From Alpha Males to Diplomats

Dries Faems - 19. Mai 2021

Tips for practitioners

The current Coronacrisis is pushing companies to substantially accelerate their digitalizationstrategies and efforts. This triggers the fundamental question of ‘How can companies create a sustainable competitive advantage in this novel context.’ To become one of the winners in the digitalera, it is crucial to offer customers seamlessly integrated solutions. When we buy a car, we not only expect that it can bring us reliably and safely from A to B, but we also want to get an optimal user experience where the integrated infotainment system of our car can play our favorite music on demand and provides us accurate updates of current weather conditions. When we read our favorite newspaper or magazine, we expect that we can easily download the newest edition on different electronic devices and that we can listen to additional podcasts or watch complementary videos that provide us additional background information on a topic that we are really interested in.

New collaborations for new offerings

Developing such seamlessly integrated solutions, however, triggers novel challenges for innovation managers. Often, companies do not possess all the necessary skills and capabilities to individually provide such fully integrated solutions to the end user. Instead, companies need to build innovationecosystems, which refer to the creation of a multilateral network of partners to create a new value proposition for users. To introduce the ApplePay service, Apple needed to build a complex constellation of partnerships with financial institutions, credit card companies, merchants, and mobile operators to allow consumers to smoothly use their smartphone for financial transactions. In the automotive industry, we see that companies increasingly build innovation ecosystems. Companies which have a long history of vertical partnerships with automotive suppliers are now forced to engage in more extensive and complex collaborative endeavors, involving the need to team up with novel partners. The automotive supplier ZF, for instance, launched in 2017 an initiative to create blockchain-based wallets that would allow autonomous cars to automatically execute different transactions such as paying for toll, parking, or fuel. To realize this innovative value proposition, ZF teamed up with UBS and IBM. In other words, ZF engaged in a partnership with a financial institution and a software provider, which are not necessarily the partners that ZF was used to work with.

A modern way of thinking is what ecosystems need

Whereas the need for innovation ecosystems is becoming increasingly clear, companies are also struggling to turn such collaborative endeavors into a success. Based on my own academic research as well as numerous discussions with practitioners, I want to highlight one crucial condition that needs to be present for building successful ecosystems. Turning ecosystems into a success requires a change in mindset where companies no longer focus on maximizing their individual share of the pie, but rather try to jointly increase the size of the pie and subsequently take their fair share of it.  Let me give a rather unusual example to illustrate this core argument.

At first sight, the Place Jourdan in Brussels does not look like a very attractive place. The square is mainly used by locals as a parking spot and some of the houses around the square could benefit from a renovation. In normal times, however, this square is one of the most popular places in Brussels to hang out. Every night, the square is buzzing with activity, with people from multiple nationalities occupying the local terraces of different bars. Not only locals, but also the most prominent European actors tend to visit this square when they are in Brussels. After one of the numerous recent crisis meetings, Angela Merkel, for instance, was spotted at this square, holding freshly baked French Fries from the local snack bar Maison Antoine in her hands.

Situated in the middle of the square, this snack bar is indeed the pivotal point of the Place Jourdan. However, the success of Maison Antoine is not primarily driven by the taste of their French Fries. Instead, the core recipe for success is their informal arrangement with the bars that surround it. People who have purchased their French Fries at Maison Antoine, are allowed to eat them on the terraces of the local bars as long as a beverage is consumed.

Enhanced cooperation leads to more profit for everybody

In this way, Place Jourdan nicely illustrates the power of ecosystems. Maison Antoine and the surrounding bars have established a setting that offers consumers a unique and attractive culinary experience. However, this ecosystem can only be successful if all involved actors are willing to give away some of the value to the collaborating partners. In sum, they are able to jointly create a larger pie, and each of them takes a fair share.

The end of the Alpha era?

What does it take for companies to develop this distinct ecosystem mindset? I strongly believe that industry leaders, who have tended to occupy the front pages of the business magazines in the past decades, cannot be the drivers of such cultural change. That kind of leader has been extremely successful in navigating their companies in very competitive environments, where the focus was on aggressively increasing the profits for the individual company. In my opinion, this leadership style is likely to fail when the company engages in complex ecosystems, where the interests of different companies need to be aligned in order to maximize joint profits.

Instead, we will need a new generation of leaders, who are able to function as diplomats, eagerly searching for an acceptable win-win situation for all ecosystem actors. I also believe that this need for a new leadership style is an important opportunity for a younger generation of ambitious individuals. Collectively building creative structures in Minecraft, jointly killing the bad guys on multi-player platforms such as Roblox, these are just two examples of how a current generation of youngsters learns on a daily basis to jointly increase the pie. I am hopeful that this generation will have the skills and mindset to lead the next wave of successful innovation ecosystems.