A Case Study of Innovation Ecosystem Design: BYD

比亚迪 is a Chinese company that produces electric vehicles, batteries, and other products. It has been recognized as one of the most innovative companies by Boston Consulting Group (BCG) since 2016, when it first entered the list at number 50. In 2023, it reached the top 10, ranking ninth among the global innovators. How did BYD achieve such a remarkable improvement in its innovation performance??

This article will explore BYD's innovation ecosystem design, which involves various aspects of open innovation, co-creation, collaborations, innovation platforms, and innovation ecosystems.

Problem Statement

Before BYD started its innovation programs, it faced several challenges and problems in its business environment, such as:

• ?Intense competition from domestic and foreign rivals in the new energy vehicle market, which required BYD to constantly upgrade its products and technologies to maintain its market share and customer loyalty.
• ?High dependence on the Chinese market, which exposed BYD to the risks of policy changes, market fluctuations, and consumer preferences.
• ?Low brand recognition and reputation in the global market, which limited BYD's ability to expand its presence and influence in overseas markets.
• ?Lack of core competencies and differentiation in some of its business domains, such as electronics and rail transit, which reduced BYD's profitability and growth potential.

Approach

To overcome these challenges and problems, BYD adopted a comprehensive and systematic approach to design its innovation ecosystem, which involved:

• ?Developing a clear vision and strategy for innovation, which guided BYD's decisions and actions in pursuing its innovation goals and objectives.
• ?Building a strong culture and capability for innovation, which fostered BYD's internal creativity, learning, and collaboration among its employees.
• ?Leveraging external resources and networks for innovation, which enabled BYD to access diverse sources of knowledge, ideas, and opportunities from various external parties.
• ?Implementing various initiatives and platforms for innovation, which supported BYD's innovation activities and processes in different domains and stages.
• ?Evaluating and improving its innovation performance and impact, which helped BYD to monitor its progress and outcomes, and to identify areas for improvement.

Innovation Culture

Innovation culture is a set of values, beliefs, norms, and behaviors that support and encourage innovation within an organization. BYD has fostered a strong innovation culture among its employees, which is characterized by:

• A passion for technology and excellence, which motivates BYD’s employees to pursue continuous improvement and innovation in their products and processes.
• A spirit of entrepreneurship and experimentation, which encourages BYD’s employees to take risks, try new things, and learn from failures.
• A sense of ownership and responsibility, which empowers BYD’s employees to make decisions, solve problems, and take initiatives.
• A culture of collaboration and communication, which facilitates BYD’s employees to share information, knowledge, and ideas across functions, levels, and locations.

BYD has also implemented various measures to nurture and sustain its innovation culture, such as:

• Providing training and education programs for its employees to enhance their skills, knowledge, and creativity.
• Establishing incentive and recognition systems for its employees to reward their innovation efforts and achievements.
• Creating a conducive work environment for its employees to stimulate their inspiration, motivation, and collaboration.
• Organizing various events and activities for its employees to showcase their innovations, exchange feedback, and celebrate successes.

Open Innovation

Open innovation is a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as they look to advance their technology. BYD has adopted an open innovation approach to leverage the knowledge and resources of various external parties, such as startups, universities, research institutes, customers, partners, and the public. Some examples of BYD’s open innovation initiatives are:

• It launched its Open Innovation Platform in 2019, which is an online portal that connects BYD with external innovators, who can submit their solutions and proposals for BYD’s innovation needs and challenges. The platform also provides various resources and support for the innovators, such as mentoring, funding, testing, and incubation.
• It joined the Hydrogen Council in 2020, which is a global initiative of leading energy, transport, and industry companies that aims to accelerate the transition to a hydrogen society. The Hydrogen Council promotes collaboration among its members and stakeholders, and advocates for policies and investments that support the development and deployment of hydrogen solutions.
• It established the BYD Innovation Center in 2021, which is a physical space that showcases BYD’s products and technologies, and facilitates interactions and co-creation with customers, partners, and the public. The center also hosts various events and activities, such as workshops, hackathons, exhibitions, and competitions, to stimulate innovation and exchange of ideas.
• It participated in the Global Innovation Alliance in 2021, which is a network of international partners that aims to foster cross-border collaboration and co-innovation among enterprises, startups, and talent. The alliance provides various platforms and programs for its members to access new markets, technologies, and opportunities.

