The etymology of “innovation’ is intriguing. “Novation” in the 13th century was a term for renewing contracts. Subsequently, during the industrial revolution, it came to be associated with science, focused on technical invention. The progression from invention to innovation came when intellectual creativity was measured along with commercial viability in the latter half of 19th century.
Today, many organizations claim continuous innovation, and are not afraid to say that they innovate every day, or indeed attribute lack of innovation as the cause of all ills, from slowing macro growth to falling stock prices.
One way to look at the effectiveness of innovation is to measure it on the three parameters of:
- Customer experience
- Process effectiveness
- Alternative business model creation
Uber remains the most cited example of a new business model which combined customer experience (simplistic mobility) with GIS. Where advancement in battery technology would have been considered “innovation”, Tesla provided a case of precipitous evolution – not only creating with their cars a rapidly growing niche in the auto industry, but projecting the applications across sectors to even compete with traditional utilities.
Alibaba, Apple, Amazon, Baidu Google, Facebook, Tencent – not only have these platforms influenced the innovations impacting traditional sectors, they have gotten a dominating dimension in human lives. Gartner predicts that by 2020, about 20% of all activities an individual engages will involve at least one of the big 7. The rise of tech start-ups and their ability to start disrupting the value chain or the business model was possible partly because of the extension of these platforms in one way or another. One could argue that the majority of product design and development was dominated by the concept of platform-led innovation. It provided a basis for the model where a large, sustainable and profitable platform could be used by others as a medium for value distribution.
I believe we are now looking at the next step of evolution whereby the next move is likely to be around building ecosystems rather than depending on existing platforms.
- The platforms have extensive access to the customer, a highly developed understanding of consumption patterns, financial muscle, and agility in execution of new business ideas. Amazon Prime Video is a case in point. The platforms are exceptionally strong for numerous reasons, with the negotiation position tilted strongly in their favour.
- We are already starting to see use-cases whereby an idea can’t be supported by any of the existing platforms. An alternative case is when platforms are causing limitations on the developers to address real needs.
- We are likely hitting a stage that if the dependency is not taken away to some extent, the rate and/or pace of innovation will slow down.
Often times, it is at the point of complete dominance by some players that disruptors emerge. The idea around ecosystem is co-existence and inter-connection. Each part of the ecosystem is vital for the overall growth of the ecosystem and the sustainability of the ecosystem will also increase by the number of organisms that sustain it. The important part here is that the organisms are not attached to the same platform; instead the underlying fabric of the ecosystem that binds it together is “value creation opportunity”.
There are organizations and even countries who are now betting on these ecosystems in their growth strategies: for example, building new initiatives via accelerators programs. The Disney Accelerator is a compelling case of how the company is building an ecosystem around the entertainment industry. Disney has the experience and resources to help start-ups create a robust business model.
This evolution towards ecosystem-led innovation is an exciting journey and it most certainly will be particularly interesting to see how the big 7 react and adapt to it. It is difficult to crystal-ball it, but as William Blake said, “What is now proved was once only imagined”.