Managing Multiparty Innovation25 November, 2016 / Articles
On an October morning in 2015, inside an aging beer factory in the Tempelhof neighborhood of Berlin, a group of people assembled amid idle machinery in the hope of transforming their respective industries with a novel approach to innovation. Standing shoulder to shoulder around oil barrels converted into temporary tables were innovation mavericks and senior executives at large established companies—Airbus, DHL, Caterpillar, and Cisco.
The gathering, hosted by Cisco, the California-based networking and technology company, was a crucial point in a process carefully designed to tackle the most pressing challenges at the intersection of supply chain and digitization. The goal: launch partnerships for groundbreaking solutions to shared problems within the next six months.
In an increasingly digital and connected environment, leaders of established companies frequently find themselves facing opportunities that they—or even their industries—cannot seize alone. The Berlin “Living Lab” (the name Cisco gives to such events) was a unique model for addressing such opportunities. Instead of relying on start-ups to create innovations and then buying in to them, organizations taking part in this new process, which we call ecosystem innovation, collaborate to develop and then commercialize new concepts.
Cisco Hyperinnovation Living Labs (CHILL) differs from seemingly similar approaches, such as R&D alliances, because it focuses on the fast and agile commercialization of ideas without a complicated intellectual property agreement. It also differs from traditional partnership efforts, because it brings multiple partners together at a very early stage all at once. “We believe that no one company can deliver the full breadth of technology solutions that customers need at the pace the market requires,” says Chuck Robbins, Cisco’s CEO. “This process brings our teams together with partners, customers, and other companies working to find new business opportunities. Through intense analysis and collaboration, these lab sessions result in breakthrough ideas that can be implemented or invested in by those that participate, including Cisco.”
At the Living Lab in Berlin, one team addressed the data-sharing problems that were created by multiple proprietary platforms; along with four universities, it is in the process of creating a cross-industry open-data platform to encourage application development by other start-ups. Another team sought to update the “pen and paper” tools used by most warehouse workers: Its solution was to replace them with augmented-reality wearables—and to design a pilot that launched in a Houston warehouse 60 days later. Cisco has applied this ecosystem innovation process to challenges in supply chain, retail (convening Nike, Costco, Visa, and Lowe’s), and health care (convening the University of California, San Francisco; Community Healthcare Network, Walgreens, and Vocera), and will soon host a lab in finance.
Early results are impressive. For example, Cisco estimates that the Airbus-DHL-Caterpillar lab produced internal projects, spinouts, and joint ventures to digitize supply chains, factories, and warehouses that will generate $6 billion in new revenue and save $3.4 billion in costs over the next 10 years. Not all projects survive to fruition, but something much more important is happening: Participants are developing new innovation capabilities at the ecosystem level. Markus Durstewitz, the head of corporate innovation at Airbus, told us, “We are convinced that these big changes can only be managed and put into place by the right partners. The ecosystem innovation process was a big opportunity to show us a new way to collaborate.”
In this article we discuss how large companies can develop their own ecosystem innovation capabilities, using Cisco’s process as a model. We combined insights from Kate O’Keeffe, a coauthor and the chief architect of CHILL, with those gained from dozens of interviews with participants and senior executives from the organizations involved, and interpreted those insights through the lens of our research on innovation methods, R&D alliances, and learning networks. We will describe the basic principles and the process, identify the most common traps, and explain how leaders can capture valuable opportunities—the ecosystem innovations at the core of a digital age.
How to Lead Ecosystem Innovation
If you think collaborating effectively with one partner is a challenge, imagine doing it with four at once—each one an enormous organization with its own distinct culture and objectives. Overcoming these challenges requires leadership, and for ecosystem innovation involving Cisco, the CHILL team leads and facilitates the entire process. It coordinates the ecosystem and the application of tools and methods drawn from design thinking, lean start-up, and business model innovation methodologies. The process has four phases, which run over several months.
- Identify the “focus zones” and innovation partners.
First the host company identifies the arenas of opportunity, or focus zones, that are important to its own strategy. Cisco recently identified health care—in particular, the digital transformation of health care—as a major growth area. However, the company’s leaders realized that to capture the most valuable opportunities, they would need to draw on partners’ capabilities to create ecosystem-level solutions. So the CHILL team evaluated the best way to apply its methodology to the digital health care ecosystem. Specific problems to be addressed in the focus zone emerged later, in consultation with ecosystem participants.
The CHILL team uses a scorecard to assess potential partners along three dimensions: maturity in innovation capability; a well-developed internal innovation process; and experience partnering with other companies, working with start-ups, or investing in start-ups. It selects partners on the basis of alignment of goals, market power, and resources. Participants needn’t be in the same industry (in fact, more radical and diverse ideas come when they’re not), but they should all have a connection to the host, or to one another, that is relevant to the ecosystem innovation effort. For example, the Berlin lab explored a subject that would benefit every participant: how to create an adaptive supply chain—one that responds nimbly to sudden changes—through digitized systems and tools. Although the companies had not worked together in the past, they were eager to gain new knowledge and bring their respective insights and resources to bear on the challenge.