Credit Katri Valkokari
I wrote a post “the Interconnected Parts of the Ecosystem” earlier this year, after a paper written by Katri Valkokari, a Research Manager at VTT Technical Research Centre of Finland caught my eye. I wanted to come back to this really powerful visual, recognizing the three interrelated ecosystems we require to form around. I mentioned in my post, these three parts actually do fuse into one, making up an integrated ecosystem of their distinct parts.
It gave me a level of recognition that we do have this need for this three-stage evolution, especially in a business context. Each establishes a boundary of scope and feeds into each other constantly. It is the fact they combine ideas, skills, learning, fresh insights, leading to promising outcomes and creations. It is how they interact and add new value that gives this ‘combination effect’ such potential for us to consider.
The combining of tangible and intangible assets gives us ‘fresh capital’. I have written about Capital and consciously focused upon this, up to know, more under Innovation Capital, as this draws in knowledge through insights and then pushes these out from Knowledge into Organizations as concepts to be explored and exploited, to grow and improve.
Our innovation capital has mostly been internally built to date, yet there is a time and need to take this out with new forms of collaboration, leveraging all the combined assets into a new “collective capital”. This needs reflecting upon, of how you would ‘break this down’, perhaps within this awareness of all these three ecosystems that we do need to consider.
Have you asked why are business ecosystems emerging as a real competitive force?
As we begin to open up our thinking and begin to focus on the concept of ecosystems, it will increasingly have a powerful effect on our future growth perspectives in considering alternatives and possibilities. The network of different partners will all contribute to this often ‘emergent’ thinking and will very quickly increase the total sum of the value, the ‘combination effect’ will bring to the ‘party’. Diversity in innovation is a powerful catalyst.
The single industry and business-specific approach are seeing change, many companies are exploring the value of becoming involved in a business ecosystem that crosses a variety of industries to build new communities that have the capacity to transform existing environments.
Linking the three interdependent ecosystems
To plug into achieving this ‘paradigm shift’ that Business is required to manage, to transform themselves, the search is on for forming the ecosystem or set of ecosystems that can deliver on this ‘transformation’ going on in front of our eyes that works for us. We can’t afford to wait, we must experiment, explore and extract different learnings from our own involvement. Standing back never wins the race, it only relegates you to being a bystander and to achieve any successful innovation outcome demands engagement and involvement.
As you build your awareness of the ecosystems that are connecting up your business and its capabilities, there is this real need for new knowledge, for exploiting and exploring innovation concepts, mixed in with the growing need for greater “real-time” customer’s engagement. It is this recognizition of the value of others, within the (ecosystem) design chain, those other stakeholders who are the experts in different parts of the connected need of customers, who link up to deliver better value than any one single part.
Ecosystems are far more today about managing beyond the immediate known’s found within one organization’s limited focus of the world, they are exploring many of the unknowns that need discovery and then connecting these all up into a greater “whole”.
Innovation Capital is absolutely important to build and leverage
There was a McKinsey report called “Innovation matters: Reviving the growth engine” where they break down Innovation Capital into three components drawn from a study they undertook in selected developed countries. The breakdown of the capital being:
Physical Capital represents 16 percent of the Innovation Capital.
Knowledge Capital represents 60 percent of Innovation Capital across the countries McKinsey analyzed.
Human Capital represents 24 percent of Innovation Capital.
I wrote in a post on this McKinsey report called ” Place Your Future Bets – Invest In Innovation Capital” that it was the pivotal role of people as innovation carriers – their networks, collaborations, knowledge flows, interactions and tacit knowledge – and how innovation itself is a potent competitive force, that drives productivity. All this is often ‘hidden in plain sight’ as our people are innovation’s active ingredient, the catalyst that turns novelty into real benefits, they ‘form’ our thriving ecosystems.
In the future, we need to build new capital based on different thinking: ecosystem thinking.
It is finding uniqueness that becomes increasingly important and comes from new knowledge, innovation investigation, validation, and outcomes and delivered in business ecosystems that offer new customer value, it builds greater value into capital. It is the amount of capital you invest that drives the potential and today, we are increasingly finding that Ecosystems and Platforms, formed around ideas that are often too complex to be developed by a single entity, are benefiting through collaborative endeavors.
They require interactions and interdependencies so as to find ways to tackle more complex, challenging problems and it is this “reacting” taking place between knowledge, innovation, and business on a common platform that gives a certain “synthesis” and greatly extended capital. One feeds into the other and has a greater reinforcing value loop by seeing this exchange between knowledge, innovation, and business, as ongoing learning to search for better and new value.
Absorptive capacity raises it’s head here.
In one post I wrote: “Learning to absorb new knowledge for innovation” on my paul4innovating posting site I outlined the absorptive capacity components
The absorptive ability needs to be developed to use external knowledge and has three sequential processes.
