Innovating with the ecosystem in mind

credit: dupress.deloitte.com

credit: dupress.deloitte.com

In our previous posts, we’ve asserted that the reason so many “innovative” new products and services fail is because the innovators fail to understand the circumstances, ecosystems and environments in which the new product must exist.  Even more important to consumers than new features is ease of use, ease of integration, ease of connection.  We call this a holistic, continuous seamless experience.

If seamless experience, as we’ve defined it in previous posts, is the emerging requirement for innovators, then what are the components that construct a seamless experience?  And further, if seamless experiences are so vital, what are the forces that converge to create so much interest in seamless experiences?

If we consider and answer these questions, innovators can see a growing confluence of ecosystems, platforms and patterns of disruption that are combining to create new opportunities.  We can also take a look back at past innovation efforts to see how little we’ve moved the needle in terms of customer engagement and the value that past innovations have created.

With so much in motion, it’s time for a careful consideration of what fuels innovation, what patterns exist and what factors – such as ecosystems and platforms – will combine to create what customers really want:  a continuous, holistic and complete experience.

Ecosystems

In a recent paper for Deloitte University Press, Eamon Kelly lays out how “business ecosystems are coming of age“.  He quotes James Moore who first introduced the idea of ecosystems in a business context who said “in a business ecosystem, companies co-evolve capabilities around a new innovation:  they work cooperatively and competitively to support new products, satisfy customer needs and eventually incorporate the next round of innovation”.

Ecosystems provide near term, comprehensive solutions for customers but also signal the evolving needs and potential new innovations.  Kelly speaks about the ecosystem Apple created, noting that such an ecosystem would offer customers a “seamless” experience.

Kelly notes that ecosystems, while they may differ in size and makeup, are characterized by three factors:

  1. Ecosystems encourage participation by a diverse range of organizations, which provides for ecosystem health and broad solutions.
  2. Ecosystems are characterized by increasing engagement between actors that would be difficult to organize in a top down manner.  These ecosystems are smart but self-organizing and self-correcting to adjust to the needs of customers and consumers.
  3. Participants are bonded by some combination of shared interests, purposes and values which makes the ecosystem a “shared commons”.

Once basic product needs are met, consumer attention turns to services, business models and experience.  These are met not by discrete products but by ecosystems.  Ecosystems are often enabled and supported by platforms.

Platforms

In another paper from DUP, entitled Anticipating disruptive strategies in a world of unicorns, black swans and exponentials, the authors define and describe platforms.

They say that platforms help make resources and participants more accessible to each other, and are often catalysts for ecosystems.  They describe two characteristics of a platform: a governance structure and a set of protocols.  The governance structure that includes protocols on who can participate and the roles the participants play.  The protocols facilitate connection and coordination between collaborators.

The authors define four types of platforms:  aggregation platforms, which facilitate transactions and connect users, social platforms, which facilitate interaction, mobilization platforms which encourage people to take action together and learning platforms, that facilitate sharing information.  I believe they missed the most vital type of platform, which is a payment platform.  As Amazon is demonstrating, aggregating products, encouraging interaction (through reviews and comments) and enabling simplified payments creates a platform that is exceptionally sticky.

Ecosystems don’t necessarily require platforms to succeed, but without a platform the ecosystems are somewhat self-organizing and may lack common goals and protocols.  This is why some platform companies (like Amazon or payment platforms like Visa) could have a powerful impact on innovation.  They can simplify and standardize activities within the ecosystem, leading to a better customer experience.

Definitions over, signals ahead

Now that we’ve fully and carefully defined the importance of seamless experience, platforms and ecosystems, we can evaluate the signals that indicate that innovation will shift from discrete, incremental products to more robust solutions and integrated experiences.  From these trends we can see how events are unfolding that will lead to more integrated ecosystems and even higher customer expectations of seamless experience.

Deloitte University Press has another good paper, entitled 9 patterns of disruption

This paper identifies the emerging themes and trends that signal how markets and customer behavior will radically rework channels, customer relationships and markets.

The authors break the 9 patterns into two groups:  emerging patterns that harness network effects and patterns that transform the value/price equation.  I’d like to look closely at the first group, because network effects rely on platforms and they grow ecosystems.

The authors define five of the emerging patterns as contributing to network effects:

  • Expanding marketplace reach – connected distributed buyers and sellers
  • Unlocking adjacent assets
  • Turn products into platforms
  • Connecting peers
  • Distributing product development

These emerging patterns thrive on and are either built on or are building platforms (see turning products into platforms) or ecosystems (connecting peers, expanding marketplace reach).

As these patterns emerge and are reinforced, customers will demand greater integration across products, platforms and services within an ecosystem.  This is what we’ve been calling a continuous, holistic and complete experience – a seamless experience.

What innovators should do

As customers become less satisfied with stand alone products and have higher expectations, and as the internet and other technologies continue to draw all products and people into tighter, more integrated orbits, customers expect more and more continuity and consistency across what were originally discrete offerings.  But as platforms emerge (Google, Android, Amazon, Facebook, etc) and social interaction increases (social media, the Internet generally) consumers expect that products, channels and services will work together more effectively.

The patterns of disruption we noted previously demonstrate that products and markets are growing more integrated and rely more and more on peer communication and networking.  As these factors occur, innovators have to change their thinking about outcomes.  Producing a uninteresting, discrete product that doesn’t integrate or align to existing platforms or ecosystems costs more, because you must convince consumers to overlook the lack of integration or seamless connectivity. Further, a discrete product created without regard to an ecosystem is less likely to “fit” within the ecosystem or rest easily in the supporting platforms.

Ideally, innovators will apply the three horizons framework and will choose to create incremental products and experiences (find gaps within existing platforms and ecosystems that can be filled), or will create breakthrough solutions (new products or services that extend existing platforms and ecosystems), to improve customer uptake.

Really disruptive innovators will create disruptive new solutions, upending existing platforms or ecosystems to create new ones or radically rework old ecosystems, but will need to think through more than just a product in order to achieve their goals.  Developing a new or competitive ecosystem requires products, services, business models, channels and data or information, some of which can be provided by the innovator, and some of which may need to be provided by third parties.

Thus, there is no longer any distinction between product innovation and service innovation, or internal innovation or open innovation.  Innovation in an ecosystem context requires all of these facets in order to create real value.

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