FACULTY INSIGHT: Ron Adner, professor of strategy and entrepreneurship at Tuck School of Business, accepts that it is a cliché but no less true for all that, “everything is becoming more connected”. The nuance, he says, “is in understanding how the specific structure of interdependence should affect strategy and decision making.” Adner’s particular research interest is in harnessing the ecosystems that new innovations are launched into – the focus of his 2013 book, “The Wide Lens: What Successful Innovators See that Others Miss”.
“Historically, research into innovation has been how to come up with great ideas; but today the problem is not getting suggestions, it is being able to sort them…” and distinguish which ones will fly and which will not. “More and more companies are launching ideas that don’t fulfil their promise… and when this happens, it is often not the innovation or its direct execution that was bad but that they did not account for things outside of the company’s control to enable the innovation to succeed” says Adner.
Innovation blind-spots lie at the core of this, where the innovator, be they an individual or a large multi-national, fail to spot blockers in the market place. Adner’s Wide Lens approach distinguishes among three different kinds of innovation risks. Execution Risk – are you sure the customer wants what you are offering and that your competitors are not doing it better. This is a reasonably well understood task that most organizations have already learned how to manage. Co-innovation Risk and its counterpart Adoption Chain Risk are much harder to spot – and are the keys to Adner’s ecosystem model. Co-innovation Risk is “the extent to which the success of your innovation depends on the successful commercialization of other innovations”; and Adoption Chain Risk is “the extent to which partners will need to adopt your innovation” before it ever arrives to customers.
In our complex world where everything is becoming more connected it is inevitable that new innovations will require partners to work together to deliver greater value. This collaboration therefore has a clear benefit but it also brings the hidden risk of dependence that can impact a co-innovation strategy. And the ‘partners’ need not realise they are even partners in the project.
Adner cites Boeing’s development of the 787 Dreamliner, a radically new aircraft built largely of composite materials making it much lighter and therefore more efficient and allowing for larger windows and more internal space: all great news for the airlines and the passengers. But the composite materials were new and so their suppliers needed to learn how to manipulate them effectively, which takes time, but was foreseeable and understandable. Less clear was that the Federal Aviation Authority, the US regulator that would grant permission for the new aircraft to fly, had no tests for the new materials, so had to develop a new testing regime for them. This was highlighted, after approval had been granted, when a number of the new plane’s lithium-ion batteries went on fire, causing the subsequent investigation to report “the government failed to properly test the Boeing 787's lithium-ion batteries and relied too much on Boeing for technical expertise”.
Adner says that managing the co-innovation risk is vitally important, “the need to allocate resources to partners and so understand your own route map and timetable” so that these partner delays do not derail the process.
Often managing the ecosystem can give advantage to those that follow, rather than those that lead. He notes that Apple has probably been even better at managing its ecosystem strategy than its core product development one. The iPhone was good, but it was its extraordinary profit generating potential that made it such a success, and this came through its evolution from the iPod and the existing infrastructure afforded with iTunes accounts. Adner sees that Apple’s exploration of mobile pay, with Apple Pay, also looks promising. They have the collaboration of both the ultimate end-users, through their iPhones and critically also the banks, by telling them that each user will only have a single preferred account they can link to their Apple Pay account. The risk for the banks being if they do not make their accounts compatible with the technology at the start they will have a much harder battle trying to get users to change their accounts later on. Consequently the banks have dutifully lined-up to co-operate. However, it is still a task to bring the retailers on-board to complete the ecosystem circle for mass take up of the service.
Prof Adner has acknowledged that companies do not have an obvious candidate to oversee this external ecosystem exploration. “You’re not going to see a Chief Ecosystem Officer any time soon, and not just because there is already a CEO position” he notes wryly. “Managing this cuts across the whole C-Suite. The way it plays out will depend on the ecosystem being played into.” Adner and his colleagues have devised tools and frameworks that can be applied to help structure the process of analysing the ecosystem that innovations will play into that help reduce these risks. By using these tools leaders can be more confident that they will not run into unforeseen problems, though as he notes luck will always play its part, positively or negatively; as he tells his students “if forced to choose between good strategy and good luck – always go with good luck. But since they are not mutually exclusive, and since you can’t actually choose luck, the wise course is to invest in good strategy. Good luck will follow”.
Ron Adner is professor of strategy and innovation at Tuck School of Business at Dartmouth and Faculty Director for the Tuck executive education program, Leading Innovation: From Idea to Impact. This week long program covers where ideas come from; the idea dynamics, including managing the ecosystem; and best practice execution for learning how to navigate the end-to-end innovation execution process. It is designed for senior managers from established organizations who lead or support innovation initiatives.
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