Success within the innovation ecosystem : evidence from a field study : what are the critical success factors of the innovation ecosystem during the leadership phase of the business ecosystem life circle?

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Statement of Originality

This document is written by Danielle Brons, who declares to take full responsibility for the contents of this document:

I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.

The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

Signature __________________________________

Danielle Brons

UvA ID: 10691499

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FOREWORD

This thesis presents my first research, but above all it represents a journey into a new world: to the world of the semiconductor industry: an industry, which is dominated by Moore’s law.

The goal of this thesis is to increase awareness about the Innovation Ecosystem; to reveal how it originates, how it work, and how to nourish it, and to get a clear understanding of the factors that drive its success. I believe that increased awareness, knowledge and practical implications of this concept can improve growth in other industries as well. If you are aware of the network you are part of, a new world of possibilities will open up.

The concept of Innovation Ecosystem will increase the chances of the Netherlands as a whole, as I may believe the stories of all the inspirational leaders I interviewed for this thesis. I hope to share knowledge and the inspiration of the ecosystem that is created by the path of this thesis.

As how healthy ecosystems work, also this thesis is the result of joint efforts. Although I did the writing and behaved as ‘the orchestrator’ of this project, by the realization of this thesis I

received support from a lot of people. I was honored to listen to the stories of the main leaders in the high tech industry of the Netherlands. They challenged me to think in new ways and thereby undergo my own innovation process. The result is what you are reading right now, which also represents my personal development. I am very grateful for all the people I met and inspired me during this adventure.

First I would like to thank my supervisor Jeroen Kraaijenbrink for his guidance, patience, and constructive feedback. Also I would like to thank Willem de Vries for introducing me into the high tech industry. Furthermore I would like to thank the interviewees, for their time, inspiring conversations and openness. I really appreciate their warm welcome, and inspiring

conversations. Next, I would like to thank the teachers of the UvA, my fellow students, which were also of enormous support for me. Finally my family; my parents Aad Brons and Jose Brons, and family in law for their encouragement. In particular I would like to thank my partner, Bas van Amersfoort and my children, Miloe and Rens, for their support, and understanding.

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EXECUTIVE SUMMARY

The goal of innovation ecosystems is to constantly introduce new or significantly improve products and services, thereby integrating the exploration of new knowledge and its exploitation for value co-creation. The baseline of the Innovation Ecosystem (IE) concerns the co-creation of innovation, and fosters the creation of growth and interaction to align innovation processes between organizations. This is especially true for the semiconductor industry, which is dominated by Moore’s Law and were the pace of innovation is extreme. Innovation within an ecosystem is becoming increasingly important for firms because of changing environments and high demanding customers. Moore (1993), the founder of the concept of the business ecosystem, claims that the business ecosystem has four stages: birth, expansion, leadership, and

self-renewal, or death, which is defined as the Business Ecosystem Life Cycle (BELC).

This thesis reviews, completes, prioritizes and concretizes the success factors of the IE during the leadership phase of the BELC by a comprehensive literature study and an in-depth case study among top management, business development managers, and knowledge partners of a high tech IE. The case study gives insights in the ‘black box’ of the business ecosystem by determining the most critical factors for success. The innovation and growth potential of companies nowadays is determined by both internal and external factors. Access to knowledge, capital, talent and other resources (outside the organization’s boundaries) are of great importance. All parties benefit from a well-functioning ecosystem

The overview of these critical success factors (CSF) assist executives by making decisions regarding the design and execution of their strategies, and will assist executives by nurturing their IE.

First, a list of success factors was extracted from a comprehensive literature review. To come to the list of critical success factors of the IE during the leadership phase, twenty-five

semi-structured interviews were conducted to find the missing factors and to detect the irrelevant factors. The success factors from the literature review were compared with the data collected from the interviews, completed, and finally, prioritized.

Almost all success factors, obtained from the literature study were present in the data, however, the list of success factors could be completed by success factors obtained by the interviews. In

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total eight success factors could be added to the literature study. After further analyzing of the data, in total seven critical success factors could be identified. The outcome of this study result in seven CSFs:

- Resource allocation - Flexibility

- The presence of an ‘ecosystem connector’ - Trust

- Reduce transaction costs and increase efficiency - Clear communication and agreements

- Co-creation: Involve suppliers early in product development

These CSFs will increase the health of the ecosystem, which can be assessed by their

productivity, its robustness, and the ability to create niches in order for the ecosystem to survive. By understanding the BELC, and the critical success factors during the leadership phase,

individual members of an ecosystem can proactively respond to the opportunities that the environment offers and react on developments of fellow members, thereby evolving together to the next (renewal) phase. That this is not an easy task, is shown by the case study. Especially value creation is highly important, but is still a point of discussion between members.

Furthermore, the identification of the CSF, ‘the presence of an ‘ecosystem connector’, relates to a fifth role that can be added to the four roles – keystone player, niche player, dominator, and hub landlord – according the ideas of Iansiti and Levien (2004). This role is crucial during the leadership phase because the ecosystem connecter pro-actively creates new alliances, partner combinations, and thereby stimulates the creation of ideas, innovations and new technologies.

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LIST OF ABBREVIATIONS

BE: Business Ecosystem

BELC: Business Ecosystem Life Cycle

BMF: Business Model Framework

BWE: The Bullwhip Effect CSF: Critical Success Factor

EUVL: Extreme Ultra Violet Lithography

IC: Integrated Circuits

IE: Innovation Ecosystem

IL: Immersion Lithography

IoT: Internet of Things

IP: Intellectual Property

KE: Knowledge Ecosystem

OEM: Original Equipment Manufacturer

OI: Open Innovation

PLM: Product Life Cycle Management

RBV: Resource Based View

R&D: Research & Development

RQ: Research Question

SME: Small-Medium Enterprises TCE: Transaction Cost Economics

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LIST OF TABLES AND FIGURES

Figure 1: Business Ecosystem (Moore, 1996, p. 27)

Figure 2: The sequence of steps during the development of ecosystems (Letaifa, 2014)

Table 1: The evolutionary stages of a business ecosystem (Moore, 1993)

Table 2. Success factors from literature review - Theme 1: Entrepreneurship Table 3. Success factors from literature review - Theme 2: Structure