Co-Creation

Co-creation is a form of collaborative innovation where ideas are shared and improved together by multiple stakeholders (Prahalad and Ramaswamy 2004). BYD has engaged in co-creation activities with various stakeholders, such as customers, partners, suppliers, employees, and communities. Some examples of BYD’s co-creation activities are:

• It launched its premium brand Yangwang in 2021, which targets high-end customers who value technology, design, and quality. Yangwang features BYD’s latest innovations, such as the DiSus system (a dual suspension system that enhances driving comfort), the Blade Battery technology (a new type of lithium iron phosphate battery that has higher energy density, longer cycle life, and better safety than conventional batteries), and the DiLink system (a smart vehicle platform that integrates artificial intelligence, big data, cloud computing, and internet of things technologies to provide intelligent features and services for BYD’s vehicles). Yangwang also involves customers in the design process, allowing them to customize their vehicles according to their preferences.
• It formed a joint venture with Toyota Motor Corporation in 2020, to develop and produce electric vehicles and batteries for the Chinese market. The joint venture, called BYD Toyota EV Technology Co., Ltd., aims to leverage the strengths of both companies in technology, R&D, and manufacturing.
• It partnered with Daimler Truck AG in 2020, to launch a new premium electric vehicle brand called Denza, which targets high-end customers who value quality, design, and technology. The Denza brand is operated by Shenzhen DENZA New Energy Automotive Co.,Ltd. New Energy Automotive Co., Ltd., a joint venture between BYD and Daimler established in 2010.
• It signed a strategic cooperation agreement with 华为 Technologies Co., Ltd. in 2021, to collaborate on various fields, such as cloud computing, artificial intelligence, 5G, and intelligent driving. The two companies also plan to jointly develop new products and solutions for the new energy vehicle industry.

Collaborations

Collaborations are a form of cooperative interaction where two or more parties work together to achieve a common goal. BYD has established various collaborations with different parties, such as government agencies, industry associations, academic institutions, and social organizations. Some examples of BYD’s collaborations are:

• It collaborated with the Shenzhen Municipal Government and the Shenzhen Bus Group Company Limited Group to launch the world’s first pure electric bus fleet in 2011, which has since grown to more than 16,000 buses and reduced carbon emissions by over 1.35 million tons.
• It joined the Zero Emission Vehicles (ZEV) Alliance in 2015, which is a coalition of national and subnational governments that aims to accelerate the adoption of ZEVs worldwide. The ZEV Alliance commits to making all passenger vehicle sales in their jurisdictions ZEVs as fast as possible, and no later than 2050.
• It cooperated with the 清华大学 and the China Automotive Technology and Research Center to establish the National New Energy Vehicle Technology Innovation Center in 2017, which is a platform for R&D, testing, certification, and standardization of new energy vehicles and related technologies.
• It partnered with the United Nations Development Programme ( 联合国开发计划署 ) and the Global Environment Facility (GEF) to implement the Panda Green Energy Project in 2017, which is a global initiative that aims to promote renewable energy and sustainable development through building solar power plants that resemble giant pandas.

Innovation Platforms

Innovation platforms are a set of tools, methods, and processes that enable and support innovation activities. BYD has developed various innovation platforms, such as:

• The BYD Cloud Platform, which is a cloud-based platform that provides data analysis, remote monitoring, intelligent diagnosis, and online service for BYD’s products and customers. The platform also supports BYD’s internal management, R&D, production, and operation processes.
• The BYD Open Innovation Platform, which is an online portal that connects BYD with external innovators, who can submit their solutions and proposals for BYD’s innovation needs and challenges. The platform also provides various resources and support for the innovators, such as mentoring, funding, testing, and incubation.
• The BYD Innovation Center, which is a physical space that showcases BYD’s products and technologies, and facilitates interactions and co-creation with customers, partners, and the public. The center also hosts various events and activities, such as workshops, hackathons, exhibitions, and competitions, to stimulate innovation and exchange of ideas.
• The BYD Academy, which is a training and education platform that provides courses, seminars, lectures, and certifications for BYD’s employees, customers, partners, and students. The academy covers various topics related to BYD’s business domains, such as new energy vehicles, batteries, rail transit, and electronics.

Conclusion and lessons learned

BYD’s innovation ecosystem design has been successful in enhancing its innovation performance and impact. By adopting an open, collaborative, and co-creative approach to innovation, BYD has been able to:

• Improve its product quality and technology level, and launch innovative products and solutions that meet customer needs and expectations.
• Increase its market share and sales volume, and expand its presence and influence in both domestic and overseas markets.
• Enhance its brand recognition and reputation, and gain awards and recognition from various organizations and media outlets.
• Diversify its business portfolio, and enter new domains and segments with high growth potential.

BYD’s case study provides valuable insights and lessons for other firms that want to design their own innovation ecosystems. Some of the key takeaways are:

• Innovation is not a one-time event, but a continuous process that requires constant adaptation and improvement.
• Innovation is not a solo activity, but a collaborative effort that involves multiple stakeholders with different perspectives and interests.
• Innovation is not a linear process, but a complex system that involves various elements, interactions, and feedback loops.

By understanding these principles, firms can design their own innovation ecosystems that suit their specific contexts, challenges, and goals.