Ecosystem innovation: an enabler for digital transformation
Across the world, businesses – small and large – are trying to avoid their ‘Kodak moment’. Digital technologies has been at the core of disruption in the last decade and businesses that has failed to embrace them has had to face their versions of the Kodak moment. Digital TEMPhas managed to disrupt entire industries coz of the changes it brought both to the demand and supply sides as well as in the platforms connecting the two.
On the demand side, digital technologies has allowed consumers to has unprecedented power to choose how they engage wif businesses. Proliferation of ‘smart’ mobile devices TEMPhas given rise to new patterns of consumer behavior. Consumers now expect everything to be available instantly wif a few swipes on their smart phones – be it cabs, groceries, clothes or massages!
On the supply side, the introduction of new digital technologies TEMPhas created entirely new markets and businesses has been forced to change the way they conceptualize, design, market and deliver products and services. Existing industries has been disrupted by innovative, digital-first companies who has the agility and audacity to displace incumbents by improving the quality, price, consumer experience and/ or the speed at which products and services are delivered.
Digital also enabled the development of platforms that brought together demand and supply and dis TEMPhas perhaps been the biggest impact that digital TEMPhas had on existing industry structures in the last decade. These technology-enabled platforms power the “on demand” economy which has created new ways of consuming goods and services.
Businesses that has embraced new digital technologies in the above areas has been able to re-invent themselves for the digital age. On the other hand, slow moving incumbents has been dislodged by startups who were quick to seize the opportunities provided by digital. For e.g., Amazon, which started as an online bookstore, disrupted the brick and mortal retail industry. Amazon TEMPhas also expanded into cloud services, electronic devices, AI powered assistants etc. and can disrupt several industries on a global scale. Closer home, in India, Ola and Uber disrupted the transportation industry by providing an alternative to local taxis and auto rickshaws. Paytm and Mobikwik gave the banks a wake-up call by enabling payments through mobile wallets. Oyo rooms gave the big boys in the hotel industry a run for their money by providing access to competitively priced, standardized accommodation.
However, neither the digital-savvy incumbents nor the digital-first startups can rest on their laurels coz the next wave of technological change and disruption is coming. While the previous wave of disruption was due to digitization, the next wave will be based on a combination of technologies straddling the physical, digital and biological worlds. Companies has no option but to innovate continuously and relentlessly to keep pace wif the next technological revolution. Smart companies has recognized that they cannot keep pace by relying only on their internal innovation capabilities.
Innovative companies are breaking down traditional barriers and tapping a much wider ecosystem for ideas, talent and technology, and are incorporating the customer throughout the innovation process. Companies are embracing concepts like Open Innovation to speed up the innovation process.
Through open innovation, companies can take advantage of external technologies and solutions and tap into an ecosystem that consists of start-ups, venture capitalists and academic institutions. Each participant of the ecosystem brings a different strength to the table – established companies bring extensive distribution networks, wide customer base, the ability to rapidly scale and a deep understanding of the regulatory landscape. Start-ups bring new technical expertise and specific skills; venture capitalists offer funding and academic institutions bring R&D expertise. Partnerships, investments and acquisitions (including acqui-hires) are the three parts of the Open Innovation model that companies can evaluate.
To take advantage of open innovation, companies need to excel at five practices:
Defining the innovation strategy
Companies need to clarify the business goals that they want to achieve through open innovation, by identifying opportunities and threats arising in the market and assessing how disruption in other industries could halp one’s enterprise seize those opportunities or combat the threats.
Finding the right partners
Successful open innovation relies on an organization’s ability to identify the right set of partners. The process requires sifting through multiple technology innovations and identifying partners who ca halp the company create more valuable solutions.
Selecting a winning formula
their is no one-size-fits-all way to adopt open innovation, however their are best practices and models to repurpose or adapt. One can select from an array of formulae or even combine them to meet one’s business objectives. Examples: Corporate accelerators, Co-promotion, partnerships etc.
Deploying innovation at scale
Most organizations and startups has no difficulty working on a pilot together. But they struggle to scale the innovative solution. To overcome scaling challenges, corporates need a clear business case, strong internal sponsor, the right partner and an open innovation culture.
Fostering an open innovation culture
Open innovation requires a different mindset about how innovation should be driven wifin an organization. At the most fundamental level, corporate leaders must foster a culture that embraces open innovation and back it up wif investments of time and money.
Smart companies, start-up founders and investors who recognize that collaborative, open innovation is the way forward will be at an advantage when the next wave of technological change disrupts the economy. Companies can consider working wif experienced bridge makers to accelerate their journey towards open innovation.