Table 4. Success factors from literature review - Theme 3: Collaboration & Competition Table 5. Success factors from literature review - Theme 4: Open Innovation

Table 6. Interviewees’ industries

Table 7. Success factors from empirical data - Theme 1: Entrepreneurship Table 8. Success factors from empirical data - Theme 2: Structure

Table 9. Success factors from empirical data - Theme 3: Collaboration & Competition Table 10. Success factors from empirical data - Theme 4: Open Innovation

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1. INTRODUCTION

“Successful innovation requires tracking your partners and potential adopters as closely as you

track your own development process.” (Ardner, 2009)

“It is not the strongest of the species that survive, nor the most intelligent, but the one most

responsive to change.” (Darwin, 1853)

In more and more industries, relevant knowledge and capabilities are abundant and dispersed among potential players across the globe (Williamson, 2012). This trend, combined with today’s volatile world of uncertainty and rapid change, calls for a structure of activities and interactions between businesses that can be quickly and flexibly reconfigured (Williamson, 2012). Therefore, the ecosystem form of economic coordination has become pervasive in the business landscape (Moore, 1996, Iansiti & Levien, 2004a). Besides the market and the hierarchy, which are known as the two main governmental forms, ecosystems are defined as the third pillar of organizational theory. They need to be addressed differently (Moore, 2006). The notion of a "business

ecosystem" is a strategic planning concept, officially introduced by J. Moore in 1993, that can be defined as a collection of companies that co-evolve, developing capabilities in response to new, wide-ranging innovations (Marin, 2007).

In the future, more and more industries will be subject to the forces that favor ecosystem strategies over those that either concentrate activities into vertically integrated organizations or rely on traditional outsourcing (Williamson, 2012). According to Moore (2006), managers establish ecosystems to coordinate innovation across complimentary contributions arising within multiple markets and hierarchies. In order to leverage innovation, it is important to know which innovation strategy to adopt. Firms in a business ecosystem (BE) are interdependent and will exploit opportunities to achieve co-evolution (Rong, 2015). Moore (1996) describes co-evolution as the process in which interdependent firms work together and evolve in a reciprocal cycle. Any truly revolutionary advances in serving customers, in creating and transforming markets, in introducing new products or processes, or in restructuring an enterprise require complementary adaptations on the part of many other organizations (Moore, 1997). Innovation and new product development are believed to be the fundamental sources of significant wealth generation within

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an economy (Jackson, 2011) and the key drivers of growth in today's competitive environment (Goldberger, 2008).

The BE can be seen as a set of relationships (vertical and horizontal; direct or indirect; formalized or not) between heterogeneous key players guided by the promotion of a common resource (know-how) and an ideology that leads to the development of shared competencies (Gueguen et al., 2006). Moore (1996) states that interactions between firms and collective value creation processes are often much more complex than the strategy frameworks drawing on the industrial organization perspective of Porter’s (1980, 1985) value chain. In advanced modern economies the value chain has become characterized by interfirm specialization such that individual firms engage in a narrow range of activities that are embedded in a complex chain of input-output relations with other firms (Dyer, 1996). A BE is dynamic because of its process of co-evolution, and therefore suits today’s volatile and uncertain world.

Challenges may not come mainly from an individual firm or supply chain level but from a more complex, dynamic, and much wider range of business contexts and systems together. Industrial people adopted ecological metaphors and gave the new challenging totality a highly imaginable terminology: BE (Rong, 2015). There is a growing consensus that BEs provide entrepreneurial firms with resources and information to navigate a volatile and constantly changing competitive environment (Zahra & Nambisan, 2012).

In recent years different ecosystems have been researched and described. There are different types of BEs. The main interest of this thesis concerns success in a system where innovation is the integrating mechanism (Valkokari, 2015), appointed as the Innovation Ecosystem (IE). Because the BE evolves, a description of the different stages of the process must be appreciated. Moore’s (1993) Business Ecosystem Life Cycle (BELC) clarifies the different stages of the ecosystem.

According to Moore (1993), every BE develops in four distinct stages: birth, expansion,

leadership, and self-renewal – or, if not self-renewal, then death (Moore, 1993). This is outlined as the BELC. In reality, the evolutionary stages blur, and the managerial challenges of one stage are often present in another. The BE is in continuous growth and the different phases of the evolution must be respected (Lataifa, 2014). The assumption is that the needs of these four stages

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differ. During the phase of leadership, the key aspects are stability and profitability of value creation processes and the BE as a whole unit (Peltoniemi, 2004). The main threat is defined by the leaders' domination inside the BE, which can have a negative impact for the BE. It is the leadership phase that is a critical in order for the ecosystem to survive. New strategies and development or growth directions need to be established (Galateanu, 2014). A detailed description of the BELC and its four stages is provided in Chapter 2.3.1.

In order to assess the health of a BE, Iansiti and Levien (2004) propose three measures. These are productivity, robustness, and the ability to create niches (Iansiti & Levien, 2004a). This ability depends mainly on the adopted strategies inside and by the members of the ecosystem. The rate of success of an individual member within the BE relates to the strategic role this member chooses. Iansiti and Levien (2004a) identify four specific roles: the keystone player, the niche player, the dominator, and the hub landlord.

1.1 Objective

Although previous research has described the success factors of BEs to explain to some extent the important features of value creation (Iansiti & Levien, 2004a), it is still unclear which success factors are most critical to each of the different phases of the BELC. This thesis focuses on the leadership phase of the BELC. During this phase, there is a need for new strategies and development or growth directions (Galateanu, 2014) in order for the ecosystem to survive. It is interesting to examine this phase because if the system is unable to renew itself, this will lead to business dropouts (Dijkhuis, 2008) and thereby its death (Moore, 1993).

Therefore, the research question and sub-questions are formulated in the next section.

1.2 Research Question and Sub-questions

The research question addressed in this thesis is as follows:

What are the critical success factors of the Innovation Ecosystem during the leadership phase of the Business Ecosystem Life Cycle?

To answer the research question, the following sub-questions will first be addressed:

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- What are the phases of the development of an Innovation Ecosystem?

- What is the importance of the leadership phase?

- Which factors determine a successful leadership phase?

