Open management and the enterprise ecosystem

Open Management and the Enterprise Ecosystem: A new management paradigm and its metrics

Haydn Shaughnessy, Cogenuity July 26-28, 2010 Park Hyatt Aviara Resort Carlsbad, CA

nGenera Insight All-Member Meeting

Changing Externalities

The Ecosystem as Solution

Measuring Innovation in Ecosystems

A Sector Example

Lessons

Agenda

Case Study

2 | © 2010 nGenera Corp. All Rights Reserved.

Changing Externalities


The era of unprecedented economies of scale

Competition just got very tough. China and India enjoy unprecedented economies of scale:

• The $2,000 Auto in India

• India mobile market headed towards 1 billion + subscriptions

• 30% price reductions in telecommunications infrastructure equipment globally (delaying introduction of next generation Internet, IPv6)

• China supercomputer industry – 10 new supercomputer centers THIS YEAR


The growth of system-wide challenges

These types of issues create systemic or sector-wide problems beyond what one enterprise can address – the innovation focus is autos, cities, mobile, logistics, silicon….

Debt de-leveraging at enterprise and national levels, hyper-competition, energy issues, the empowered consumer.


The innovation crisis

Remarkably, the return on assets (ROA) for U.S. firms has

steadily fallen to almost one-quarter of 1965 levels

The $20,000 infant incubator

The $20,000 auto

15,000 UK bank branches

The $7 infant incubator

The $2,000 auto

17,500 mobile money

agencies in Kenya

Developed world Developing world

–John Seely Brown and John Hagel, The Shift Index 2010

500 million Facebook users 560 million China Mobile

subscribers


India’s $35 laptop


Unveiled 23.07.10

New frontiers in innovation

The ecosystem is becoming the model for powering growth and extensibility.

New business models

Hypergrowth

Global innovation in

technology and banking

One sold every three seconds

3 sold per second


The Ecosystem as Solution


0

10000

20000

30000

40000

50000

60000

70000

80000

90000BusinessEcosystem

BusinessEcosystem (w/e)

Open Ecosystem

Open Ecosystem(w/e)

Comparison of Business Ecosystem blog references using exact term and using “all the words” (excluding all ecological references)

80,000 blog posts a year reference ecosystem and business together

in the same post

The growth of the new ecosystem conversation

Source: Cogenuity May 2010 10 | © 2010 nGenera Corp. All Rights Reserved.

Old New Open ecosystems and the future of management

The new ecosystem 2008….

• The old idea of ecosystems: “glocal” partnerships

• Tight corporate focus

• Glocal search for cheap labor

• Labor market dis-alignment

• Central planning and reporting

• Corporate value focused

• Communications driven

• Investing your business future in the relationship cloud

• Focus on externalities

• Global search for free labor and talent + revenue generating micro-partnerships

• Value re-alignment process

• PLANNING FOR RANDOMNESS

• Value-diverse and customer-centric

• Perception driven

The old ecosystem 1995 - 2007


Why randomness?

We are speaking of a

significant societal shift — from

organizations leveraging technology to accomplish their goals TO

individuals leveraging technology to accomplish THEIR goals.

And their goals are MUNDANE

They are ABSURD

And they are anything BUT rational —Blogger Sean Howard, June 28, 2010


Enterprise objectives

The ecosystem can be defined as a need or approach to radically improving the external environment and as a

consequence changing the enterprise, driven by the need to:

To overcome industry or sector bottlenecks

Disrupt the product roadmap or current business models

Use open source to reduce cost and extrapolate innovation outside the organization

Integrate customer ecosystems to refresh customer service offerings and respond to empowerment


A Sector Example


Ecosystems and competition in the mobile sector

Device and equipment sales in this

industry – a model for challenges and solutions elsewhere

A significant growth

sector estimated at 5 billion online devices by 2014 (CISCO)

USA India

Projected

Current

720 million

285 million

1.1. billion

mobile phone subscriptions to 2013

10% growth

50% growth

315 million


Major open source initiatives in mobile

Android – the Google-led alliance developing an open operating system based on Linux

