From alpha males to diplomats: Why we need a new generation of leaders for ecosystem innovation
March 2, 2021
Companies increasingly need to collaborate with a wide variety of partners to develop and deliver integrated solutions for their customers. In this blog, I emphasize that companies can only succeed in building such innovation ecosystems when they also develop a different strategic mindset. Whereas companies have long focused on trying to increase their share of the pie, playing the ecosystem game requires a focus on jointly increasing the overall share of the pie and subsequently acquire a fair share out of it. Such shift in mindset will require a different generation of innovation leaders.
The current Corona crisis is pushing companies to substantially accelerate their digitalization strategies 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 digital era, 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, 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.
Developing such seamlessly integrated solutions, however, triggers novel challenges for innovation mangers. Often, companies do not possess all the necessary skills and capabilities to individually provide such fully integrated solution to the end user. Instead, companies need to build innovation ecosystems, which refer to the creation of a multilateral network of partners to create a new value proposition for users. To introduce the Apple Pay 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. Also in the automotive industry, we see that companies increasingly build innovation ecosystems. Whereas these companies have a long history of vertical partnerships with automotive suppliers, they are now forced to engage in more extensive and complex collaborative endeavors, involving the need to team up with novel partners. The automotive company 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 novel value proposition, ZF teamed up with UBS and IBM. In other words, ZF now engaged in a partnership with a financial institution and a software provider, not really the partners that ZF was used to work with.
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 discussion with practitioners, I want to highlight one crucial condition that needs to be present for building successful ecosystems. In particular, I strongly believe that, 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 a fair share out 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 regular people, 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. In particular, people, who have bought 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. As a result, Place Jourdan is transformed every night into a crowded space, where people first buy their fried delicacies at Maison Antoine and subsequently consume them in combination with one of the famous Belgian beers.
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. The fact that people are allowed to eat their French Fries at the local bars implies that these bars will not be able to sell a lot of food themselves. At the same time, Maison Antoine is not able to sell a lot of beverages as people will consume their drinks at the local terraces. In sum, they are able to jointly create a large pie – i.e. a crowded square of people that are consuming fries and beer – and each of them takes a fair share.
What does it take for companies to develop this different ecosystem mindset? I strongly believe that the Alpha male leaders, who have tended to occupy the front pages of the business magazines in the past decades, can not be the drivers of such cultural change. This kind of leaders have been extremely successful in navigating their companies in very competitive environments, where the focus was on aggressively increasing the share of the pie 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 the jointly created pie. 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 involved ecosystem actors. I also believe that this need for a novel 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.
This is a translation of the original version (in German), which was published on fosteringinnovation.de/von-alpha-maennchen-zu-diplomaten-innovative-oekosysteme-brauchen-neue-fuehrungskraefte/