Since James Moore introduced the term business ecosystem in 1993 the term ‘innovation ecosystems’ has gained currency within corporate headquarters’, management consultancy, government white papers for economic development and academic papers on global innovation and competition. New concepts and words like ‘innovation ecosystems’ often denote a departure from an old reality to a new one and an underlying shift in mainstream thinking from an existing to a new paradigm. The ecosystem raises (at least) two important questions.
How should we understand innovation ecosystems in the evolutionary context of global economics and innovation?
How should we operate and interact strategically with innovation ecosystems from a company perspective?
Though we pay little attention to it there is an evolutionary pathway for economic systems and transitions. We are currently accustomed to seeing the United States in the dominant global position influencing technology, enterprise systems, and culture, but clearly it hasn’t always been so.
We are currently accustomed to seeing the United States in the dominant global position influencing technology, enterprise systems, and culture, but clearly it hasn’t always been so.
Around 1850 the German economist George Friedrich List argued that Germany needed a ‘national system’ for economic development in order to catch up with Britain. Without going into detail one of Friedrich List’s main contributions was that of building a national manufacturing base and protecting ‘strategic infant industries’ from foreign competition until they had reached a mature level and would be able to compete successfully internationally. His influence among developing nations has been considerable. Japan has followed his model. It has also been argued that Deng Xiaoping’s post- Mao policies were inspired by List.
In 1899 the English economist Alfred Marshall coined the term ‘agglomeration’ and the advantages it held for companies to be located in proximity to other companies within the same industry. Marshall’s arguments for agglomeration was based on the numerous small companies and related services located around cutlery production in Sheffield in Northern England.
In 1950 the Swedish economist Eric Dahmén launched the term ‘development blocks’ as a recipe for Sweden’s economic development and industrial transformation. Dahmén’s thesis was very much inspired by Joseph A. Schumpeter and notions like the role of the entrepreneurs, capital, creative destruction and on the other hand focusing on particular development industries.
In the late 1980s Christopher Freeman and Bengt Åke Lundvall introduced the concept of ‘national system of innovation’. This concept embraced not only the primary actors of entrepreneurs, companies and capital but also national regulation of labour markets, factor markets, education and other policies into the framework for economic development. The case studies for national systems of innovation were among others Japan and the Nordic countries.
In 1990 Michael Porter’s publication ‘The Competitive Advantage of Nations’ was published and it introduced the concept of ‘clusters’ as a vehicle for economic development of industries, regions, and nations. Michael Porter’s cluster concept contained many of the same elements of the earlier economic development concepts mentioned above, yet it achieved more global recognition and followers than anyone else before. Today, more than 100 regions and/or nations have experimented or implemented some kind of cluster policy based on Porter’s framework.
In 2010 Stanford University launched the international innovation ecosystems network in cooperation with select partners in Finland, China and Japan. At the same time innovation ecosystems denote Information and Communication Technology Platforms like Apple’s iPhone, Google’s Android, cloud computing and software platforms dominated by companies like Microsoft, Amazon etc.
So what is an innovation ecosystem in 2011? When we talk today about innovation ecosystems, 90% of the concept is a combination of the aforementioned earlier historical examples and concepts.
Notably, innovation ecosystems are based on successful examples of agglomeration whether in geographic, economic, industrial or entrepreneurial terms. In Schumpeter’s words, innovation ecosystems are primarily about successful innovative regions (Silicon Valley, Bangalore), successful ICT platforms (iPhone, Android) or new industries (cloud computing) and entrepreneurs and investors from all over the world jump on the bandwagon of these successes. As such there is relatively little new about innovation ecosystems compared with earlier concepts like development blocks or clusters.
Yet, the remaining 10% that seems to be a novelty of today’s innovation ecosystem’s from earlier equivalents should not be underestimated.
The main novelties for today’s innovation ecosystems compared with earlier times can be found in the Internet/mobile/ICT systems’ platform dimension and web 2.0. This is because, today any entrepreneur with a good idea can, irrespective of geographical location, launch a business application for Apple’s or Google’s iPhone or Android platforms and become a successful business. This was not the case in e.g. Alfred Marshall’s time of cutlery in Sheffield. To benefit from the agglomeration or ecosystem of that time you had to be physically present in that place and time.
Even though innovation ecosystems are still based on some kind of geographical concentration of entrepreneurs, investors, talent, universities, the Internet seems finally to be so mature that its 10% may very well be the most strategic.
Even though, in 2011, most innovation ecosystems are still based on some kind of geographical concentration of amassed entrepreneurs, investors, talent, universities, the Internet seems finally to be so mature these 10% may very well be the most strategically important for any company, region or nation in the years to come. Add to this that the ICT revolution has made the old distinction between physical goods and services more or less obsolete or at best blurred. So how should companies navigate and position themselves advantageously in the 21st century’s global landscape of innovation ecosystems?
One way for companies (regions and nations for that matter) to approach which of the global innovation ecosystems they should network with and consider important could be by making an initial critical assessment of key strategic dimensions for partnering with or tapping into innovation ecosystems. Some of these strategic dimensions for consideration are highlighted below.
Leadership and partner role
Technology lock-in risks
Supply side risks
Pros and cons of tier one versus tier two ecosystems
In conclusion, in order to make sense of today’s innovation ecosystems it might be useful to see them as successful agglomerations of industrious activity sharing many of the similarities of earlier such economic configurations. Moreover, the allure of partnering with the most successful and obvious ecosystems should be considered carefully with at least some robustness testing of options such as diversifying into a larger number of ecosystems and thereby avoiding the pitfalls and risks high-lighted under strategic dimensions in this article.
By Jørn Bang Andersen
Jørn Bang Andersen is currently senior advisor to the Nordic Innovation Centre on innovation and globalization. Prior to this he has worked as special advisor to the Ministry of Business and Industry on innovation and technology development, deputy director to the Ministry of Foreign Affairs of Denmark’s unit invest in Denmark as marketing and business development manager and special advisor to the Trade Council of Denmark on the global innovation strategy.
Internationally Andersen has worked for the European Commission on international business, trade and technology co-operation, responsible for notably China, India, Vietnam. Andersen has served as Denmark’s government’s senior advisor to Estonia and Latvia on their transition to market economies and EU memberships. Embedded in the Ministry of Economic Affairs in Estonia, Tallinn.
Private sector engagements have inter alia been as founder of Hansa Consulting House and Nordic and East European Area Manager for Interlace. Andersen received a MA in political science from Aarhus University, Denmark, and a MA in Western European Politics and International Economics from University of Essex as part of an Erasmus scholarship. Jørn B. Andersen has published books and articles on innovation and lectured on the issue in Denmark and internationally.