These fit the three parts of ecosystems and connect
A) Exploratory Learning– recognizing and understanding the potential value of the new knowledge that lies outside the organization (think Knowledge Ecosystems)
B) Transformative learning– dispersing and assimilating the valuable new knowledge ( think Innovation Ecosystems)
C) Exploitative learning– using the assimilated knowledge to create something different in knowledge or product and seek to explore and exploit this in commercial ways.(think Business Ecosystems)
The call for managing the effective use of knowledge in ecosystem constructs
One of the central drivers of the competitiveness of all organizations is their effective use of knowledge. It is the generation, acquisition, integration and application of (new) knowledge needs that managers are able to manage learning. Knowledge underpins innovation, it informs it, the more it has change as part of its makeup, the more it becomes complex to discover, the more we have of this real need to upgrade how we experience, experiment and absorb learning and this is increasingly outside our own organizations.
The combination of ecosystem thinking and the use of platforms offers the potential result of integration and connection across different fields of expertise and knowledge domains. It allows for a greater use of a diverse pool of sharper minds, available only in this broader network, offering independent as well as collective wisdom and thinking.
We need to form knowledge ecosystems and these needs structuring. As we absorb more external knowledge from our collaborators the need is to organise this well. Absorptive capacity needs to go beyond good theories into increased application. Absorptive capacity is an integral part of an organizations capabilities and competencies to work upon, for its healthy development. Knowledge is a real significant dimension of innovation management and what constantly is feeding it. Treating knowledge as an ecosystem needs to be certainly considered well in any broader ecosystem design.
The Innovation Ecosystem and why Business Ecosystems need them
The significant transformation taking place around exploiting technology and digital management has made ecosystems and platforms a mainstream prospecting need, in most of our businesses today. We must engage in what all of this means and its business impact.
I certainly believe the ecosystem approach will increasingly become the main value-producing stream for innovation delivery. Platforms, strategic partnerships, new business models all will be on the agenda of any serious global organization and ecosystems through platforms are the organizing environment to enact these.
The delivering of totally different value propositions for the ultimate consumer is a highly daunting challenge. It ‘upends’ much, if not all, of how our business organizations have been organized around, mostly within themselves, it is going to need radical change, the organizations is needing inverting. It calls for bold management to instigate such a transformation and open up to external collaboration and exchanges.
The search is seemingly on for finding greater value and that will increasingly coalesce around innovation ecosystems. We are in need to ‘form’ in many different ways, significantly build more relationships that increasingly matter to each organization, ones that add value, insight and bring external expertise inside, to work on ‘greater’ innovation solutions. We are creating the potential to deliver innovative products and services that extend beyond the stand-alone discreet offering, that would be delivered by only having the one organization attempting it into broader collaborative offerings that provide a greater customer experience. Complexity is on the rise, offering discrete products is on the wane. Value is in the connecting of experience.
I would suggest opening up our thinking towards ecosystems has a powerful effect
As we begin to open up our thinking to ecosystems these are having a powerful effect on our perspectives for future growth through greater collaborative potential, as different partners contribute to this often ‘emergent’ thinking. This becomes more evolutionary and requires a completely different way to manage these ‘relationship contract’s that are forming around a given concept or platform. They require increased interactions within the community and need far more tightly controlled activities to gain the synergies and effects from working within an ecosystem. Relationship management needs to keep focusing on enhancing and searching for new knowledge, driving innovation in new open collaborative forms and knowing how to adapt this into the whole concept that delivers business value that appeals and differs itself for customer value. No easy task.
To manage ecosystems is hard, it is a constantly adaptive system and requires dedicated focus and ongoing attention to just keep it dynamic, it needs constant engagement and moving along, it needs nurturing.
Ecosystem design helps us move forward in purposeful ways.
The world seems to be evolving far more rapidly than we can cope with. We have this constant need to catch up. To become more effective we must break out of our ‘islands of knowledge’ and find ways to effectively work together, to pool resources in knowledge, innovation and business. Thinking in more ‘ecosystem ways’ offers that potential. We can build, evolve and catalyze better in collaborative designs. We can find better ways to find new insights, create scale and service markets differently. We can push our boundaries into ones that look for more collaborative ways to construct a business that provides a more radical value proposition.
The value of opening up our thinking to an ecosystem design is in what resources get attracted in this venture. We can pull in resources of all sorts, we can draw in different types of capital (tangible and intangible), we can tap increasingly into a wider pool of specialized capabilities, attract different partners, suppliers, and customers to participate with us.
We can build out this cooperative set of networks as it becomes increasingly richer in the network of collaborators you can engage with. As you co-evolve you can develop the ongoing abilities to constantly reconfigure the assets to build the relationship needs and network effects.
In Summary
Ecosystem thinking can have a very transforming effect. It opens us up to a highly fluid, changing world of possibilities. It can help allow you to match and possibly get ahead of all the volatility swirling around us. We can develop strategies built on emerging knowledge and innovations, that can grow out from a collaborating community.
The traditional confines of market boundaries are clearly breaking down and reforming around these ecosystems and platforms that connect partners and consumers in dramatically different, Value-added ways, and that ‘intent’ is driving a radically different environment to manage within, one of building knowledge ecosystems, innovation ecosystems and business ecosystems that connect up and form the interconnected parts of the required ecosystem design.
I believe ecosystems are the new organism of the business world. We need to explore these increasingly in their design and management potential and for me, it is through all three of these ecosystems that we build collective capital than is far greater then the individual parts.
The three ecosystems of knowledge, innovation and business mutually reinforce each other, it is all their interacting parts, their interdependence to each other and how one part fits and reacts with the others, gives this great power.