Limo – an alliance to build a Linux based operating system for mobile

Symbian – the Nokia operating system pitched into open source in 2010

MeeGo – an Intel – Nokia open source project for premium phones

Moblin – an Intel driven project for open source mobile interfaces, across phones, netbooks and similar devices


http://www.google.com/imgres?imgurl=http://www.cell-phone-plans.net/blog/wp-content/uploads/2010/03/android-logo-white.png&imgrefurl=http://www.cell-phone-plans.net/blog/cell-phones/cell-phone-comparison-motorola-droid-vs-motorola-devour/&usg=__IDXlt_euGhFIq-4RSS08n1Bv6V4=&h=500&w=500&sz=54&hl=en&start=3&sig2=c2-14TaQ1aKTWxk5fnFPaA&itbs=1&tbnid=H2QfI7935HZaRM:&tbnh=130&tbnw=130&prev=/images?q=android+logo&hl=en&safe=strict&client=dell-usuk-rel&channel=us&gbv=2&ad=w5&tbs=isch:1&ei=F_Y1TMvDLea1nAfBqqmbAw

http://www.google.com/imgres?imgurl=http://engtechmag.files.wordpress.com/2010/02/meego_logo_gm1.png&imgrefurl=http://engtechmag.wordpress.com/2010/02/15/mwc-nokia-and-intel-join-forces-in-mobile-software/&usg=__XZpvtXOhqINeXrSBKjN17v_XVYE=&h=330&w=1200&sz=23&hl=en&start=3&sig2=IFGvf618U_pVU_R6uXpuAQ&itbs=1&tbnid=Koq-2L8cg7up9M:&tbnh=41&tbnw=150&prev=/images?q=MeeGo+logo&hl=en&safe=strict&client=dell-usuk-rel&channel=us&gbv=2&ad=w5&tbs=isch:1&ei=k_Y1TIWEKeCMnAfEscmUAw

From open source to open ecosystem

Three innovative players:Three current strategies beyond open source

Price, market share, market range

Incremental gains from service to product to apps to ads

Extending the Google business model


End-user communities

Apps developers

Ecosystem brands

Nokia Services

Apps

Geodata/AR

Maps Location

based services

Embedded device markets

Mobile advertising

revenues

Home device markets

OS developers

Tools developers

Device sales

Content developers

Function developers

Solutions ecosystem

AR content

Supply chain

Hardware- software interface

Transforming the external environment

Apple

Google

Apps store

Ovi

Operators

A partial view of the mobile ecosystem


Extensibility: new business models, activities and markets

Case Study: How do you migrate from business as usual to a new organizational form?


Nokia heads for the ecosystem

2007 Nokia decides to open source its smart phone operating system, Symbian, the most widely distributed smartphone OS globally

Mid-2008 Nokia creates Symbian Foundation and open source project announced

April 2009 Foundation launches officially

February 4th, 2010 Almost 40 million lines of code open-sourced

NOKIA’S KEY TENSION POINT: Its core culture is not

adapting to the new realities, particularly customer

centricity and “openness”


Symbian’s mission

To create an open management paradigm

• Realign IT/engineering and other departments like design, marketing, ideation

• Liberate the strategy process from the roadmap

• Grow an ecosystem where innovation is systemic though unpredictable

• Respond to a world where openness is an expectation

• Deal with complexity


4 Steps to open management values

Values and creativity help staff to bring values and creativity to work

Participation

be a participant, e.g., open up the sustainability plan, don’t dominate the ecosystem; all staff to participate via blog and twitter

Future worlds orient not just to the future but to transformed environments

Excellence

set the highest standards


Symbian’s open management, open ecosystem tools

• Developer community

• Apps community (horizon.symbian.org)

• Ecosystem Ideagora – (ideas.symbian.org)

• Open research community

• Volunteer community

• Ecosystem blog platform (blog.symbian.org)

• Get satisfaction


An open ecosystem ideagora

Pushing the openness agenda, by ideating

The management of the foundation

The operating system

The future of mobile


NOKIA

Symbian

MeeGo, OS

Navteq, maps

Ovi - services

Qt Interface tools

Point and find (ads/search)

Forum Nokia

Device supply chain

Operators

Nokia life

tools

Rural development co-

investments India

Technology Institute

Brazil

Mobile brain bank Africa

Nokia money

Business solutions

community

Growing externalities at Nokia


Developer community

Ideagora

Members (200

enterprises)

Volunteers

Apps community

Chipset makers, Texas Instruments

OEMs, Sony Ericsson,

Nokia

Consultants, e.g. Accenture

Operators, e.g.

Vodafone

Academia/ open

innovation

OS Tools

OS component specialists, e.g.

Sun

The Symbian ecosystem


Hard- ware/soft-

ware interface redesign

Measuring Innovation in Ecosystems


Measuring innovation

• How successful has Nokia/Symbian been?

