All businesses need a clear value proposition that states why their product or service is better than their competitors’ and delivers value to a customer. However, in today’s world, businesses are increasingly specialised, and a single company will typically not have the resources to deliver a complex value proposition from start to finish.
This is particularly the case with businesses developing and commercialising new technology. Here, an entrepreneur will often need to rely on other businesses and organisations to supply a range of complementary products or services that enable them to ultimately deliver a product of value to their customers. We call this set of actors involved in achieving a complex value proposition, an ‘innovation ecosystem’.
Let’s take an example. Imagine that you have a novel solar panel technology that can be brought to the market as panels to customise building façades. Your commercial success will depend, among other things, on whether suitable solar inverters become available to convert solar energy into useable electricity; whether architects adopt the design; whether other producers change their building materials to interface with the panels; and whether construction companies have the necessary equipment and skills to install the fragile panels. All of these dependencies increase the risk that your initial proposition will not be a viable commercial product. Therefore, you may be better off commercialising the solar panel technology in a different way. For example, you might choose to develop electricity-generating ship decks instead, as this value proposition may align more easily with external complementary products or services, even if it is otherwise less attractive. In this respect, entrepreneurs have a lot to gain from exploring different scenarios on if and how their innovation would form a coherent value proposition, taking into account the products or services of other actors. Until now, there has not been a comprehensive tool for entrepreneurs, business developers, R&D managers or investors to develop and evaluate these scenarios.
In our research, we have drawn on the academic literature on open innovation and ecosystems to design and test a methodology that any entrepreneur or business can use to analyse different innovation ecosystem scenarios when commercialising products or services. At the heart of this new methodology is an exercise using a graphical tool called the Ecosystem Pie Model (EPM). The EPM, pictured below, helps users to understand the key terminology in analysing ecosystems. It then steers them to ask relevant questions and to structure answers about a particular complex value proposition. Finally, by comparing different models for different commercialisation scenarios, the user can develop a strategy that properly considers external actors – both as an opportunity for creating amazing new value propositions and as a source of risk for not turning a value proposition into a viable commercial reality.
No special equipment is needed to use the EPM. The tool and a comprehensive user manual can be downloaded for free at www.ecosystempie.com. From there, you just need to start adding graphical Post-it notes and your analysis can begin.
The EPM tool enables users to apply ecosystem theory to real-world scenarios. This can be done in a prospective manner, to consider future ecosystems with novel value propositions, and in a retrospective manner, to analyse an existing ecosystem and to redesign its structure. Our experience from extensive testing suggests the EPM can be used by insiders to analyse their ecosystem, and by outsiders looking in, who are seeking to map and analyse a particular ecosystem – for example, to assess investment opportunities or develop research funding policy. As such, the EPM can be tailored to different purposes, contexts and positions.
In addition, the EPM can be used . It can also be used to engage stakeholders in an emerging ecosystem. For example, several organisations could consider and analyse different innovation ecosystem scenarios together. They could use the EPM to explore opportunities for co-creating a new value proposition and/or mitigate potential misalignment in an emerging ecosystem. Here, the EPM makes explicit the complementary products and services, and interdependencies, between the actors.
Our research methods
We developed the EPM and accompanying methodological guidelines following an extensive literature survey. We identified the relevant issues in analysing innovation ecosystems and mapped how a complex value proposition is co-created by different actors. From these insights, we developed a graphical tool that was improved over iterations of testing, in which hundreds of participants mapped more than 250 different ecosystems. Our paper ‘Mapping, analysing and designing innovation ecosystems: The Ecosystem Pie Model’ (published in Long Range Planning) outlines this process in more depth. In addition, the paper provides a detailed example of how the EPM can generate value for users. Following its release, the EPM methodology has been adopted by other scholars and organisations, including major corporations, such as the Spanish utility company Red Eléctrica de España, the global consultancy firm Accenture, and innovation intermediary EIT InnoEnergy.
Limitations of our study
The key limitation of the EPM is that it is only relevant where multiple actors are collaborating to deliver a complex value proposition. The EPM is of no use in settings where a single entrepreneur or company sets out to deliver a value proposition in which there are few complementary services or products or interdependencies with other actors.
Madis Talmar is an Assistant Professor of Entrepreneurship & Innovation at Eindhoven University of Technology and a consultant for innovation programmes in energy corporations. His research interests include innovation ecosystems, design science, and organisation design, with focus on (innovation) management in the field of energy. He has published over 35 articles in practitioner-orientated management journals and consulted organisations of both public and private origin. Academically, he has published in the journals Long Range Planning, Technological Forecasting and Social Change, and Journal of Cleaner Production.
Bob Walrave is an Associate Professor of Modelling Innovation Systems at Eindhoven University of Technology. He holds an MSc in Industrial Engineering (cum laude) and a PhD from the same university. His main research interests are centred on strategic decision-making in dynamically complex situations in the context of innovation management. In particular, he is interested in the management of innovation processes within and across public and private organisations. His work has been published by journals such as the Journal of Management Studies, Research Policy, Long Range Planning, R&D Management, Industrial and Corporate Change, Technological Forecasting & Social Change, and several other journals, as well as chapters in books.
Ksenia Podoynitsyna is an Associate Professor of Data-Driven Entrepreneurship at JADS, the Joint Graduate School of Tilburg University and Eindhoven University of Technology. Her research focuses on business model and ecosystem innovations triggered by sustainability transitions and big data. Ksenia has published in the Journal of Business Venturing, Journal of Product Innovation Management, Entrepreneurship Theory and Practice, and California Management Review among others.
Jan Holmström is Professor of Operations Management at Aalto University. His research focuses on technology-enabled operational innovations and developing explorative design science as a research methodology for the field of operations and supply chain management. Jan has been among the first academic researchers to tackle practical problems such as last mile logistics for web retailing, merging physical and digital control of material flows, and the use of 3D printing for on-demand spare parts provision. He has published in journals such as Journal of Operations Management, Decision Sciences, Computers in Industry, and Communications of the ACM.
Georges Romme is Professor of Entrepreneurship & Innovation at Eindhoven University of Technology. His scholarly work focuses on organisation design, technology entrepreneurship, innovation ecosystems and organisational learning. Georges has been one of the original pioneers who brought the design sciences to the field of management and entrepreneurship, for which he received several awards, such as the Distinguished Scholar-Practitioner Award of the Academy of Management. His publications have appeared in many journals, including Organization Science, SMJ, Organization Studies, JPIM, Research Policy and other outlets. His monograph The Quest for Professionalism (Oxford University Press) received EURAM’s 2017 Best Book Award as well as the 2017 Responsible Research in Management Award.
Innovation, Ecosystem, Innovation Risk, Value Proposition, Technology Entrepreneurship
Business developers, new venture teams, R&D managers, CEOs, investors, entrepreneurs
Energy, Automotive, Hightech