Welcome to the Brave New World of Innovation Ecosystems

Will ecosystems replace simple ‘old’ innovation collaborations as we know them today? Open innovation has suddenly lost its pole position. Board rooms around the world will be thinking through the events that unfolded recently and I’m not talking about Eygpt.

Just get into the story that has been unfolding at Nokia in the recent weeks, it has been breathtaking but it signals a massive change in where innovation will be going. Let me summarize some of this story and add some of my own thoughts on what this means.

Firstly the famous burning platform memo within Nokia.

In early February Stephen Elop, the CEO of Nokia issued a ‘burning platform’ memo internally

• We are standing on a “burning platform,” and we must decide how we are going to change our behavior.
• The burning platform, upon which the man found himself, caused the man to shift his behavior, and take a bold and brave step into an uncertain future. He was able to tell his story. Now, we have a great opportunity to do the same
• And, we have more than one explosion – we have multiple points of scorching heat that are fueling a blazing fire around us.

While competitors poured flames on Nokia’s market share, what happened at Nokia? They fell behind, they missed out on some big trends, and they lost precious time to multiple competitors. They now find themselves years behind. So in a brutally honest assessment Nokia has lost market share, lost mind share and lost time. It needed something radical.

There are many other organizations that should be as honest as this. Automotives come to mind for example. Burning platforms are one of the best ways to galvanise and generate innovation. There are many burning platforms out there- Health, Government, Social Services, Age concerns, Poverty, Pharmaceutical, Automotive, Energy and Climate (and many others) are all burning platforms needing bolder solutions.

If leadership sees it, then disruption follows or rapid decline can set in. Competition in the world is getting mean.

The new war of ecosystems

To quote Elop: “The battle of devices has now become a war of ecosystems. In this case it is where ecosystems include not only the hardware and software of the device, but developers, applications, ecommerce, advertising, search, social applications, location-based services, unified communications and many other things. Our competitors aren’t taking our market share with devices; they are taking our market share with an entire ecosystem. This means we’re going to have to decide how we either build, catalyse or join an ecosystem.”

Today, the battle is moving from one of mobile devices to one of mobile ecosystems in Nokia’s case and perhaps many other global businesses.

Again Elop: “Ecosystems thrive when they reach scale, when they are fueled by energy and innovation and when they provide benefits and value to each person or company who participates.”

Back to Nokia’s CEO Stephen Elop brutally honest ‘burning platform’ memo.

“The first iPhone shipped in 2007, and we still don’t have a product that is close to their experience. Android came on the scene just over 2 years ago, and this week they took our leadership position in smartphone volumes. Unbelievable.”

“We poured gasoline on our own burning platform. I believe we have lacked accountability and leadership to align and direct the company through these disruptive times. We had a series of misses. We haven’t been delivering innovation fast enough. We’re not collaborating internally. Nokia, our platform is burning.”

Overall, the communique laments Nokia’s lateral movement while Apple and Google have started eating its lunch on the mid- and high end and Shenzhen-based off brands have started to cut into its traditional dominance in emerging markets, leaving Espoo with virtually zero market leadership.

So enters Microsoft needing at least one solution to its own burning platforms.

A long term strategic alliance between Nokia and Microsoft was announced on Friday 11th February 2011, proposing to build a global ecosystem that creates opportunities beyond anything that currently exists. This ecosystem offers a serious alternative to the existing choices to operators, developers and consumers. Bringing together highly complementary assets and competencies will allow this ecosystem to achieve more than any other industry partnership could achieve. Welcome to the third ecosystem of mobile devises to compete with Apple and the Google’s Android.

Does it make sense or as one commentator commented “ Nokia: here’s why we jumped off the “burning platform” into the frigid North Sea by choosing Microsoft and its Windows Phone 7” as its smart phone platform.

• Together Microsoft and Nokia have some of the most globally recognized and treasured brands on the planet. This can be leveraged for the benefit of the ecosystem and the products.
• Nokia plans to help drive and define the future of the platform. That could include contributing expertise on hardware optimization, language support, customization of the software and helping bring Windows Phone to a larger range of price points, market segments and geographies.
• Nokia operates an established, global supply and distribution network with the capability to bring products to almost every corner of the world. That provides the capability to take potential Nokia Windows Phone products and make them globally competitive.
• Scale is critical to a winning ecosystem. Together, Nokia and Microsoft would bring unrivalled scale in global reach, brand identity and product breadth.

It seems a winning idea: world’s biggest handset maker plus most profitable software firm.

