The Need for Best Practice in Managing Innovation Ecosystem

In today's rapidly evolving business landscape, innovation is no longer confined to isolated entities but thrives within interconnected ecosystems. These ecosystems, comprising various organizations working collaboratively, are essential for driving sustainable growth and competitive advantage. While quality management has long-established best practices, innovation management for single organizations will see its first standard in September 2024. However, in an Ecosystem Economy, the need for best practices in managing innovation ecosystems has become increasingly urgent.

Historical Context and Current Gaps

For decades, quality management standards, such as ISO 9001, have provided frameworks for organizations to ensure product and service quality. These standards have become globally recognized benchmarks, helping organizations streamline processes, enhance customer satisfaction, and drive continuous improvement. In contrast, innovation management has lagged, with comprehensive best practices only beginning to emerge.

For this reason, I, head of the RenDanHeYi Silicon Valley Center, decided to take an active part in the development of an innovation management standard. After several years of work, involving experts from all over the world, the ISO 56001 standard for innovation management within single organizations marks a significant milestone in the evolution of management, heavily influenced by world innovation leaders such as Microsoft, Google, Tesla, Haier, and more.

However, it raises an important question: why has it taken so long for a comprehensive best practice on innovation management to enter the global market? One reason for the delay is the idea, shared by some academics and practitioners, that innovation management can’t be standardized. This idea is however false, as another influential group of academics and practitioners already have proved that this is not the case. Based on coded best practices, governments, non-profits, and private organizations, currently all over the world, support startups and large firms in innovating and scaling new businesses. The knowledge of how to effectively do this is not evenly distributed among regions, organizations, and managers. The delay in addressing the critical need for best practices in innovation management highlights a significant gap in supporting organizations to thrive in today's interconnected world.

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The Urgency for Best Practice in Managing Innovation Ecosystems

Taking an active part in the development of ISO 56001 revealed a problem to be solved- the role played by the innovation ecosystem in organizations’ innovation management practice. Leading practices on innovation management applied by companies such as Haier, Google, and Tesla have already expressed the crucial role of the innovation ecosystem as a way for organizations to innovate, scale, and access new knowledge, competencies, and markets. For this reason, the innovation ecosystem was added and included in ISO 56001, as well as in ISO 56000.

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Organizations today are not just competing in isolation; they are part of broader ecosystems where collaboration and co-creation are paramount. This reality necessitates a shift from managing innovation within single organizations to managing innovation ecosystems comprising multiple parties. The concept of an Innovation Ecosystem, or more correctly of an Innovation Ecosystem Micro-Community (IEMC), as we discuss collaboration between organizations on a micro-economic level, is crucial here and is based on innovative new practices developed by innovation leaders such as the Haier Group, and more. An IEMC involves more than two organizations, often from different industries, working together towards common goals, such as developing cross-industry solutions. By coding applied best practices, such as e.g., the management of RenDanHeYi’s EMC (Ecosystem Micro Community) organizational structure, guidance on how to effectively govern and manage Innovation Ecosystem Micro Communities could by experts be developed.

Effective management of an IEMC requires capabilities distinct from those needed for single-firm innovation management. These capabilities include managing higher uncertainty, fostering transparency and trust, ensuring continuous value creation, and fair value sharing among participants. Without a best practice and standardized approach to these complex dynamics, organizations risk inefficiencies, missed opportunities, and potential conflicts.

The Need for a Democratized Competency

The uneven distribution of competencies and skills in managing innovation ecosystems creates unfair market advantages. Regions with advanced innovation management capabilities will naturally outpace those where such skills are less developed. This imbalance can stifle global innovation potential and economic growth, leading to a fragmented and unequal market landscape. Furthermore, successful innovation ecosystems often leverage cutting-edge technologies like AI, data analytics, and advanced information technologies. These technologies are not uniformly accessible worldwide, further exacerbating disparities.

Standardized guidance on managing IEMCs would democratize this critical competency and skill set, ensuring that organizations everywhere can effectively participate in and benefit from innovation ecosystems.

Key Principles for Managing Innovation Ecosystem Micro-Communities

For an IEMC to thrive, several key principles must be adhered to:

1. Cross-Industry Collaboration: Participants must come from various industries, bringing diverse knowledge, skills, and resources.
2. Clear Common Intention: All parties must share a common vision and objectives.
3. Human-Centric Approach: Innovation efforts should be driven by customer needs and leverage the human capabilities of member organizations.
4. Decentralized Network: The ecosystem should operate in a non-hierarchical, networked design, promoting agility and responsiveness.
5. Strategic Alignment: Objectives, strategies, and initiatives should align with the strategic directions of member organizations.
6. Continuous Value Creation: The ecosystem must focus on ongoing value creation and fair value sharing among participants.
7. Technology Integration: Effective use of technology and tools is essential to reduce management and innovation costs.
8. Intellectual Asset Management: Protecting and leveraging intellectual assets is crucial for sustaining competitive advantage.

Towards a Guidance Standard

To address these needs, a guidance standard for managing IEMCs should be developed, complementing the ISO 56000 family of standards. Such a standard would provide strategic frameworks, best practices for leadership and governance, stakeholder engagement guidelines, performance metrics, and risk management strategies. It would also promote sustainability and scalability, ensuring the long-term viability and growth of innovation ecosystems.

The introduction of this guidance would not only bridge the current gaps in innovation management but also democratize the necessary competencies, making them accessible to organizations globally. This, in turn, would foster a more equitable and competitive market environment.

Conclusion

As industries evolve into cross-industry ecosystems, managing these complex networks effectively becomes crucial. The time has come to democratize the competency and skill set for how to manage innovation ecosystems on a micro-economic level. This guidance could also be valuable for managing innovation ecosystems on a meso and macro level. By developing and implementing standardized guidance for IEMCs, we can ensure that all organizations, regardless of geographical location, have the tools and knowledge to participate in and benefit from collaborative innovation. This will lead to higher value creation, sustainable growth, and a more balanced global economy.