1.3 Contribution

This thesis contributes to knowledge about the IE by extending the literature about the critical success factors (CSFs) within an IE during the leadership phase.

This thesis reviews, complements, prioritizes, and concretizes the success factors of an IE during the leadership phase by means of a comprehensive literature study and an in-depth survey among top management, business development managers, project managers, knowledge partners, and some independent, external experts. The case study provides insights into the “black box” of the IE by determining the most critical factors for success. The literature gives insight in the inputs and outputs of the IE, but how relationships within the IE work and how processes are organized, is not yet understood.

This thesis contributes to the field as follows. First, the overview of these CSFs will facilitate executives’ decision-making regarding the design and execution of their strategies, and will assist executives by nurturing their IE. Second, this thesis adds to the ideas of Iansiti and Levien (2004a; 2004b) with the identification of the fifth strategic role of the “ecosystem connector” to the four roles of keystone player, niche player, dominator, and hub landlord. Hereby, this thesis fills the gap in defining a new type of strategy and linking this role to the BELC, as suggested by Galateaunu (2014).

1.4 Method

For this research, a single-case study was conducted. The case study is a research strategy that focuses on understanding the dynamics present within single settings (Eisenhardt, 1989). A case study was conducted because the research question refers to a contemporary phenomenon that can only be studied in its real life environment (Yin, 2014). The case study was used for this thesis because it is a suitable method for testing existing theory (Eisenhardt, 1989). The ecosystem around ASML was selected, as it is a typical example (Saunders, 2012) of an ecosystem around an Original Equipment Manufacturer (OEM), driven by a high pace of

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innovation. Moreover, the ecosystem was (and still is) in transition because of two main developments. The first related to the challenge faced in Extreme Ultra Violet Lithography technology, whose introduction was delayed. The second concerned ASML’s announcement that it would reduce its key suppliers from approximately 70 first-tier suppliers to 10 key suppliers.

The qualitative research design based on a single-case study was conducted, with the

participation of several respondents (the members of the ecosystem). In this research, six phases were completed on the basis of Yin’s (2009) roadmap. The roadmap shows the research process as a “linear but iterative process”, which serves as a basis for the entire process of conducting case study research (Yin, 2014). First, a comprehensive literature review was performed, whereby different success factors were analyzed. Then, data were collected through in-depth interviews. Subsequently, the documents were carefully transcribed and analyzed. Finally, the results of the interviews were compared to the findings of the literature review. The results are presented in this thesis.

1.5 Structure of the Thesis

This thesis is divided into five chapters and is organized as follows. First, this introduction describes the motivation, research question, and method of the thesis. The second chapter reviews the literature with regard to the key definitions the BE, the IE, and the BELC, and presents the success factors found in the literature review. The third chapter introduces the case study and explains the methodology in detail. The fourth chapter describes and analyzes the results of the study. Finally, chapter five presents the main findings, describes the research implications and managerial implications, notes the limitations of the study, and provides suggestions for further research.

Prior to presenting the research, some concepts might need illustration. The concept of BE has gained a lot of attention in management literature, but in many papers it is still indistinct. The concept knows ambiguity because of several partially overlapping concepts, such as BE, knowledge ecosystem (KE), and IE, which results in confusion. Furthermore, an explanation of how the concept of an ecosystem is distinguished from a supply chain or value chain is desirable. Finally, notions such as innovation, success, and success factors also need interpretation. Hence, Chapter 2 will clarify these concepts and their relationships.

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2. THEORY

The term “ecosystem” is in many studies still ill-defined and ambiguous. Several partially overlapping concepts, such as BE (Iansiti & Levien, 2004a; Moore, 1993; Jackson, 2011), KE (Powell, 2012), and IE (Adner, 2006) will be clarified in this chapter.

First, the upswung of the BE and the different concepts of the BE will be defined. This will provide a comprehensive background in order to explain the focus of this thesis, the IE, in more detail. Then the success factors will be analyzed based on a comprehensive literature review. Subsequently, these success factors will be listed per topic and grouped in order to provide an overview.

Finally, in the last paragraph the key terms will be brought together, and the factors of success in the IE will be discussed.

2.1 The Business Ecosystem

The nature of business challenges evolved significantly during the second half of the 20th century (Iansiti & Levien, 2004b). During much of the 1900s, creating distributed business networks was too difficult and costly, and the advantages of vertical integration dominated in most environments (Iansiti & Levien, 2004b). However, over the last decades advancements in management, legislation, and technology have significantly improved coordination and lowered the costs for companies to collaborate (Iansiti & Levien, 2004b; Kumar et al., 2015).

The roots of the BE concept can be traced to the theory of ecology (Moore, 1996). More than any other type of network, a biological ecosystem provides a powerful analogy for understanding the business network (Moore, 1993, Iansiti & Levien, 2004a).

James F. Moore (1993), who pioneered the application of biological ecosystems to the business concept, describes BEs as a set of producers and users around a focal organization that

contributes to its performance. Moore’s (1993, 1996) definition of the BE is “an economic

community supported by a foundation of interacting organizations and individuals – the organisms of the business world. This economic community produces goods and services of value to customers, who are members of the ecosystem themselves. The member organisms include also suppliers, lead producers, competitors, and other stakeholders. Over time, they

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coevolve their capabilities and roles, and tend to align themselves with the directions set by one or more central companies. Those companies holding leadership roles may change over time, but the function of ecosystem leader is valued by the community because it enables members to move towards shared visions to align their investment, and to find mutually supportive roles.”

This definition is depicted in Figure 1, adapted from Moore (2006), which illustrates three levels of interaction and value creation for companies: the core business, the enlarged enterprise, and the ecosystem. The core business entails direct suppliers, core competencies, and distribution channels. The enlarged enterprise covers suppliers of suppliers, direct customers and their customers, and suppliers of complementary products. The ecosystem offers a dynamic, system view (Baghbadorani & Harandi, 2012) and also includes other indirect actors, often missing in traditional supply chains, such as government organizations, stakeholders, research institutes, universities (Valkokari, 2015), media, cooperators, and even competitors (Li, 2009; Anggraeni et al., 2007).