• The headline 2008 – 2010 is the iPhone − And the sub-heading is Android


Conventional measures of innovation balance certainty against time:

by the time you can really measure the output it’s too late to change

ROI

Scaling a business

Internal attitude changes

Brand equity development

New ideas

Patent quantity

Pipeline metrics

(2,5, 10 year product flow)

Some kind of balanced

scorecard for knowledge production

Time

Certainty

Measuring innovation


—Secretary of Commerce, January 2008

Measuring innovation: Principles

“ Make room for qualitative and subjective measures

Measure iteratively rather statically

Measure the stack – firm, industry, sector, nation, region….

Pilot new metrics”

Source: www.innovationmetrics.gov/ 30 | © 2010 nGenera Corp. All Rights Reserved.

• Acceptance • Alignment • Consistency • Trust • Extensibility • Values/perception

Socio-cultural

• Platform deployment

• Value conversion

• Engagement

• Diversity

• Friction reduction

Socio-economic

• Price • Market conditions • Innovation dynamics • Presence

Market

• Transformational narrative

• Positioning (e.g. incumbency)

• Acquisition of low cost inputs

• Acquisition of ideas

• Messaging

• Tangible value conversion investments

• Geographical growth curve

Strategic

An approach to ecosystem innovation metrics

In search of a balanced scorecard approach to judging future value


Ecosystem metrics: Acceptance

Developers characterizing their commitment to these platforms

Developers ‘very interested’ in developing for each platform

Source: Appcelerator, Inc., 06/2010

Tier 1

Tier 2

Tier 3

iPhone (iOS) 90%

iPad (iOS) 84%

Android Phone 81%

Android Tablet 62%

Blackberry 34%

Windows Phone 7 27%

Symbian 15%

Palm Pre / Pixi 13%

Meego 11%

Kindle 6%

20 40 60 80 100 %

N = 2773


The culture of the ecosystem is developer-centric

Ecosystem metrics: Alignment with business values

Source: Cogenuity 2010 Date range All time

The core connections are from brand to device and user features

Business performance is distant from brand


Ecosystem metrics: Platform Deployment

Source: Cogenuity 2010 Date range All time

Widely criticized for terms and conditions and high handedness

Widely envied for developer engagement

Criticized for cost and complexity but admired for openness

41,000

No of apps developers

10,000

Nokia doesn’t release figures


sell test services to the ecosystem

Mobility consulting

Market analysis offers

Enterprise mobility strategy

consulting

Value conversion in the Symbian ecosystem

Ecosystem metrics: Value conversion - 1

B2B

Rapid indirect monetization


Texas Instruments

Product creation services

Google/Android

Operator OEM

OEM

Apps community

OEMs use Android, incorporate Google and receive ad revenue share

Apps community shares revenue from Android apps market, hosted by Google; apps promote handset

Operators too receive revenue share and promote Android handsets

Value conversion in the Android ecosytem

Ecosystem metrics: Value conversion - 2

B2C Rapid direct monetization


http://www.google.com/imgres?imgurl=http://www.cell-phone-plans.net/blog/wp-content/uploads/2010/03/android-logo-white.png&imgrefurl=http://www.cell-phone-plans.net/blog/cell-phones/cell-phone-comparison-motorola-droid-vs-motorola-devour/&usg=__IDXlt_euGhFIq-4RSS08n1Bv6V4=&h=500&w=500&sz=54&hl=en&start=3&sig2=HXKh3jOxakWeVXvaYT_HLg&itbs=1&tbnid=H2QfI7935HZaRM:&tbnh=130&tbnw=130&prev=/images?q=android+logo&hl=en&safe=strict&client=dell-usuk-rel&channel=us&gbv=2&ad=w5&tbs=isch:1&ei=5TU2TK7jMdTNjAek6OTyAw

The iPhone price

premium

Nokia driving price down

to widen market

Balanced by broad geographical growth opportunities

Justified by astute product focus and hardware revenues

Ecosystem metrics: Price

Price sustainability is an issue with 1000s of micro-partnerships


A measure of the iPhone’s influence: Online references to HTC/Android G1 vs Apple October 2008/January 2009: Bought vs earned media

Ecosystem innovation metrics: Owning a transformational narrative - I

Apple iPhone 3g 1,216,794

Blackberry Storm 1,188

Android G1 93,228

Palm Pre 48,359

Source: The Conversation Group 38 | © 2010 nGenera Corp. All Rights Reserved.

