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Interview
Ron Adner: managing the
interdependencies and risks of an
innovation ecosystem
Brian Leavy
n 1993, Professor James F. Moore proclaimed ‘‘the end of industry as a useful concept
in contemplating business’’ and urged the adoption of the concept of business
ecosystem as a more insightful alternative.[1] While ‘‘industry’’ remains a robust
concept in strategic analysis, there is no doubt that the ecosystem view of strategy and
innovation continues to grow in importance. In The Keystone Advantage (2004), Harvard
professor Marco Iansiti and consultant Roy Levien, argued that in the evolving competitive
landscape, ‘‘the crucial battle’’ is no longer between individual firms but ‘‘between networks
of firms’’ and that strategy was fast becoming ‘‘the art of managing assets that one does not
own.’’ In the same book, the authors provided valuable guidance on how to think about
strategy and positioning in such a networked environment.
Brian Leavy, is the AIB
Professor of Strategic
Management at Dublin City
University Business School
([email protected]) and a
Strategy & Leadership
Contributing Editor.
I
One of the current exponents of the ecosystem concept, the innovation guru Ron Adner,
warns in his latest book, The Wide Lens, that many firms will have to rethink not only their
approach to strategy but also to innovation if they are to continue to survive and thrive.
Innovation in an ecosystem context poses additional challenges and risks not typically
associated with stand-alone innovation in products and services, but also exciting
opportunities and sustainable paths to longer-term growth for companies that get it right.
Adner, a professor of strategy and entrepreneurship at the Tuck School of Business at
Dartmouth College and, previously at INSEAD, is noted for his studies of the root causes of
innovation success and failure.
Strategy & Leadership asked Professor Adner to discuss the special challenges and
opportunities offered by innovation ecosystems, along with some of the perspectives,
principles and tools that he has developed to help firms to become more successful in this
exciting and demanding context.
His interviewer, Brian Leavy, is the AIB Professor of Strategic Management at Dublin City
University Business School ([email protected]) and a Strategy & Leadership contributing
editor.
Theme 1: the need for a ‘‘wider lens’’ on innovation – getting all of the major risk
types on the radar
Strategy & Leadership: In your new book, The Wide Lens: A New Strategy for Innovation, you
argue that even companies with great ideas and great innovation execution can still end up
with massive failures on their hands. What are companies failing to take into account when
they plan their innovation initiatives?
PAGE 14
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STRATEGY & LEADERSHIP
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VOL. 40 NO. 6 2012, pp. 14-21, Q Emerald Group Publishing Limited, ISSN 1087-8572
DOI 10.1108/10878571211278840
Ron Adner: Over the past two decades we have seen companies shifting their focus from
standalone products to integrated solutions. We see this in many industries –
manufacturing, financial services, retail and healthcare, for example. In such cases, when
delivering value depends on the combined efforts of multiple partners – both within and
across firms – executing brilliantly doesn’t assure success. When success depends on
collaboration, if partners stumble you too will fall. For example, being first to market with a
great high definition television doesn’t matter if the cable and network content offered in HD
isn’t compelling yet. Thus a company may be meeting the more conventional ‘‘execution
challenge’’ of getting its own piece of the solution to market early, while still failing to meet the
wider ‘‘complementor co-innovation challenge’’ of ensuring that the other vital elements of
the value proposition are also in place for full market take-off. Philips found this out the hard
way with HDTV in the early 1990s, and Sony and Samsung have ‘‘rediscovered’’ this problem
with their recent 3D television efforts. Such missteps can arise in any industry where success
depends on collaboration.
S&L: To avoid market missteps, you talk about the need to view the innovation challenge
through a much wider lens than most companies have tended to use up to now. Why is this
so important, and why now?
Adner: In the wake of the information revolution, progress in the technologies that enable
collaboration has far outpaced the strategies that we have to manage collaboration.
Customers are no longer the only stakeholders that matter. A company might have
developed a beautiful innovation that customers love. But if the firm hasn’t managed to align
its interests with those of its critical partners, it has only solved part of the larger puzzle.
The Wide Lens is a collection of tools and frameworks that I have developed and tested over
the past decade through my research and work with companies. The book offers a
structured approach to uncovering the hidden sources of dependence that can undermine
collaboration efforts.
S&L: You say that viewing innovation as an ‘‘ecosystem’’ can help to highlight three major
sources of risk, two of which have tended to be overlooked in the past.
Adner: Historically, companies have obsessed over managing their execution risk – coming
up with innovations that are valued by their customers, and delivering them better than the
competition. But this focus often leads them to neglect critical dependencies in their
ecosystems. Because innovation success in ecosystems requires partners that are both
able and willing to participate in a novel solution, innovators need to be aware of two new
kinds of risk: co-innovation risk and adoption chain risk.
S&L: What do company strategists most need to know about the nature of ‘‘co-innovation
risk’’ and how it has undermined innovation efforts in the past? How can innovation
strategists assess and manage it?
Adner: Co-innovation risk considers the question ‘‘Who else needs to
innovate for my innovation to matter?’’ The point here is that brilliant customer
insight and heroic development efforts will not make up for the absence of
key complements (see box, ‘‘The essentials of co-innovation and adoption
risk‘‘). Software as service models – today’s cloud computing – collapsed in
the early 2000s not because of bad innovation, but because of missing
co-innovation, particularly in the areas of broadband and security. It was only
when the co-innovation challenges were finally overcome that the value
propositions took off. Sadly, by then, many of the pioneering firms found
themselves left out of the take off.
Many innovation discussions get bogged down in the question of ‘‘if’’
something can be accomplished. A ‘‘wide lens’’ approach expands the