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Moore (1993, 1996) highlights the co-evolution among the different ecosystem players, shown in Figure 1, as an extension of Porter’s five forces model (Porter, 1979). Porter’s (1979) model of industry organization proposes that there are five forces (the bargaining power of suppliers, the bargaining power of customers, the threat of new entrants, the threat of substitute products, and current competitors) that help firms to identify their position in an industry with the most attractive performance and then to penetrate the industry.

Furthermore, Moore suggests that the industry boundary has vanished. BEs do not follow a linear value creation process and many of the players in an ecosystems fall outside of the traditional value chain (Iansiti & Levien, 2004a). Different companies cooperate to jointly deliver a product or service to a customer. As a result, the value chain is not a linear process with upstream and downstream players, but is instead a network of companies with many horizontal relations (Moore, 1996). Thus, the concept of “the industry” can be replaced by the concept of the BE.

In the BE the performance of the whole unit can be influenced by the role performed by each entity. From this point of view, BEs can be seen as complex adaptive systems (Galateanu, 2014). Complex systems contain many relatively independent parts, which are highly interconnected and interactive (Cowan et al., 1994). According to Moore (1997), communities of customers, suppliers, lead producers, and other stakeholders come together in a partially intentional, highly self-organizing, and even somewhat accidental manner. In a BE actors work cooperatively and competitively to create new products, satisfy customer needs, and co-develop capabilities around innovation (Moore, 1996). The existence of both collaborative and competitive relationships results in a "coopetition" structure (Moore, 1996). Thus, the competition among ecosystems, and not individual companies, largely fuels the next round of innovations (Clarysse, 2014).

Iansiti and Levien (2004) also use the BE as an analogy that can help to describe and understand certain issues. Following Moore's definition, Iansiti and Levien (2002) identify the BE as a large number of loosely interconnected participants who depend on each other for their mutual

effectiveness and survival. Like business network participants, biological species in ecosystems share their fate with each other. If the ecosystem is healthy, individual species thrive. If the ecosystem is unhealthy, individual species suffer deeply. Furthermore, as with BEs, reversals in overall ecosystem health can happen quickly (Iansiti & Levien, 2004a). Like biological

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ecosystems, communities develop over time. This biological metaphor provides a useful model for understanding the BE. Although the fact is rarely appreciated, almost every accomplishment of the natural world is the product of the collective interactions of many richly interconnected players (Iansiti & Levien, 2004a). Interconnectedness is a rule in biological systems. As Iansiti and Levien (2004a) explain, not only in the complex inner workings of a cell and the regulatory interactions among genes, but also in the delicate balance of populations in natural ecosystems, the common theme is the profound extent to which each member of the system – gene, protein, organ, species, or individual – is dependent on others. This interdependence is the foundation of the stability, productivity, and creativity of biological systems (Iansiti & Levien, 2004a).

Another description of the BE in which the interdependence and interconnectedness play a central role is that of Peltoniemi (2006), summarized by Rong et al. (2015): “A BE consists of a

large number of participants, which can be business firms and other organizations. They are interconnected in the sense that they have an effect on each other. Interconnectedness enables various interactions between the members. These interactions can be both competitive and cooperative. Together with interconnectedness they lead a shared fate among the organizations. The members are dependent on each other, and the failures of firms can result in failures of other firms”.

The BE concept differs from a conventional supply chain because its relations are many-to-many (i.e., network) instead of one-to-one (i.e., chain). Secondly, a BE is not necessarily ordered according to a logical production sequence. Therefore, the boundary of the BE is difficult to define. The organizations that influence the value of a single product or service are many and dispersed across numerous traditional industries (Iansiti & Levien, 2004a). Traditional industry boundaries blur, and in real world systems the interest of actors (i.e., organizations) who are the ecosystem inhabitants come bundled together with multiple parts.

However, although, as previously stated, the biological metaphor is often used for understanding the business network (Moore, 1993, Iansiti & Levien, 2004a, Valkokari, 2015), some caution must be exercised because there are some important differences between the biological

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from its biological counterpart. Whereas the goal of a biological ecosystem is survival, the goal of a BE is value co-creation (Iansiti & Levien, 2004a). Furthermore, ecological ecosystems do not compete with each other for the attention of some outside observer, nor do they have an audience to please. As a result, they emphasize stability and durability in the face of external shocks (which are important goals for industries and firms as well), but they are less concerned with innovation. Finally, unlike the members of biological ecosystems, the members of BEs are capable of some degree of forethought and planning (Iansiti & Levien, 2004a). Moore (1993) explains that in a BE, companies co-develop capabilities around a new innovation: they work cooperatively and competitively to support new products, satisfy customer needs, and eventually incorporate the next round of innovations (Moore, 1993).

2.1.1 Different Concepts of the Business Ecosystem

In management studies, meta-organizations such as ecosystems have been approached with different concepts (Gulati, 2012), and most research has typically focused on one type of

ecosystem only, whereas in the real world the BE can be seen as an integration of different types of ecosystems overlapping each other (Valkokari, 2015). The diversity in ecosystem concepts and definitions reflects the variety of contexts in which the concept has been applied (Thomas, 2014). Several partially overlapping concepts besides BE (Iansiti & Levien, 2004a; Moore, 1993; Jackson, 2011) are KE (Powell, 2012), and IE (Adner, 2006). In the following sections, the concepts of KE and IE will be clarified.

The KE literature has explored the mechanisms by which geographically clustered organizations benefit from their locations (Almeida, 1999). This type of ecosystem identifies the reduced costs of moving people and ideas as the primary advantages of being stationed in technological clusters (Clarysse, 2014). The main outcome of a KE is new knowledge, and can be shaped by indicating the network nodes where the knowledge is created and retained (Clarysse, 2014). Knowledge-based ecosystems extensively draw on high-tech knowledge (van der Borgh, 2012), and the main focus is exploration instead of exploitation (Valkokari, 2015). Open source

communities are also a well-known example of this ecosystem type based on knowledge exchange (Valkokari, 2015). Physical proximity to knowledge generators, such as public research organizations, universities, and large firms with established Research & Development

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(R&D) departments, typically has a positive influence on the focal firm's innovative output (Phelps, 2012).

The ecosystem concepts are partially overlapping, and some ecosystems may have characteristics of more than one specific type. Because the IE offers a fertile ground for understanding the processes through which firms perform their “prime mover” functions in network operations, and because of the growing importance of innovation for competitive success (Dhanaraj, 2006), this type of ecosystem has been chosen as a point of focus for this thesis. A comprehensive

explanation of the IE is provided in the next section.