Online references to Symbian, Android and iPhone in millions, April 1st 2009 to March 31st 2010

Ecosystem metrics: Owning a transformational narrative - 2

1.1

6.4

19.5


http://www.google.com/imgres?imgurl=http://www.krds.es/skins/images/iphone_logo.jpg&imgrefurl=http://www.krds.es/index.php?page=mobile&usg=__4EzW-i7zm7SBNm0dOgcfZHPUyDs=&h=112&w=200&sz=7&hl=en&start=6&sig2=buOJpHzIka_V09_F3I0uZQ&itbs=1&tbnid=hGH7hyibifjfhM:&tbnh=58&tbnw=104&prev=/images?q=iphone+logo&hl=en&gbv=2&tbs=isch:1&ei=jfAoTO62GofBsgb-tLjEBA

http://www.google.com/imgres?imgurl=http://www.cell-phone-plans.net/blog/wp-content/uploads/2010/03/android-logo-white.png&imgrefurl=http://www.cell-phone-plans.net/blog/cell-phones/cell-phone-comparison-motorola-droid-vs-motorola-devour/&usg=__IDXlt_euGhFIq-4RSS08n1Bv6V4=&h=500&w=500&sz=54&hl=en&start=3&sig2=HXKh3jOxakWeVXvaYT_HLg&itbs=1&tbnid=H2QfI7935HZaRM:&tbnh=130&tbnw=130&prev=/images?q=android+logo&hl=en&safe=strict&client=dell-usuk-rel&channel=us&gbv=2&ad=w5&tbs=isch:1&ei=5TU2TK7jMdTNjAek6OTyAw

Alignment with emergent values

– = Not evident = of average relevance = highly relevant

Ecosystem metrics: Alignment

Nokia/Symbian Android/Google Apple

Open

Altruism – –

New naturalism

Randomness

Individualism – –

Collaboration – –

Popularity –


Lessons


Lessons: Three styles of ecosystem strategy

NOKIA, global, across market segments,

income groups, price bands and service offers with diffuse ecosystem, poor

perception management

ANDROID, tight interaction between industry participants

for broad device distribution, improving

perceptions

APPLE, high end single product focus, multiple services; high

margins, targeted ecosystem, astute

perception management

Price

Models for sustainable competitive advantage


Lessons: Ecosystem strategy

Polarization -uniqueness

Incumbent - scale

Chain and channel

Facilitation - reciprocation

Ecosystem strategies


Lessons: Management

Invest in the relationship

cloud

Work with developer

meritocracies but create

wider values

Use platforms to structure ad hoc innovation

and revenue micro-

partnerships

Strategize around price vulnerability

Create downstream

metrics

The key tension point

Managing perception becomes MORE important Perceptions influence

relationships. An ecosystem is a diffuse relationship matrix.


Question:

• System-wide innovation

• Access to free or very cheap labor and talent

• Unpredictability and random effects in a planned environment

• Labor market value-system realignment

• Adaptation to customer centricity and customer ecosystems

Does the ecosystem deliver?


Some way to go with aligning the enterprise ecosystem to consumer ecosystems or in evolving a wider emerging value set

Lessons

Free labor/ talent/revenue

partnerships

1200 entries at ideas.symbian.org

< $8 million annual budget, 200 company members, 40 million

lines of codes, 29 innovations

Apple passes on $1 billion in revenues to micro-partners, 2008-

2010

200,000 Nokia Forum members

System wide innovation

Mobile transformation is global, sector wide

and extensible

Involves content (music), maps, geo-

data, augmented reality, autos, home devices, advertising

New hardware – software integration

initiatives

Mobile brain bank, Africa

Unpredictable innovation

iphone 250,000 apps

Price reductions from $250+ to $150 to $70

in a year

M-PESA, Kenya 17,000 micro-partners,

mobile money agents

Symbian contributions from TI, Sun,Ixonos

Labor market alignment

Brings enterprises closer to open source

values

Places too much emphasis on meritocracy


Lessons: Summary

There is a new moral framework out there around the

preferences of labor and talent, and a new wealth creation paradigm is evolving around ecosystems where complexity is

managed in the relationship cloud.

Competitiveness will only get more uneven and difficult.

Ecosystems have a role in helping to create system-wide

innovation, through a broader open management approach.

There are models to work from.


Haydn Shaughnessy [email protected]


[email protected]