Haydn Shaughnessy on ecosystems

The Enterprise Ecosystem: How do we analyze a new management paradigm?

Haydn Shaughnessy

Systemic Problems

The Ecosystem as Systemic Solution

Measuring Innovation in Ecosystems

A Sector Example

Lessons

Agenda

Case Study

2

Systemic Problems

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Introduction: The era of unprecedented economies of scale

• Competition just got very tough. China and India enjoy unprecedented economies of scale:

• The $2,000 Auto in India• India mobile market headed towards 1 billion +

subscriptions• 30% price reductions in telecommunications

infrastructure equipment globally (delaying introduction of next generation Internet, IPv6)• China supercomputer industry – 10 new

supercomputer centers THIS YEAR• China’s strategy to retain more value added

each year - current target 20%4 |

Introduction: The growth of system-wide problems

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These types of issues create systemic or sector-wide problems beyond what one enterprise can address – the innovation focus is autos, cities, mobile, logistics, silicon….

Debt de-leveraging at household, enterprise and national levels, hyper-competition, energy issues, declining world trade….

Introduction: The innovation crisis• Remarkably, the return on assets (ROA) for U.S. firms has

steadily fallen to almost one-quarter of 1965 levels

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The $20,000 infant incubator

The $20,000 auto

15,000 UK bank branches

The $7 infant incubator

The $2,000 auto

17,500 mobile money agencies in Kenya

Developed world Developing world

–John Seely Brown and John Hagel, The Shift Index 2010

500 million Facebook users 560 million China Mobile

subscribers

Enterprise objectives• The ecosystem can be defined as a need or

approach to radically improving the external environment and as a consequence changing the enterprise, driven by.

A need to integrate customer ecosystems to refresh customer service offerings The desire to use or experiment with an API strategy to create an entirely new

supply chain to transform the cost base or product offering To overcome industry or sector bottlenecks Disrupt the product roadmap or the current business models Use open source to reduce cost and extrapolate innovation outside the

organization

7 | © 2010 nGenera Corp. All Rights Reserved.

The Ecosystem as Systemic Solution

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Abso-lute

2002 2003 2004 2005 2006 2007 2008 20090

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

Business Ecosystem

Open Ecosystem

Ab-solut

e

2002 2003 2004 2005 2006 2007 2008 20090

10000

20000

30000

40000

50000

60000

70000

80000

90000Business Ecosys-tem

Business Ecosys-tem (w/e)

Open Ecosystem

Open Ecosystem (w/e)

Comparison of Business Ecosystem blog references using exact term and using “all the words” (excluding all ecological references)

80,000 blog posts a year reference ecosystem and business together

in the same post

The growth of the new ecosystem conversation

9 |Source: Cogenuity May 2010

Old NewOpen ecosystems and the future of

managementThe old ecosystem

1995 - 2007• The old idea of ecosystems:

“glocal” partnerships

• Tight corporate focus

• Glocal search for cheap labor

• Labor market dis-alignment

• Central planning and reporting

• Corporate value focused

• Communications driven

The new ecosystem 2008….

• Investing your business future in the relationship cloud

• Targets system wide innovation

• Global search for free labor and talent + revenue generating micro-partnerships

• Value re-alignment process

• PLANNING FOR RANDOMNESS

• Value-diverse and customer-centric

• Perception driven

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Why randomness?• We are speaking of a

significant societal shift — from organizations leveraging technology to accomplish their goals TO individuals leveraging technology to accomplish THEIR goals.

And their goals are MUNDANE

They are ABSURD

And they are anything BUT rational• —Blogger Sean Howard, June 28, 2010

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A Sector Example

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Ecosystems and competition in the mobile sector

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Device and equipment sales in this

industry – a model for challenges and solutions elsewhere

A significant growth sector estimated at 5 billion online devices by 2014 (CISCO)

USA India

Projected

Current

720 million

285 million

1.1. billion

mobile phone subscriptions to 2013

10% growth

50% growth

315 million

Introduction: New frontiers in innovation

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Mobility is a model for massive market growth and system-wide innovation.The ecosystem is becoming the model for mobile management.