2.2 The Innovation Ecosystem

First, this paragraph will shortly explain the concept of “innovation”, and it will then extensively discuss the IE.

A firm’s competitive advantage depends on its ability to create more value than its rivals do (Porter, 1985). In turn, many firms strive to be technology leaders in their industry by being the first to introduce new innovations to the market, thereby increasing economic output. The two ways to increase economic output within an economy are to (i) increase the number of inputs in the productive process, or (ii) think of new ways to obtain more output from the same number of inputs. The latter is the essence of what is broadly meant by Schumpeter’s concept of innovation, which is defined as “the introduction of new or significantly improved products (goods or

services), processes, organizational methods, and marketing methods in internal business practices or the marketplace” (Davis, 1960). Innovation can be defined at the most general level

as a new idea, which may be a recombination of old ideas, a scheme that challenges the present order, a formula, or a unique approach that is perceived as new by the individuals involved (Ven, 1986). In the academic literature, innovations are often defined as new ideas, improvements, or solutions that are implemented and transferred into useful outcomes (Bessant, 2011), thereby acknowledging that not all creative ideas become innovations: it is only those that are

implemented and adopted in a beneficial way. Organizations innovate to gain competitive advantage, to stay ahead of competition, to deal with more demanding and sophisticated customers, to improve processes, and to increase efficiencies to decrease costs.

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Ardner (2006) describes IEs as "the collaborative arrangements through which firms combine

their individual offerings into a coherent, customer-facing solution". Therefore, the exploitation

of new high-tech knowledge, instead of only the exploration of new knowledge, is also an important element. The exploitation of new knowledge refers to the creation of economies of scale by further systematization and standardization of the production process, whereby the exploration emphasizes the discovery of new possibilities (Matthyssens, 2007). In a healthy IE, interactions between various institutions can combine entrepreneurs, venture capitalists, and other participants to fulfill the national objectives (Wessner, 2007). IEs occur as an integrating mechanism between the exploration of new knowledge and its exploitation for value creation in BEs (Valkokari, 2015). Wessner (2007) states, “an IE captures the complex synergies among a

variety of collective efforts involved in bringing innovation to market”. An IE comprises the

knowledge of economy and commercial economy, and evolves for the purpose of enhanced competitiveness (Jackson, 2011). The successful implementation of these ecosystem analogies depends on synergy of factors that can be found in the areas of governance, strategy and leadership, organizational culture, resources, human resources management, people, partners, technology, and clustering (Poutanen, 2013). Rubens et al. (2011) use the term "IEs" to refer to the inter-organizational, political, economic, environmental, and technological systems of innovation through which an environment conducive to business growth is catalyzed, sustained, and supported. They argue that a vital IE is characterized by a continual realignment of

synergistic relationships that promote harmonious growth of the system in agile responsiveness to changing internal and external forces (Rubens, 2011).

2.3 The Analysis of the Ecosystem

The management of an ecosystem can influence the ecosystem at two distinct levels: the individual firm level (i.e. transactions of resources between ecosystem members) and the ecosystem level (i.e. macro culture) (van der Borgh, 2012). In this thesis, the IE will be approached from a macro culture, or holistic point of view, in particular, by studying the relationships within the ecosystem as a whole. However, in order to focus on the broad characteristics of the ecosystem as a whole, individual strategies and roles must also be taken into account. The interoperability between individual actors is a prerequisite for an ecosystem to function. A BE, like its biological counterpart, gradually moves from a random collection of

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elements to a more structured community (Moore, 1993). It is believed that determining which success factors are critical depends on the specific stage in the BELC. Every phase has its

specific needs and characteristics (Moore, 1993). The next paragraph describes the BELC and its four different stages in greater detail.

2.4 The Business Ecosystem Life Cycle

Different authors have contributed to the stages of the BELC. Rong et al. (2011) focus on the value chain and distinguish between the four stages of birth, expand, authority, and the renewal phase. Li et al. (2012) investigate the design and establishment of a value platform and

distinguish between the four stages of exploit, expand, authority, and the rallying phase. More recently, Rong et al. (2015) identify a five-phase life cycle that includes emerging, diversifying, converging, consolidating, and renewing.

Moore (1993) visualizes the BELC with the four distinct phases: birth, expansion, leadership, and self-renewal – or, if not self-renewal, then death (Moore, 1993). There is not (yet) a specific framework available for the IE, but the assumption is that the stages of the BE are similar to those of the IE. Because Moore’s BELC is the most applicable for the description of the phases of the IE, this model will be adopted in the present thesis.

The BELC explores the general evolutionary stages of a BE (Rong & Shi, 2015). A BE has different phases, and the different phases in its life cycle will generate different contexts and implications for firms’ development (Rong & Shi, 2015). Therefore, in the next section, the different phases of the BELC will be discussed, and this thesis’s focus on the leadership phase will be explained. The success factors will then be enumerated.

2.4.1 Stages of an Ecosystem

In reality, the evolutionary stages blur, and the managerial challenges of one stage often appear in another. During the first stage (birth) of a BE, entrepreneurs focus on defining what customers want: that is, the value of a proposed new product or service and the best form to deliver it. In the second stage (expansion), BEs expand to conquer broad new territories. It is therefore important to scale up to a broader market and to stimulate market demand without greatly exceeding the ability to meet it. It is then in the third stage, the leadership phase, that companies become preoccupied with standards, interfaces, the modular organization, and customer-supplier

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relations. Bargaining power comes from having something that the ecosystem needs and being the only practical source. Fundamentally, bargaining power depends on constant innovation, and on creating value that is critical to the whole ecosystem's continued price/performance

improvement. The leadership phase is a critical phase in the BELC. This phase lays the foundation for the future for ecosystem’ members to work together, to continue to improve offers, and to successfully transition to self-renewal (Moore, 1993). The fourth stage (self-renewal or death) of a BE occurs when mature business communities are threatened by rising new ecosystems and innovations. For an ecosystem to survive, it is important for it to work with innovators to bring new ideas to the existing ecosystem (Moore, 1993). The evolutionary stages of a BE are listed in Table 1.

