11 Innovation Ecosystems Flashcards
What is an innovation ecosystem?
An innovation ecosystem is a collaborative arrangement where multiple organizations jointly create a customer-facing solution. Each participant contributes complementary innovations that together form a coherent offering, and the success of the system depends on all players effectively coordinating their efforts.
Why can achieving success in an innovation ecosystem be more challenging than succeeding with a stand-alone product?
In an ecosystem, a firm’s success doesn’t only depend on its own innovation; it also relies on the successful, timely contribution of partners, complementors, and intermediaries. Even if the firm’s product is excellent, the market may not emerge if other necessary parts of the system lag or fail.
What are the three fundamental categories of risk in innovation ecosystems?
The three types of risk are:
- Initiative Risks: Challenges of managing the focal project itself (feasibility, development time, internal capabilities).
- Interdependence Risks: Uncertainties arising because the innovation depends on other complementary innovations being delivered on time.
- Integration Risks: Difficulties arising in adoption across the value chain (getting intermediaries and end-users to accept and integrate the solution).
How do interdependence risks differ from initiative risks?
Initiative risks concern the firm’s own project and capabilities, while interdependence risks arise when the firm must rely on external partners’ timely success. Even if the focal firm excels, the entire solution may be delayed or fail if complements or partner projects are late or underperform.
What causes integration risks in ecosystem innovation?
Integration risks occur when multiple intermediaries in the value chain must adopt the innovation before it can reach the end-user. Each intermediary may require time to become aware, test, accept, and scale up the solution, leading to cumulative delays and potential market entry failures.
Why is timing critical in ecosystem innovation?
Arriving early with a perfect product doesn’t guarantee success if essential complements and partners aren’t ready. Misalignments in timing lead to delays, eroding first-mover advantages and increasing the risk that other competing solutions or substitutes emerge.
What strategic choices help manage or mitigate ecosystem risks?
Firms can adjust their strategies by:
- Changing target markets to those with fewer intermediaries or fewer required complements
- Deliberately slowing their internal development to match partner readiness
- Investing resources in helping partners meet their milestones
- Engaging in coalitions or lobby efforts to align ecosystem players or set industry standards
How does choosing the right target market affect ecosystem risk?
Different markets have varied ecosystem complexity. A smaller market with fewer needed complements and intermediaries reduces interdependence and integration risks, making success more likely even if it limits the opportunity’s scale.
How should managers incorporate ecosystem risk analysis into setting project expectations?
Managers should map the full ecosystem, assess interdependence and integration delays, and then revise performance expectations accordingly. This ensures that targets and milestones reflect the actual likelihood and timing of market success, leading to more realistic goals and better strategic decisions.
What is the main takeaway regarding innovation strategy in an ecosystem context?
When operating in innovation ecosystems, managers must look beyond their own development process and carefully track partners, complements, and intermediaries. Doing so allows them to set realistic expectations, prioritize effectively, and craft a robust ecosystem strategy that anticipates and manages delays and uncertainties.
Please mark as True or False the following statements about “The Forces of Ecosystem Evolution” (Holgersson et al., 2022)
Ecosystems are stable over time
The stronger the complementary the greater the centripetal forces (i.e., forces pushing toward integration)
Ecosystems arise when there are benefits of coordination as well as autonomy
Modularization is a major for source of centrifugal force (i.e., forces pushing toward disintegration)
Ecosystems are stable over time
False. The article emphasizes that ecosystems evolve and are dynamic rather than remaining in a stable equilibrium.
The stronger the complementarity, the greater the centripetal forces (i.e., forces pushing toward integration)
True. When ecosystem players’ offerings strongly complement one another, they are more likely to integrate closely to maximize synergy.
Ecosystems arise when there are benefits of coordination as well as autonomy
True. Ecosystems strike a balance between coordination (to capture collective benefits) and autonomy (to allow each participant to innovate independently).
Modularization is a major source of centrifugal force (i.e., forces pushing toward disintegration)
True. Modularization reduces interdependence among parts of the system, encouraging more independent (or “disintegrated”) development paths among different ecosystem players.
Please mark as True or False the following statements about ecosystem risks as explained in “Match Your Innovation Strategy to Your Innovation Ecosystem” (Adner, 2006).
Michelin needing garages to understand and support the PAX system before the end consumer could adopt the PAX tires is an example of integration risk
The more dependent a firm’s innovation is on complementary innovations, the greater the interdependence risk.
Sony needing third-party developers to finish the video games in times for the launch of the PlayStation 4 is an example of an interdependence risk
The bigger is the number of intermediaries positioned between the innovation and the final customer, the greater is the integration risk
Michelin needing garages to understand and support the PAX system before the end consumer could adopt the PAX tires is an example of integration risk
True. The PAX system depended on garages’ ability and willingness to service the tires before end customers could see the full benefit. This is a classic case of adoption chain (or integration) risk.
The more dependent a firm’s innovation is on complementary innovations, the greater the interdependence risk
True. If your offering requires several complementary innovations (e.g., other technologies or services) to work, your success hinges on those innovations being ready and available on time.
Sony needing third-party developers to finish the video games in time for the launch of the PlayStation 4 is an example of an interdependence risk
True. Sony’s console launch depended on the timely creation of compelling third-party games. A delay from partners could undermine the console’s success.
The bigger the number of intermediaries positioned between the innovation and the final customer, the greater is the integration risk
True. Each intermediary must adopt (or at least support) the innovation for the end customer to realize its value. More players in that chain typically increase adoption chain/integration risk.
