Prof. Mikko Koria
Institute for Design Innovation
Loughborough University London
In the world of tomorrow intelligent technologies are seen to create the key opportunities and much of this immaterial value is found within networks of actors. This creates direct demands on how innovation enablers, hubs and like structures are to be built up and managed. In the network world much of the value lies in the connections that one is able to manage to one’s benefit. The value chain becomes a value network. The downside of the value network as compared to the value chain is that the creation of value is no longer so clear, and value may be created in many ways over the same connections. Sometimes it is also very difficult to understand how the value is actually created.
While innovation and related value is driven by entrepreneurship and business development, ecosystems have an important enabling role. Collaborations empower the ecosystems as shared value drives organisations to participate. Innovation can be seen as the successful application of new ideas in practice in the form of new or improved products, services, or processes. Creativity, enabled through collaboration, is the ability to combine ideas into new ways to solve problems and exploit opportunities. In turn, design is the purposeful application of creativity throughout the process of innovation.
There are shifts between parties, e.g. going from being competitors to becoming collaborators and vice versa. And the intangible value of the companies increases due to the diminishing role of tangible products in this systemic approach. This increase is especially notable in publicly quoted companies, but also the start-up and knowledge creation and research world is seeing very high premiums that are being paid for great ideas, sometimes without any tangible products at all.
Recent thinking pinpoints towards a trend where the captivating idea is based on meaning. This is the next step from the self-actualization (through e.g. brands) that the experience and knowledge economies bring forth. It is recognised that we need to have multiple actors that create value and many that benefit from it. The collaborations are also needed to make sense of the value creation overall. We do not share the same values (nor should we), but we do need to make sense of the common set of understandings that we have on value. And the main objective is to create ideas that really are valuable in terms of solving problems of users, businesses, the ecosystem and society at large, preferable in win-win-win-win situation.
There are different value drivers for users, organizations/businesses, the ecosystem and society at large. Value can mean economic, as well as social, psychological or ecological values. The key observation is that until now, it has been difficult to place sometimes very contradicting values into a joint framework. When we move to think about the meaningful value propositions that are needed, again the levels of the value framework are a handy way of distinguishing between the ideas. It should be noted that pleasurable experiences seem to be the only way in which human behaviour is changed on a permanent basis.
A key piece in the puzzle is derived from the sources of value. Value propositions are the very core of the business model. As seen from below, from the business modelling perspective, value can be created in many different ways, through new solutions, or satisfying an entirely novel set of needs through new offering, often technology related, or improving the performance of existing products or services.
Tailoring products and services to the needs of customers (mass customization, customer co-creation) or simply helping the customer get things done in their own business or activity are important value adding mechanisms, as is differentiating products and services through designing them in different, distinctive ways, to create distinction and status through branding products and services. These often happen in networks and through collaborative efforts, as few single actors today have the necessary resources and knowledge to do it alone.
Collaborative work is also needed to make sense of the ever-increasing complexity of products, services and experiences. The time of the lone creative genius has given way to enthusiastic interdisciplinary collaboration between engineers, designers, marketers, architects, anthropologists, psychologists, to name a few.
While ecosystems (and collaboration in them) enable innovation, two key challenges manifest themselves: how to model an ecosystem and what are the things to consider when fostering them?
Ecosystem models originate from the natural sciences, and have many similarities with biological ecosystems. They are dynamic in nature and made up of interconnected organisms that operate in a shared environment. They evolve, grow and contract, and can be destroyed if the environment suffers drastic changes. In man-made ecosystems, actors are intelligent and able to plan and understand the dynamics of the system.
This ecosystem model presented below is one of many. It uses nine elements, and represents a version built up to promote entrepreneurship and innovation. The model enables mapping out the key preconditions, launch enablers, and growth enablers, which are further divided into nine elements. This process-wise modelling is useful when thinking about prioritising the ecosystems build-up.
Figure 1. Ecosystem Elements
The Market section of the ecosystem includes market needs, location, and early-stage accessibility for early-stage entrepreneurs. This component has a top-down approach on the macro level needed for establishing an enterprise. The market need is crucial for start-up creation. The location of early-stage entrepreneurs and their enterprise is largely influenced, affected, and driven by the entrepreneurial conditions that make the growth, acceleration, and scaling of the start-up possible. The accessibility of the resources is also conditional to the further development of the start-up.
Infrastructure as the second section of the ecosystem and the key preconditions include creative hubs, mobility, and connectedness. This component is another precondition either initiated by top- down structures or established from the bottom-up level. It is primarily a physical precondition for the emergence of early-stage enterprises. The connectedness enables communication, setting up of, and dissemination of enterprise features to immediate and wider audiences. Creative hubs are the connecting and reference points for the start-ups in terms of accessing resources and establishing connections with other entrepreneurs and experts. The creative hubs also provide information about possible partnerships and resources that are key to the success and further development of initial ideas, proposals, prototypes, and like. Mobility is also a key issue in any emerging economy context as many employees work far away from where they live, and therefore the locations of accommodation, business, and commuting methods become the key preconditions or constraints in the development of enterprises.
Agile Entrepreneurship, as the third section of the ecosystem, refers to development from a grass-roots level and includes enterprise affordability, promoting youth entrepreneurship, and creative experimentation. Enterprise affordability relates to what extent the enterprise is feasible in terms of succeeding on the market and being sustainable in the long term. Creative experimentation is an important element as it is a way to learn from prototyping and experimenting on-field in order to test, iterate, and improve a solution, either as a product, service, or product-service system (PPS).