The aim of this thesis is to describe the CSFs of the leadership phase. The success factors derived from the literature will be analyzed thoroughly in Section 2.6. Prior to that paragraph, the

importance of the leadership phase, and how success within the IE can be defined during this phase, will be discussed in Sections 2.4.2 and 2.4.3.

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2.4.2 Importance of the Leadership Phase

In any case, the leadership stage can make or break dominant companies (Moore, 1993), and thereby making the IE vulnerable. The key aspects of this stage are stability and profitability of value creation processes and the BE as a whole unit (Peltoniemi & Vuori, 2004). The main threat is defined by the leaders’ domination inside the BE, which can have a negative impact for the BE (Galateanu, 2014). There is a need for new strategies and development or growth directions (Galateanu, 2014). A healthy ecosystem will allow new BEs to emerge from the mature business communities by developing new ideas and innovation (Rong & Shi, 2011). According to a study by Lataifa (2014), there is a true need for leadership during the leadership phase at the ecosystem level to help communicate and leverage collaborative capabilities (Lataifa, 2014).

2.4.3 Success during the Leadership Phase

Success within IEs can be defined as the development and implementation of new ideas by people or firms which are perceived as useful: profitable, constructive, or solving a problem (Ven, 1986). A healthy ecosystem will be able to continue to create ideas and opportunities (Levien, 2004b) in order to renew itself (Moore, 1993).

How can innovation success be measured? Most previous studies underline financial

performances, such as profit and revenue (Wang, 2013), but also the amount of patents (Bruins, 2015), which are indispensable for the ecosystem’s existence. With this understanding, Iansiti and Levien (2004) identify three success measures in order to assess the ecosystem’s health (Levien, 2004b). These three measures will be adopted for the present thesis. The first is productivity, and a relatively simple measure of this is the return on invested capital. Secondly, the robustness of an ecosystem involves the ability to survive disruptions, such as unforeseen technological change. A company that is part of a robust ecosystem enjoys relative predictability, and the relationships among members of the ecosystem are buffered against external shocks (Levien, 2004b). Perhaps the simplest, if crude, measure of robustness is the survival rate of ecosystem members. Third, it is also important for these systems to exhibit variety, which is the ability to support a diversity of organizations. The best measure is the ecosystem's capacity to increase meaningful diversity through the creation of valuable new functions, or niches. Niche creation can be evaluated by determining the extent to which emerging technologies are being applied in the form of a variety of new businesses and products (Levien, 2004b). The assumption

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is that a healthy BE will be successful during the leadership phase and will able to evolve. In order for the ecosystem to be successful during the leadership phase, the success factors must relate to environmental uncertainty, volatility, and interoperability (co-evolution).

The next paragraph discusses the success factors that are important for the productivity, robustness, and niche creation within the IE during the leadership phase.

2.5 Success Factors

Based on a literature review of 22 studies, an analysis was conducted of the factors that have relevance for success within an IE during the leadership phase, in order for that IE to evolve to a successful renewal phase. The selection of articles is based on conceptual studies and empirical studies in the period of 1993 (the introduction of the concept by J. Moore) to 2015 (which includes the most recent developments and insights). The reviewed articles present different factors for a successful leadership phase, which can be assigned to the themes of

entrepreneurship, structure, collaboration, and open innovation. The themes have been chosen because of their relevance for the IE on an ecosystem level, and because of the assumption that these themes are useful indicators for the three success measures of productivity, robustness, and niche creation. The success factors are grouped per theme in Table 2 through Table 5, which are described in Sections 2.6.1 to 2.6.4.

2.5.1 Theme 1: Entrepreneurship

Entrepreneurship is an important theme in economic practice. Schumpeter sees innovative creation by the entrepreneur as the prime endogenous cause of innovation in the economic system (Praag, 1999). Entrepreneurial leaders declare a new “space” for invention and investment, and provide a broad template on which members of the ecosystem can identify potential contributions and step forward to join the community (Moore, 2006). Successful

entrepreneurs focus not on the company or the industry itself, but on the value-creating system as a whole, in which different economic actors—suppliers, business partners, allies, customers— work together to co-produce value. Despite the difficulties of a complex business environment, entrepreneurs can design longevity into an ecosystem. During the leadership phase, forinstance, companies can work hard to micro-segment their markets, and to create close, supportive ties with customers (Moore, 1993) and external suppliers (Lipparini, 1994). Furthermore,

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entrepreneurship is needed in order to discover new opportunities. An entrepreneurial

opportunity consists of a set of ideas, beliefs, and actions that enable the creation of future goods and services (Sarasvathy et al., 2010). Thus, entrepreneurs within an ecosystem must focus on forming whole ecosystems with innovative power, and on ecosystems whose purpose is to absorb more customers and more new ideas into their orbit Moore, 1996). In a sense,

entrepreneurs are responsible for community organizing by forging new economic relationships. In this way, new centers of industrial organization and co-evolution can be created (Moore, 1996). The opportunities of entrepreneurship refer to partnerships, resource allocation, managing risks, and strategic vision and alignment with the environment.

To enhance productivity, robustness, and niche creation, a variation of entrepreneurial success factors can be derived from the literature. Table 2 provides an overview of the success factors of the theme of entrepreneurship.

Success factors of entrepreneurship

Description

derived from literature

Source

1. Alliances, partnerships, and relationships between actors

The entrepreneur's ability to configure roles and relationships with different actors, such as external suppliers, and coordination of strategic activities, is important to achieve cooperation.

Normann, 1993; Lipparini et al., 1994; Williamson et al., 2012; Autio et al., 2014 2. Resource allocation and orchestration of (dynamic) capabilities

Excellence in dynamic capabilities undergirds an enterprise’s capacity to successfully innovate and capture sufficient value to deliver superior long- term financial performance.