New business models

Hypergrowth

Global innovation in

technology and banking

One sold every three seconds

3 sold per second

Major open source initiatives in mobile• Android – the Google-led alliance developing an open

operating system based on Linux

• Limo – an alliance to build a Linux based operating system for mobile

• Symbian – the Nokia operating system pitched into open source in 2010

• MeeGo – an Intel – Nokia open source project for premium phones

• Moblin – an Intel driven project for open source mobile interfaces, across phones, netbooks and similar devices

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From open source to open ecosystem•

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Three innovative players:Three current strategies beyond open source

Price, market share, market range

Incremental gains from service to product to apps to ads

Extending the Google business model

End-user communities

Apps developers

Ecosystem brands

Nokia Services

Search/Play

Geodata/AR

MapsLocation

based services

Embedded device markets

Mobile advertising

revenues

Home device markets

OS developers

Tools developers

Device sales

Content developers

Function developers

Solutions ecosystem

AR content

Supply chain

Hardware-software interface

Managing complexity in the relationship cloud

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Apple

Google

Apps store

Ovi

Operators

A partial view of the mobile ecosystem

Case Study: How do you migrate from business as usual to a new organizational form?

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The Nokia open source decision

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2007 Nokia decides to open source its main smart phone operating system, Symbian, the most widely distributed smartphone OS globally (about time of iPhone launch)

Mid-2008 Nokia creates Symbian Foundation and open source project announced

April 2009 Foundation launches officially

February 4th, 2010Almost 40 million lines of code open-sourced

NOKIA’S KEY TENSION POINT:Its core culture is not

adapting to new open realities

Symbian’s mission

To create an open management paradigm

• Realign IT/engineering and other departments like design, marketing, ideation• Liberate the strategy process from the roadmap•Grow an ecosystem where innovation is systemic

though unpredictable• Respond to a world where openness is an expectation• Deal with complexity

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Symbian’s open management values• Values and creativity

help staff to bring values and creativity to work with openness as a byword

• Participation be a participant, e.g., open up the sustainability plan, don’t dominate the ecosystem

• Future worlds orient not just to the future but to transformed environments

• Excellence • set the highest standards 21 |

Symbian’s open management, open ecosystem tools

•Developer community•Apps community (horizon.symbian.org)• Ideagora – (ideas.symbian.org)•Open research community•Volunteer community•Ecosystem blog platform (blog.symbian.org)•Get satisfaction

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An open ecosystem ideagora• Pushing the openness agenda, by ideating

– The management of the foundation– The operating system– The future of mobile

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NOKIA

Symbian

MeeGo, OS

Navteq, maps

Ovi - services

Qt Interface tools

Point and find (ads/search)

Forum Nokia

Device supply chain

Operators

Nokia life

tools

Rural development co-

investments India

Technology Institute

Brazil

Mobile brain bank Africa

Nokia money

Business solutions

community

Relationship management in the cloud at Nokia

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Developer community

Ideagora

Members(200

enterprises)

Volunteers

Apps community

Chipset makers, Texas Instruments

OEMs, Sony Ericsson,

Nokia

Consultants, e.g. Accenture

Operators, e.g.

Vodafone

Academia/open

innovation

OS Tools

OS component specialists, e.g.

Sun

The Symbian ecosystem

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Hard- ware/soft-

ware interface redesign

Measuring Innovation in Ecosystems

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Measuring innovation

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• How successful has Nokia/Symbian been?• The headline 2008 – 2010 is the iPhone

− And the sub-heading is Android

Conventional measures of innovation balance certainty against time:

by the time you can really measure the output it’s too late to change

ROI

Scaling a business

Internal attitude changes

Brand equity development

New ideas

Patent quantity

Pipeline metrics

(2,5, 10 year product flow)

Some kind of balanced

scorecard for knowledge production

Time

Certainty

Measuring innovation

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—Secretary of Commerce, January 2008

Measuring innovation: Principles• “ Make room for qualitative and subjective measures

• Measure iteratively rather statically

• Measure the stack – firm, industry, sector, nation, region….

• Pilot new metrics”

29 |Source: www.innovationmetrics.gov/

• Acceptance• Alignment• Consistency• Trust• Extensibility• Values/perception

Socio-cultural

• Platform deployment

• Value conversion• Engagement• Diversity• Friction reduction

Socio-economic

• Price• Market conditions• Innovation dynamics• Presence

Market

• Transformational narrative

• Positioning (e.g. incumbency)

• Acquisition of low cost inputs

• Acquisition of ideas• Messaging• Tangible value

conversion investments• Geographical growth

curve

Strategic

An approach to ecosystem innovation metrics

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In search of a balanced scorecard approach to judging future value

Ecosystem metrics: Acceptance

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Developers characterizing their commitment to these platforms

Developers ‘very interested’ in developing for each platform

Source: Appcelerator, Inc., 06/2010

Tier 1

Tier 2

Tier 3

iPhone (iOS) 90%

iPad (iOS) 84%

Android Phone 81%

Android Tablet 62%

Blackberry 34%

Windows Phone 7 27%

Symbian 15%

Palm Pre / Pixi 13%

Meego 11%

Kindle 6%20 40 60 80 100%

N = 2773

The culture of the ecosystem is developer-centric

Ecosystem metrics: Alignment with business values

32 |Source: Cogenuity 2010 Date range All time

The core connections are from brand to device and user features

Business performance is distant from brand

Alignment with emergent values

– = Not evident = of average relevance = highly relevant

Ecosystem metrics: Alignment

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Nokia/Symbian Android/Google