Innovative Policies enable entrepreneurial activities and creative services, and potentially allow for more efficient coordination within the ecosystem itself. Ecosystems enable the initiation and coordination of entrepreneurship, and innovative policies enable the monitoring and evaluation of the ecosystem design itself.
Skills include a triad of key competences that are necessary for successfully setting up any enterprise. These are technological competences that relate to the technological setup of products, services, and PSSs, and include coding, platform creations, digital networks, and the like. Business sense refers to business modelling, business planning, and the financial coordination of a business. Finally, design innovation applies design thinking, user-centred research, empathy, and customer experience design to address real user needs for long-term socio-economic impact.
Mentoring/Coaching using bottom-up approaches includes idea accelerators, mentoring networks, and business coaches. These are localised services that enable entrepreneurs to find adequate support for developing their business ideas, proposals, and prototypes. Accelerators are physical spaces where services such as mentoring and coaching about technical, financial, and legal aspects may be addressed by external experts. They offer expert advice on business feasibility, desirability, and viability. This also forms part of the mentoring networks that become readily available in support to the entrepreneurs through diverse mentoring programmes. Lastly, business coaches can offer business support to entrepreneurs and also be the connectors between businesses and new ventures that seek to spot potentially innovative proposals.
Capital as a top-down approach includes microloans as a means to financially inject capital to entrepreneurs who are starting their businesses on a small scale. The microloans can come from diverse sources, including microcredit banks and peer-to-peer lending platforms. Secondly, capital partly comprises alternative financial models that enable entrepreneurs to exchange services using complementary currencies. These can take form as digital credits or currencies, paper vouchers, and other types of self-organised community currencies. Finally, grants can be additional support mechanisms that enable enterprises to receive initial funding in order to set up and develop their business. These tend to come from public funding bodies or the private sector.
Business Networks include business test beds, collaborative networks and fast-track regulations. Business test beds allow the prototyping of business ideas, technical testing, and/or role playing of services in order to understand where possible iterations can help enhance or improve the innovative proposal. Collaborative networks enable services and consumption models that benefit all actors within a business network. Fast-track regulations enable businesses to flourish with minimal constraints. These regulations also enable quick failure as a way to save investment in the long term.
Knowledge Transfer includes collaborative research and consultancy, cross-pollination, and academic entrepreneurship. Collaborative research enables academic knowledge to be transferred and applied within industries. This can be achieved via diverse open innovation approaches where research and development (R&D) is being commercialised. Consultancy allows the cross-pollination of knowledge across sectors. Finally, academic entrepreneurship builds on knowledge acquired within universities and through diverse “enterprise through curriculum” academic programmes that foster entrepreneurship by supporting early-stage enterprises of students and/or graduates. These cohorts consider setting up their own companies and developing their enterprises after their formal academic degrees.
The 3×3 ecosystem matrix in Figure 2. with the subcategories is a useful tool to understand the elements at play. This paints a picture with some degree of granularity that has a degree of explanatory power foreseeing the impact case studies.
Figure 2. Ecosystem Elements
When looking at the complexity of the actors in the ecosystem, the partnership issues often emerge as a key challenge. The aims could be summed up in terms of optimization and economies of scale, where typically companies do not wish to own or do all activities by themselves. The try to reduce costs through outsourcing and sharing infrastructure. The reduction of risk and uncertainty through partnerships is important in competitive environments. Firms also acquire new resources and are able to undertake new activities, through extending capabilities through the resources of partners, open innovation, licensing, accessing customers. Ideally, these partnerships help to create scalable business models and to enhance the robustness/resilience of the business.
Many governments try to build up ecosystems, but they cannot do it on their own. Copying models is also very difficult, as ecosystems tend to be very much time and place specific. The key issues lie with promoting collaboration across the ecosystem. The system is essentially both top-down and bottom-up. Thus, a key challenge is to create integration between the two.
If we think that local actors have the best local knowledge, we have (at least) three main roles that need to be taken if ecosystems are to be viable: integrating (bring parties together to collaborate); translating between the parties is essential, as the knowledge and understanding is highly asymmetric. And finally, expanding the capabilities of the local actors to operate with the top-down parties is an essential element in making global business grow from local drives.
Studies have found common elements in the systemic build-up of innovation ecosystems:
- There is a need to find the champions: Identify the community leaders and activists receptive to collaboration and entrepreneurship.
- It is important to find the Success Stories: In an ecosystem existing success stories have a great impact as roles models.
- One must also allow access: Invite the community members to enter, to attend events and workshops, exchange knowledge and to scout for opportunities together.
- There is a need to listen & have dialogue: Aim to understand the inter- actions and real problems of the community through active listening.
- Long-term gain is often built up from a series of small wins: Understand ‘our limitations and capacities’ and start with small, well-defined projects and prototyping, developing the collaboration step-by-step.
- Attention must be given to relevance & respect: If starting new initiatives together, address the problems that are most pressing issues from the community’s point of view.
- There is a need to co-design and co-develop: Develop solutions to the defined problems together.
- It is necessary to also manage expectations: Highlight and voice to all parties that the risk is high, and failure can happen, but learning will happen, too.
- Furthermore, it is necessary to develop skills and capabilities: Offer entrepreneurship support and orientation for the local inhabitants and community interested in becoming entrepreneurs.
- And finally, there is a need to commit long term: A long-term orientation is need- ed to gain trust and to realistically expect changes and impact to take place. Relationship building and project preparations can take a long time.
In ecosystems, stakeholder analysis also becomes a very important task; knowing who is in the system is not enough, we also need to understand their position of power to influence our activities and whether they are interested in doing so. The power, legitimacy and urgency analysis give a good indication of what issues and who has to address out of the multiple demands that are made towards a starting entrepreneur.