Ardner, 2006; Teece (2007)

3. Managing risks Managing risks is a CSF of the robustness and productivity of the ecosystem.

Viswanadham et al., 2013; van Weele, 2014 4. Strategic vision,

alignment, and clear specializations

It is important for the health of an ecosystem to have a strategic vision and strategic alignment with partners from its environment to perpetuate innovation.

van Weele, 2013; Zahra, 2012; Letaifa, 2014; Thomas, 2014

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1. Alliances, partnerships, and relationships between actors

The entrepreneur's ability to configure roles and relationships with different actors, such as external suppliers (Lipparini, 1994), is a success factor. Larsen (1991) states “Alliances do not

form by chance but can be studied as patterned, predictable exchange structures that can be replicated and used to improve a firm's competitive position against larger players” (Larson,

1991). In addition, informal sharing of information and knowledge trading can lead to the discovery of useful ideas that might solve importantbusiness problems that reach beyond

company boundaries (Chesbrough , 2006). Because any new innovation requires complementary adaptations with many other organizations (Moore, 1997), it is the responsibility of the

organization to find the best partners. Depending on others for one’s own success has important strategic implications. Timing is nearly always affected: getting to market ahead of one’s rivals is only possible when one’s partners are also ready (Ardner, 2006). It is essential to achieve focus for individual partners and to promote cooperation in order to mobilize the creation of value (Normann, 1993; Williamson, 2012). Therefore, having a solid understanding of the potential activities in which one has a comparative advantage, combined with a realistic understanding of the potential dangers inherent in co-dependent relationships, is key to

successful operation in an IE (Thomas, 2014). When there is a clear role configuration within the ecosystem, then tasks can be divided and the strategic goals can be aligned.

2. Resource allocation and orchestration of (dynamic) capabilities

The Resource-Based View (RBV) helps to describe why business networks are formed. The RBV theory states that firms that possess resources can achieve competitive advantage (Wernerfelt, 1984). In order to obtain access to complementary resources and capabilities, companies have become more interdependent and business relationships have become more essential (Williamson, 2012). As Teece (2007) argues, to maintain the sustainable advantage, more than the ownership of difficult-to-replicate (knowledge) assets is needed in the fast-moving business environment that is open to global competition (Teece, 2007). Unique and difficult-to-replicate dynamic capabilities from other players may be required as well. Dynamic capabilities include difficult-to-replicate enterprise capabilities, such as the enterprise’s capacity to shape the ecosystem it occupies, to develop new products and processes, and to design and implement viable business models. In virtually all businesses, the potential for innovation is increasing

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dramatically. This potential is being stimulated by concrete factors, as was mentioned in the introduction of this thesis, such as uncertainty, volatility, and rapid change. The more radical the innovation, the more deeply and broadly other players must be involved (Moore, 1996). As Moore (1996) states, the major factor limiting the spread of realized innovation is not a lack of good ideas, technology, or capital. It is the inability to command cooperation across broad, diverse communities of players who must become intimate parts of a far-reaching process of co-evolution (Moore, 1996). Therefore, the allocation of resources of other players is also

increasingly needed. The “orchestration” capacities undergird an enterprise’s capacity to successfully innovate and capture sufficient value to deliver superior long-term financial performance (Teece, 2007).

3. Managing risks

The phenomenon of interconnectedness is not new: it has evolved over human history and has accelerated dramatically with each new wave of social transformation or enabling technology, most recently driven by the spread of capitalist market systems and of computing and

communications technology (Iansiti & Levien, 2004a). There may be a concern with the extent of the dependency on others and on the consequences of this interconnectedness. However, individuals live embedded in a system and have to deal with the risks that this involves (Iansiti & Levien, 2004a). For example, when companies differentiate between core versus non-core

competencies, then outsourcing to suppliers who specialize in the non-competencies is needed (van Weele, 2014). Outsourcing means that the company divests itself of the resources to fulfill a particular activity to another company, to focus more effectively on its own competence (van Weele, 2014). Hence, these firms not only have to manage their own resources and capabilities, but are also dependent on the resources and capabilities of supplying firms (van Weele, 2013). This may bring in some risks. These risks of outsourcing may relate, for example, to loss of control, loss of critical skills and knowledge, loss of intellectual property, loss of security, drops in service quality, increases in costs, and loss of innovative capability (van Weele, 2014). One of the most important challenges associated with outsourcing is dealing with the change in the balance of power, which is usually in the service provider’s favor (van Weele, 2014).

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4. Strategic vision, alignment, and clear specializations

Strategic thinking and the entrepreneurial activities in an ecosystem are essential to influence one another in a cycle that perpetuates innovation (Zahra, 2012). Visionary executives can sometimes lead an ecosystem so that it rapidly and effectively embraces anticipated developments – be they new technologies, regulatory openings, or consumer trends (Moore, 1993) – and creates an easy transition. The recognition that many aspects in businesses are changing and that executives will have to offer new benefits to customers to stay in business means that executives will have to invest in new skills, new assets, and new directions. However, they cannot make these decisions unilaterally, because there is interdependency on at least some of the other members of the community (Moore, 1996). They must seek shared visions to coordinate their investments: they cannot afford to invest in all possible futures and in all possible scenarios of partner investments (Moore, 1996). The members of an ecosystem must find a balance between the desire for

autonomy and the need to collaborate and to align a strategic vision.

Ozcan and Eisenhardt found that entrepreneurs who had a strategic vision of their industry were more likely to build high-performing alliance portfolios (Thomas, 2014). Hallen and Eisenhardt (2012) found that entrepreneurs could establish advantageous positions in IEs by employing different catalyzing strategies, such as casual dating and timing relationship activities around important milestones (Thomas, 2014). The ecological literature indicates that it is also important for ecosystems to exhibit variety: the ability to support a diversity of species. The idea of

diversity, in business as well as in biology, suggests an ability to absorb external shocks and the potential for productive innovation (Iansiti & levien, 2004b). Therefore, niche creation and the ability of actors to choose clear specializations within the system are crucial for the ecosystems’

health (Iansiti & Levien, 2004a). Niche creation demonstrates the ability to maintain the growth

of firm, product, and technical variety (Rong & Shi, 2015). As explained in Section 2.4.3, niche creation (along with productivity and the robustness of an ecosystem) is one of the three success measures used to assess an ecosystem’s health (Levien, 2004b). The extent to which emerging technologies are applied in the form of a variety of new businesses and products (Levien, 2004b) is important for a healthy BE to evolve. During change, it is important for the survival of an ecosystem to have actors with a clear vision and elected steering committee to expand and create new ecosystems’ capabilities (Letaifa, 2014).

