The Ecosystem for Innovation

Effective innovation requires a strong ecosystem. How do we make it happen?

Innovation does not occur in isolation. The ideas may look like they come out of nowhere but success generally requires the support of a healthy ecosystem. Where would an iPod be without iTunes? Or for that matter, a lightbulb without electricity? OK, maybe a bit over the top there, but it's a point worth making as many technology driven innovations fail because they neglected to confirm the critical aspects of a complete ecosystem.

The ecosystem contains key success factors for an innovation over and above the deliverables of development or marketing. Examples could be a supporting technology, manufacturing process, distribution or supply chain, regulatory, political, economic or even cultural conditions. The risk lies in treating these as knowns. It can be easier to set them aside "for later" given the more immediate challenges of keeping the development on track. However, nothing can be taken for granted, least of all the environment where the innovation must take root.

Addressing the Ecosystem

Issues with the ecosystem fall into one of two categories. There is a gap that was not previously highlighted as a showstopper, or some modification of behavior, standard, process or practice is required to support a novel solution in the market. The gaps can be addressed with a development plan. Convincing a third party to make a change to accommodate the innovation can be harder. The time and effort can easily be underestimated when the focus is on the core development.

A concerted effort to address the key unknowns is a fundamental risk management activity. The learning from pro-active engagement can be quite valuable in advance of a major investment. A problem with the ecosystem can potentially have a larger impact on schedule and time-to-market than the core development. You don't want to be caught trying to fill a gap there when you're ramping up your burn rate.

If the innnovation is targeting new markets, technologies or product categories for the company, the unknowns may not relate to core competencies or existing experience sets. Too many companies or ventures will try to resolve these on their own. They may feel they do not have or need an alternative. Best guesses will be made, consultants will be paid, but more often than not, will fail to yield the insights needed to drive the specific innovation. This is not the fault of the company or the consultants. This is a result of trying to resolve an unknown with a "static" approach.

Agile innovation utilizes a flexible framework with a pro-active approach to resolving the unknowns as a priority. A dedicated team will explore these with a "learn-by-doing" approach and the responsibility to capture any insights in shorter cycles [See XTM for more detail]. This is both cheaper and faster. The unknowns are documented and tracked as a key metric and the feedback used to expand the available options. There is much to be gained by making this a key part of the plan.

The make up of the team is important. Effectiveness can be traced to diversity and flexibility when it comes to resolving any issues in the ecosystem. Domain experience, best practices and extended networks are useful supplements. As issues are identified, the team is expected to lay out and support the options for a potential solution.

Enabling the Ecosystem

A neglected aspect of the ecosystem is an active program to expand it. The groundwork for an innovation includes the market potential and development plans, but fails to support a continuous learning process. There is a danger of becoming trapped into thinking you have to do everything on your own, or getting so caught up fighting fires that where you don't have time to look for help. Successful resolution of the unknowns requires availability of as many resources and options as possible. They should be actively and continuously cultivated as a key element of a successful strategy.

A fundamental priority for any innovation should be to leverage existing resources as much as possible. In a progressive climate this includes both internal and external corporate assets. There can be special challenges with this, but in principle, it addresses a core need.

It must be enabled to support the effort. Proven business practices are generally good starting points. In fact it helps to reduce the perceived risk of working with an innovative product or service by referencing standard business models. Examples include distribution agreements, co-branding, contract R&D, IP licensing, JVs, etc.

There is a challenge to avoid burdening the effort with counterproductive terms designed for a more mature business. Standard business practices are usually based on known entities or conservative policies for risk management. An innovation contains unknowns which cannot be realistically or easily quantified by existing policies. Standard practice is to put the risk on the innovative party as they are the unproven entity. This can place a significant amount of stress on the initiative, often with detrimental results. Risk may be "managed", but the potential for the innovation generally suffers as a result.

Innovation deserves the best possible conditions for success. The investment team needs to maximize return. The partner prefers to maximize the value of their contribution. Neither are much of a reality unless there is a successful market engagement and delivery. The recommended approach is to work out progressive terms based on relevant timelines and results. A flexible framework for agile innovation can be a key factor in securing proper support from the ecosystem. A plan designed to address the unknowns in a capital efficient manner will reduce the exposure for both parties. There is an art to managing the unknown, but reward should be based on results.

Leveraging the Ecosystem

It is generally not possible to build a complete ecosystem for your innovation. Key external partners are critical success factors. Figure out who they are and make sure they are part of the plan The ecosystem also provides an excellent opportunity to address the unknowns and accelerate the learning required for a successful launch. Every innovative venture should have a map of the required ecosystem in the same hand as the unknowns. And the plan to address both.

A novel ecosystem has been proposed in the Hybrid Innovation Model. It brings together two critical sets of resources that while adequate on their own, could be much more effective when working together.