partners. A tertius gaudens broker takes resources or ideas from its partners and executes on its own. However, emerging research suggests a different, dynamic view on brokerage. That is, a broker can benefit from identifying partners that normally don’t work with one another and bringing these partners together. In this strategy, termed “tertius iungens,” the broker can create value not only for itself, but also for the partners. [See D. Obstfeld, “Social Networks, the Tertius Iungens Orientation, and Involvement in Innovation,” Administrative Science Quarterly no. 50 (March 1, 2005): 100-130.]
3. See Cisco Hyperinnovation Living Lab videos at https://vimeo.com/hyperinnovation.
4. Andrew Shipilov interview with Philippe Houzé, chairman of the board, Galeries Lafayette, Feb. 2, 2018, Fontainebleau, France.