“Companies have a huge potential to open their innovation up to the outside world”

What is ecosystem innovation? And what’s the difference between “open innovation” and “ecosystem innovation”? In this interview, Prof. Oliver Gassmann from University of St. Gallen, answers questions by Christoph Birkholz, Co-Founder Impact Hub Zurich and Kickstart Co-Lead, in order to illustrate the concept of ecosystem innovation, that lies at the heart of Kickstart.

This interview can be found in our book “Ecosystem Innovation”. Free download here.

Christoph Birkholz: Prof. Gassmann, what is ecosystem innovation?

Prof. Oliver Gassmann: An ecosystem consists of a configuration of partners which formed alliances along a customer journey in order to deliver superior or radically new value propositions. Typically the partners bring modular products or services with complementary assets and competencies into the game. Ecosystems bridge today’s industry borders. Ecosystem innovations are new configurations of these multi-lateral alliances.

Why is ecosystem innovation important today and in the future?

Let me answer by two perspectives: first, from a technology standpoint, then from a market view.

(1) Due to the technological trends in digitalization, we can observe four effects: dramatically reduced transaction costs, ubiquitous computing and connected products, immense increase of data, and immense improved algorithms. Lower costs, connectivity and intelligence made it possible that superior value propositions have been created by alliances. Now, this is only technology which enables ecosystems.

(2) The real pull for ecosystems comes from customer behaviour: customers are no longer willing to accept fragmented deliveries and high personal transaction costs. The point of sales has been shifted, customer journeys such as home, mobility, travelling, finance embrace more and more value chain activities.

How has ecosystem innovation developed in the past 10-15 years?

Ecosystems have been always around. But due to digitalization, they became more efficient and effective. Data and connectivity are huge drivers for many ecosystems. Most successful ecosystems develop sooner or later towards clear platforms where a dominant player sets the rules of the game. Amazon, which has already between 42 and 49 % of the whole eCommerce business in Europe, is a typical example. The complementary players have been marginalized, while the platform becomes more and more dominant.

Which trends or key topics do you see emerging with regards to ecosystem innovation?

It becomes more important to build emotional ties to the customer and to become more relevant for the customer journey. The set up in ecosystems offers great opportunities for partners to specialize. At the same time, specialization in most industries drives the need towards partnerships with complementary companies.

Which players or concrete cases have you seen with regards to successful ecosystem innovation?

One of the best players is Amazon, but Google is also building up ecosystems. All automotive players want to build up ecosystems in order to stay competitive when more and more value is created with connectivity and data-based services

What are the do’s and don’ts for an organization that wants to successfully activate ecosystem innovation

Companies will need strong capabilities in partnering, not just in production and marketing but also in the core of differentiation: innovation will be done more collaboratively. We observed the trend towards open innovation now for nearly 20 years, there is progress there, but most companies still have huge potential to open their innovation up to the outside world.
In future, it will be more difficult to distinguish between competitors and opportunities. Without partnering it will become more difficult to survive. It makes also sense to build up more technological capabilities on all levels in companies, up to the management board. It is all about the business model around the data, how to translate relevant data into a valuable business model. That stays important in ecosystems. On a metalevel, companies need to learn how to balance their interests and relationships. Stakeholder management, which is known for many years, becomes a new and more important role.

Which role, if any, do startups play?

Startups are underestimated in complementing ecosystems. Often startups are built around a knot of the ecosystem in order to be a neutral place for
mature companies to cooperate.

About Prof. Oliver Gassmann
Oliver Gassmann is Professor of Technology Management at the University of St. Gallen and Director of the Institute of Technology Management. After completing his PhD in 1996, he was leading research and advanced development at Schindler Corporation. Gassmann published in leading journals such as Research Policy, R&D Management, International Journal of Technology Management, Journal of World Business, European Management Journal and more. At the core of his research is the pervading question of how companies innovate and profit from innovation. Thus, he is dedicated to discovering new approaches to the management of technology and innovation that contribute to firms’ competitive advantage.