Apple

Open Altruism – –New naturalism Randomness Individualism – – Collaboration – –Popularity –

Ecosystem metrics: Platform Deployment

34 |Source: Cogenuity 2010 Date range All time

Widely criticized for terms and conditions and high handedness

Widely envied for developer engagement

Criticized for cost and complexity but admired for openness

41,000

No of apps developers

10,000

Nokia doesn’t release figures

sell test services to the ecosystem

Mobility consulting

Market analysis offers

Enterprise mobility strategy

consulting

Value conversion in the Symbian ecosystem

Ecosystem metrics: Value conversion - 1

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B2B

Rapid indirect monetization

Texas Instruments

Product creation services

Google/Android

OperatorOEM

OEM

Apps community

OEMs use Android, incorporate Google and receive ad revenue share

Apps community shares revenue from Android apps market, hosted by Google; apps promote handset

Operators too receive revenue share and promote Android handsets

Value conversion in the Android community

Ecosystem metrics: Value conversion - 2

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B2CRapid direct monetization

The iPhone price

premium

Nokia driving price down

to widen market

Balanced by broad geographical growth opportunities

Justified by astute product focus and hardware revenues

Ecosystem metrics: Price

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Price sustainability is an issue with 1000s of micro-partnerships

A measure of the iPhone’s influence: Online references to HTC/Android G1 vs Apple October 2008/January 2009: Bought vs earned media

Ecosystem innovation metrics: Owning a transformational narrative - I

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Apple iPhone 3g1,216,794

Blackberry Storm1,188

Android G193,228

Palm Pre48,359

Source: The Conversation Group

Online references to Symbian, Android and iPhone in millions, April 1st 2009 to March 31st 2010

Ecosystem metrics: Owning a transformational narrative - 2

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1.1

6.4

19.5

Lessons

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Lessons: Three styles of ecosystem strategy

•

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NOKIA, global, across market segments,

income groups, price bands and service offers with diffuse ecosystem, poor

perception management

ANDROID, tight interaction between industry participants

for broad device distribution, improving

perceptions

APPLE, high end single product focus, multiple services; high

margins, targeted ecosystem, astute

perception management

Price

Models for sustainable competitive advantage

Lessons: Ecosystem strategy

•

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Polarization -uniqueness

Incumbent - scale

Chain and channel

Facilitation - reciprocation

Ecosystem strategies

Lessons: Management

Invest in the relationship

cloud

Work with developer

meritocracies but create

wider values

Use platforms to structure ad hoc innovation

and revenue micro-

partnerships

Strategize around price vulnerability

Create downstream

metrics

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The key tension point

Managing perception becomes MORE importantPerceptions influence

relationships. An ecosystem is a diffuse relationship matrix.

Question:• System-wide innovation

• Access to free or very cheap labor and talent

• Unpredictability and random effects in a planned environment

• Labor market value-system realignment

• Adaptation to customer centricity and customer ecosystems

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Does the ecosystem deliver?

Some way to go with aligning the enterprise ecosystem to consumer ecosystems or in evolving a wider emerging value set

LessonsFree labor/ talent/revenue

partnerships

1200 entries at ideas.symbian.org

< $8 million annual budget, 200 company members, 40 million

lines of codes, 29 innovations

Apple passes on $1 billion in revenues to micro-partners, 2008-

2010

200,000 Nokia Forum members

System wide innovation

Mobile transformation is global, sector wide

and extensible

Involves content (music), maps, geo-

data, augmented reality, autos, home devices, advertising

New hardware – software integration

initiatives

Mobile brain bank, Africa

Unpredictable innovation

iphone 250,000 apps

Price reductions from $250+ to $150 to $70

in a year

M-PESA, Kenya 17,000 micro-partners,

mobile money agents

Symbian contributions from TI, Sun,Ixonos

Labor market alignment

Brings enterprises closer to open source

values

Places too much emphasis on meritocracy

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Lessons: Summary• There is a new moral framework out there around the

preferences of labor and talent, and a new wealth creation paradigm is evolving around ecosystems where complexity is managed in the relationship cloud.

• Competitiveness will only get more uneven and difficult.

• Ecosystems have a role in helping to create system-wide innovation, through a broader open management approach.

• There are models to work from.46.

Haydn [email protected]

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