Teaming up for the future
To survive in the complex business environment of the 21st century, companies have joined startups, research centers – and even competitors – to create ecosystems that have one main objective: to innovate and maintain their relevance in the market.June-August | 2019
Until recently, innovation was seen as a solitary activity that relied on ideas from geniuses such as Henry Ford, Sakichi Toyoda and Steve Jobs, to name a few. Further back, the great inventions and discoveries were also the result of the intellectual work of a single man – such as Leonardo da Vinci and Archimedes of Syracuse (purported author of the interjection “eureka”, used to this day when someone has a good idea).
Over the 21st century, this ingenious figure has not become irrelevant (something that will hardly happen), but has certainly lost its importance. In an economy based on digital technologies and convergence of companies from different sectors, isolating a genius in a lab no longer makes sense. Increasingly, innovation is an activity that involves not just several people – but different groups, representing different institutions. These are called “innovation ecosystems”.
“An innovation ecosystem is a set of entities that collaborate to innovate in the production of goods or services”, says Jefferson Denti, Deloitte’s partner in the Business Consulting area and leader of the Digital practice. Either large or small companies, universities, startups or even public agencies and research centers can form ecosystems. What is important here is understanding that it is very difficult for a company to innovate on its own, as products and services become more complex. In the current scenario, it is easier to find innovative solutions by gathering different capacities.
“Entering an ecosystem broadens the horizons, because it prevents companies from being stuck with the same vision”, says Eduardo Kfouri, vice-president for Latin America of the software developer Qlik. “By partnering, you bring different perspectives, demands and needs and this enables a collaborative environment that results in innovation at a higher level.” Qlik leads a digital community with more than 100,000 people, including customers, employees and data analysis experts. “Most of the participants are directly involved with our platforms and come up with ideas and solutions that, if propitious, are incorporated by our research and development team”, explains Kfouri.
The digital economy is creating new paradigms and this alone forces companies to innovate – and to do so in a much faster way, Jefferson Denti, Deloitte's partner in the Business Consulting area and leader of the Digital practice.
Joining a group that even a former competitor may be part of is the answer to a changing world where the business environment is affected by the breakdown of barriers across sectors – for example, is a stand-alone vehicle assembler a manufacturer or technology industry? –, by changing consumer habits and by the rapid development of digital technologies such as Internet of Things (IoT), 3D printing, artificial intelligence, nanotechnology and machine learning. “The digital economy is creating new paradigms and this alone forces companies to innovate – and to do so in a much faster way”, stresses Denti. According to him, it is no longer conceivable that a company should spend years thinking about a project to innovate. “You have to go for open innovation by getting others involved in the process.”
Innovation ecosystems are the result of a process that dates back to the 19th century. Experts point to its start at the 1850s, when the German economist George List advocated for Germany to establish a national system to develop and confront the Great Britain. The idea was to build a national factory base and protect the nascent strategic industries from foreign competition, until they reached the point of being able to compete internationally. At the turn of the 20th century, economist Alfred Marshall created the term “agglomeration” to define an environment in which companies settle in the same area. In 1990, Michael Porter launched the concept of “clusters” for the economic development of industries, regions and countries. Finally, in 1993, James Moore created the concept of “business ecosystem” which evolved into the innovation ecosystem in the 21st century. “At the basis of all this is the digitization trend, which has allowed the collection and analysis of an immense amount of data” says Renata Muramoto, Deloitte’s partner in the Strategy and Operations practice. “The exchange of information provides benefits and opens opportunities for all.”
Earlier this year, Huawei, a Chinese multinational specializing in networking and telecommunications equipment, launched the Global Industry Vision 2025. According to the study, in 2025, all things will have the ability to “feel”, meaning they will have sensors that will connect them to other devices. If this scenario confirms itself, there will be a world where everything is intertwined and intelligent. In seven years, the number of smart devices will reach 40 billion, with about 100 billion connections. That will build a digital economy of US$ 23 trillion – larger than the United States’ GDP, today at US$ 20 trillion. “This environment creates new markets and ecosystems. Innovating will be essential for companies to remain relevant”, says Juelinton Silveira, director of Communication and Business with the Government of Huawei in Brazil. After all, if all things are interconnected, why should companies isolate themselves to innovate?
