Relatedness demands Ecosystem Approach To Innovation

In my previous post on “Theory of Relatedness”, we appreciated how all things in our life and our daily experiences are inter-related.

The industry leaders in their respective fields be it be car manufacturers, health care providers or government / agencies providing citizen services capitalize on this concept to gain competitive advantage or improve citizen experiences.

The leader who aspires to “control” or “orchestrate” his customer experiences aims to be the logical convergence point to which all his ecosystem participants and customers get attracted. Logically we can represent ecosystem and platform as in picture below.

 

We call this convergence point as “Platform”.    Obviously the platform leader is now faced with 2 key challenges to create and sustain this force of attraction.

1. It has to assimilate capabilities that offer compelling “Value Propositions” for its eco-system participants. Similarly the participants should be able to offer value propositions that attracts the platform leader.
2. Platform leader has to offer compelling “Value Propositions” to  its customers.

A platform is kind of sticky object which connects or gels together multiple parties of the ecosystem. It is also called as multi-sided platform. History is replete with many examples where businesses have taken “Platform” and “Ecosystem” approach for economic success in both traditional and digital world.

Lets start with shopping malls, a concept that was invented not too long ago. If you like an older example even airports are platforms.  The mall owner on one side attracts various types of retailers  (can also call them as Retail Service Providers or RSPs) like super markets , cineplex’s, food courts, event organizers, large book marts, niche fashion boutiques with a value proposition that co-located aggregation of various type of RSPs will guarantee good number of foot falls and all retailers will benefit from these increased foot falls. Consumers on the other side like the value proposition of malls as they can enjoy diverse shopping and entertainment under one roof.

The important point to note here is that the mall owner is more like a facilitator. He does not directly deal with end consumers but he deals with businesses. So this is a B2B platform. His customers or RSPs deal with end consumers. This arrangement is slightly different from the Toyota example we saw before but the fundamental premises of ecosystem and platforms remains the same.

The mall’s agenda is to increase the foot falls which can only happen if he can attract RSPs and if he could do that more consumers will visit malls which will attract even more RSPs. So there is a kind of positive “Network Effect” that benefits all eco-system participants.

“Network Effect” is one of the key value driver of “Platform Economics” and “Platform Based Business Models” . I shall delve on this important aspect in subsequent posts.

The other interesting observation here is there could be multiple platforms working together under different kind of arrangements. For example NTUC supermarket inside a mall is a platform of its own. It has its own eco-system of suppliers and customers.  Cineplex’s are another platform inside a mall.

The other observation is some eco-system participants may be more important than others.

For example in an airport however classy the airport may be , the air traffic controllers offer the most important service to guide safe take-off and landing of planes.

Microsoft Windows,  Google,  Apple, Amazon , Ebay, Facebook, Salesforce.Com.,  are all classic examples of successful platforms. Google started with Search platform but now has built a set of related platforms like Google+, Google Apps etc.

In my consulting engagements the big question that often comes up is “Where to Start ?”, since this whole idea of eco-system , multiple participants, platforms, complex industry dynamics etc clouds our thinking.

I see “Service Innovation” as a journey and not a destination.  Sales talk is typically “there are many ways to skin the cat”.  As an architect by profession I believe that there is only one right way to do things, That is the whole essence of architect profession.

I feel that any idea or concept whether small or big, simple or complex that has reasonable "Service Quotient" in the context of the firm or industry that drives value is a good start.  It also must fit into the framework of “Platform Thinking”, “Platform Economics” and “Platform Business Model” . We also need vision, leadership and commitment from strategic thinkers in senior management who are chartered with scaling up the "Service Quotient"  of their organisations.


1. The first rule to remember is "Do not start your discussion with technology". "Service Innovation" is non-technological side of innovation.  Remember the Service definition  :   “Application of competencies for the  benefit of other entity"

You may hear lots of terms like cloud, analytics, semantic web, mobile, social media tools etc They are all just tools to build something eventually. IBM is a great compamy that has extensive portfolio of on-the shelf and off-the shelf tools from research labs that can be leveraged.

2. The second  step on this journey would be to understand the principles, economic drivers and motivation behind service innovation and platforms. We will need organization wide training  to enable this process especially to those who are chartered with innovation.

3. The third step would be studying various platform case studies across various industries to draw parallels from value propositions that have been innovated.

4. The fourth step would be to understand  own industry and related industries and also the major players and participants.

5. The fifth step would be to understand the approaches and developing a roadmap specific to your intentions and desired outcomes. We will also need a lot of co-creation wokshops to develop the service value propositions, new business models that are relevant in your business context.

6. There could be issues related to standards, intellectual property rights, government roles, rules and regulations that have  to looked into.

We will go into "Service Quotient"  in my next post.