A turkey or an eagle has been raised with this strategic partnership

One further commentator quoted:

“On paper, it looks like a simple win: the world’s biggest handset maker joins the world’s most profitable software maker, which dominates the PC platform. Why shouldn’t it be an open goal on mobiles? The problem is nobody thinks of Nokia or Microsoft when buying a “smartphone” because that means “apps”, for which everyone thinks of Apple (330,000 third-party apps) or, increasingly, Google’s Android (200,000 third-party apps). Developers know they can make money on either platform if they have a hit like Angry Birds or some other app, and companies know apps can drive commerce to their business.

It might mean many possibly heading fast for the exit. As an interesting question for a developer is, where best would it be to put their skills to write code for Windows Phone 7, for Android, or Apple’s iOS?”

Rebuilding fortunes

Embattled mobile phone firm Nokia has now signed up to a “broad strategic partnership” with Microsoft in an effort to rebuild its fortunes. It is most likely to go beyond just smart mobiles.

Elop said the partnership meant the mobile market was now a “three horse race”, with Nokia-Microsoft competing strongly with Apple, and Google’s Android platform.

Let’s see how HP reflects on this; will they join this ecosystem or stay with their own efforts to battle on the hardware front? They might be forced to join one of the three ecosystems themselves as they will increasingly find it expensive to build another alternative.

So the battle of ecosystems becomes the necessary innovation platform.

Are ecosystems and platforms the global answer to innovation acceleration?

I don’t think this set of events is contained to one industry. I think we will see the rapid acceleration of ecosystems; new platforms and business models will suddenly transform many industries. Scale and scope will be seen differently from this move of Nokia and Microsoft.

Take a quick look at what these ecosystems can bring in this Nokia-Microsoft deal.

At present in what must be a fairly fluid strategic rethink, Nokia said it will continue to make phones running its Symbian operating system, thus “leveraging previous investments to harvest additional value”. Symbian, though, will be relegated to the status of a “franchise partner”. Third world phones suddenly have a fairly decent operating system at affordable prices perhaps?

MeeGo, Nokia’s Linux-based open source mobile operating system, will also continue – but with a focus on “longer-term market exploration”. This seems like picking the parts that are different and merging these into the Windows Mobile 7 platform in the next few years.

Further scanning the different commentary from recent events show that while the specific details of the deal are being worked out, here’s a quick summary of what we are working towards:

• Nokia will adopt Windows Phone as its primary smartphone strategy, innovating on top of the platform in areas such as imaging, where Nokia is a market leader.
• Nokia will help drive and define the future of Windows Phone. Nokia will contribute its expertise on hardware design, language support, and help bring Windows Phone to a larger range of price points, market segments and geographies.
• Nokia and Microsoft will closely collaborate on development, joint marketing initiatives and a shared development roadmap to align on the future evolution of mobile products.
• Bing will power Nokia’s search services across Nokia devices and services, giving customers access to Bing’s next generation search capabilities. Microsoft adCenter will provide search advertising services on Nokia’s line of devices and services.
• Nokia Maps will be a core part of Microsoft’s mapping services. For example, Maps would be integrated with Microsoft’s Bing search engine and adCenter advertising platform to form a unique local search and advertising experience.
• Nokia’s extensive operator billing agreements will make it easier for consumers to purchase Nokia Windows Phone services in countries where credit-card use is low.
• Microsoft development tools will be used to create applications to run on Nokia Windows Phones, allowing developers to easily leverage the ecosystem’s global reach.
• Microsoft will continue to invest in the development of Windows Phone and cloud services so customers can do more with their phone, across their work and personal lives.
• Nokia’s content and application store will be integrated with Microsoft Marketplace for a more compelling consumer experience.

The combination of these 800lb Gorillas will seemingly be impressive

Nokia’s history of innovation in the hardware space, global hardware scale, strong history of intellectual property creation and navigation assets are second to none. Microsoft is a leader in software and services; the company’s incredible expertise in platform creation forms the opportunity for its billions of customers and millions of partners to get more out of their devices.

So the war of ecosystems is upon us.

Stephen Elop made these comments recently:

• There are other mobile ecosystems. We will disrupt them.
• There will be challenges. We will overcome them.
• Success requires speed. We will be swift.
• Together, we see the opportunity, and we have the will, the resources and the drive to succeed.

Time will tell on this strategic partnership, it has a massive challenge to catch up and regain lost ground but it signals the ecosystem for innovation step change is upon us.

In my view innovation has just entered a new phase

The ecosystem becomes main stream for innovation delivery. Platforms, strategic partnerships, new business models all will be on the agenda of any serious global organization. Burning platforms are all around us, welcome to the new era of global innovation. Perhaps the bold new innovation frontier.

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Paul Hobcraft runs Agility Innovation, an advisory business that stimulates sound innovation practice, researches topics that relate to innovation for the future, as well as aligning innovation to organizations core capabilities.