There are even companies that are born from an ecosystem. One example is Alelo, created in 2003 through the conjunction of two competing banks, Banco do Brasil and Bradesco, to operate in the payments and benefits market for workers. A year ago, Alelo’s innovation area is located at Inovabra, a co-innovation habitat that brings together companies, startups, investors and entrepreneurs focused on generating new businesses and bold solutions – based on networking and collaboration. “Acting in ecosystems is a path with no return”, says Márcio Alencar, director of Business with Commercial Establishments and Innovation at Alelo. The innovation team, made up of three professionals, spends four days a week at Inovabra – and one day at Alelo headquarters for meetings. “It is no longer possible to be aware of what happens outside if we are restricted to our corporate environments”, explains Alencar.
One of the results of this collaborative environment was Alelo Pay, which allows the payment of meals by reading a QR code through a smartphone. The service is still in its testing phase and was created to reach an estimated 6 million people who do not have mobiles with touch and pay technology. The project is conducted in partnership with startups and with the software developer TOTVs.
In the telecommunications sector, companies create partnerships to aggregate expertise that until recently was not considered important, such as digital services. In the last century, telecoms were focused on creating infrastructure for voice transmission. Then they began to transmit data. Today, they need to add value, by producing content and developing other services. “Companies are faced with the challenge of offering digital services that require DNA, experience and culture distinct from what traditionally exist”, explains João Moura, president of the Brazilian Association of Competitive Telecommunications Service Providers (TelComp). “That’s why we operators creating ecosystems that bring together different areas, such as technology, marketing and customer service to develop new products.”
How to build your ecosystem
The first step for those thinking of creating an ecosystem is to structure an internal innovation program. This is not a contradiction. Before looking outside, one needs to do some housekeeping. “It’s not enough to set up a research and development department”, explains Denti, from Deloitte. “It’s about creating a mentality based on value and the experience to be delivered to the client or consumer.” From there, one needs to establish a cycle to measure the results in three axes: (1) generation of ideas; (2) acceptance by the consumer or client; (3) performance from the point of view of financial results. “Often, there is an immediate chase for the financial return of a new product or service. However, it is necessary to have a broader horizon in these cases. This is a mistake that can kill good ideas”, adds the Deloitte’s partner.
The internal innovation program cannot be, in any way whatsoever, a limiting factor to partnerships or disruptions. A common risk is that corporatism overlaps with some new solution that can compete with the company itself. This was the case with Kodak, which developed the digital camera technology, but preferred to continue focusing on the analog, losing a billion dollar market to the competition. “Innovation cannot be annihilated by the organization’s status quo”, says Denti. “Leadership must be assertive and take the necessary steps to prevent this from happening.”
Implementing a modern culture that values teamwork and collaboration outside the home greatly facilitates this process. “Without a doubt, it is not trivial to change a company’s method of development, since it may be difficult to look outside and understand which partners accelerate the innovation process”, states Alencar, from Alelo. “People need to be engaged and understand that the collaborative setting is not just a beautiful phrase; is a concept that must be put into practice.”
A frequent obstacle is the lack of trust among the players in an ecosystem. “It is necessary to overcome the points that can generate insecurity, such as data reliability and information security, so there are no weaknesses in the process”, defines Renata Muramoto, from Deloitte.
It is necessary to overcome the points that can generate insecurity so that there are no weaknesses in the process, Renata Muramoto, Deloitte's partner in the Strategy and Operations practice.
Another determining factor is the ecosystem structure and archetypes, which vary according to the degree of participation and the responsibility of those involved. Denti, from Deloitte, highlights two: the orchestrated and the collaborative chains. The first is characterized by being commanded by a “conductor”, usually a large company that leads the process and coordinates the others in the delivery of the result. In the collaborative chains, there is no leadership. All perform in a proportional way. In both cases, it is important that one feature remains: interdependence between participants.
The consolidation of this mode of innovation should lead companies – and in tandem, society – to see the creation of products and services that we cannot even imagine today. One has only to glimpse what could happen if the great geniuses of humanity divided the same environment with the sole intention of innovating.