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2.5.2 Theme 2: Structure

Collaborative networks are seen as having an “organic” ability to adjust and reorganize their patterns and structures in order to improve their growth, sustainability, and resilience (Eisenhardt & Galunic, 2000; Baker, 2011). The structure comprises the foundation and competitive

advantage of an ecosystem. In a dynamic environment, the structure of these complex webs evolves, nodes might strengthen or weaken, new nodes may emerge, and existing ones or even the entire ecosystem may be eliminated. In order to achieve the benefits of specialization and focus for individual partners, it is essential to promote cooperation over competition (Willamson, 2012). The ecosystems’ structure is of vital importance, and includes the strategic roles within the ecosystem, the flexibility of the system, and how the different actors are connected.

Concerning the theme of structure, the success factors presented in Table 3 are derived from the literature.

Success factors of structure

Description

derived from literature

Source

1. Diversity of strategic roles

For an IE's health and survival, the strategic roles – keystone player, niche player, dominator, and hub landlord – are indispensable to developing (the future) specialized capabilities.

Iansiti et al., 2004a; Powell et al., 2010; Vuori, 2004; Rosenberg, 2012 2. Presence of an anchor tenant, keystone, or lead firm

The key to a BE is the leadership company, “the keystone species”, which provides a stable and predictable set of common assets that other organizations use to build their own offerings.

Powell et al., 2010; Iansiti et al., 2004; Williamson et al., 2012

3. Flexibility Having a wide network – and thus more options –

provides flexibility when faced with industrial challenges (Iansiti & Levien, 2004a).

Iansiti et al., 2004; Sali, 2012

4. Connected actors Connections between different kinds of actors

increase success. Kanter, 2012;

Clarysse et al., 2014

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1. Diversity of strategic roles

According to Iansiti and Levien (2004a), the BE's health can be defined through established its strategic roles. While Moore thought that a BE consisted of different levels of organizations and business environments (Figure 1: Moore, 1996), Iansiti and Levien (2004a) elaborate on the analogy of biological systems and develop different roles to implement their strategies inside the ecosystem. These strategic roles are the keystone player, niche player, dominator, and hub landlord.

Keystone organizations play a crucial role in BEs. A lead firm must extend control by continuing to shape future directions and the investments of key customers and suppliers, especially during the leadership stage (Moore, 1993). Keystones maintain the health of their ecosystems through specific behaviors or features that have effects that are propagated through the entire system (such as providing key nutrients that form the foundation for many ecosystem niches) (Iansiti & Levien, 2004a). When these effects are beneficial to the system, the species serves as an effective keystone. It is important to appreciate the significance of this characteristic of keystone species: it is essential that they encourage the health of their ecosystems – specifically of the other members of their ecosystem (Iansiti & Levien, 2004a). Keystones exercise the power of their position within an ecosystem in a somewhat indirect manner. Other authors, such as Hinterhuber (2002) and Fung et al., (2007), call this role the orchestrator. The network orchestrator needs to think about building and managing this broader network, and also about designing the best supply chain from it to meet a specific customer need (Wind, 2007).

The literature also proposes a contrasting dominator role. Ecosystem dominators wield their clout in a more traditional way, exploiting a critical position to either take over the network or, more insidiously, drain value from it (Levien, 2004b). The dominator integrates vertically or horizontally to manage and control a large part of its network (Iansiti & Levien, 2004a). The distinction is that the keystones do not occupy a large number of the nodes in the ecosystem network, whereas dominators do (Iansiti & Levien, 2004a).

In BEs, most firms follow niche strategies. A niche player aims to develop specialized capabilities that differentiate it from other companies in the network (Levien, 2004b). These players develop specialized capabilities to add value to a BE and typically operate in the shadow

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of a keystone. Fundamentally, they aim to improve the overall health of their ecosystems by providing a stable and predictable set of common assets (Iansiti & Levien, 2004a). Effective leveraging by niche players also serves to enhance the health of the entire ecosystem (Iansiti & Levien, 2004a). This aspect of niche players has important implications for keystones as well: they must encourage niche players to leverage whenever they can. A further critical function served by niche players is the role they play in inducing central players to pursue effective keystone strategies (Iansiti & Levien, 2004a).

The hub landlord extracts as much value as possible from its network without directly controlling it. Because it extracts value and does not add value, the hub landlord might damage the

ecosystem. According Levien (2004b), the keystone players and niche players contribute the most to ecosystem health and sustainability (Levien, 2004b).

By choosing a particular role in an ecosystem, an important implication is that the firm will create interdependency in business. A company’s performance is increasingly dependent on the firm influencing assets outside of its direct control (Iansiti & Levien, 2004a). The potential benefits of leveraging a BE can be high, but it is not a guarantee for success. It is important to select the right type of collaboration. To select the right type of collaboration options, Pisano and Verganti (2008) recommend understanding the four basic collaboration modes. These modes differ along two dimensions: openness (can anyone participate, or just select players?) and hierarchy (who makes key decisions – one “kingpin” participant or all players?) (Verganti, 2008).

In order to deliver customer value cost efficiently in an ecosystem, the activities of partners with complementary capabilities need to be aligned. This requires the lead firm to create a structure and incentives for attracting partners, as well as to manage the overlaps and possible conflicts between them. Any partner can play one or more roles (Levien, 2004b). These include providing components of a solution (as in a traditional supply chain), operational capacity, sales channels, or complementary products and services. Partners in an ecosystem can also act as an important source of technology and competence, or of market and customer knowledge (Williamson, 2012).

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2. Presence of a keystone, orchestrator, or lead firm

The leadership company, or “the keystone species”, is key to a BE. Different authors describe this role by using concepts such as keystone (Iansiti & Levien, 2004a), orchestrator (Hinterhuber, 2002; Fung et al., 2007), or lead firm (Williamson, 2012). These species have a strong influence over the co-evolutionary processes. Fundamentally, they aim to improve the overall health of their ecosystems by providing a stable and predictable set of common assets that other organizations use to build their own offerings (Levien, 2004b). Lead firms need to be able to manage the process of joint learning in ways that maintain the delineation and compatibility between the different niches as the ecosystem evolves (Williamson, 2012).

According to Hinterhuber (2002), the orchestrator has roles such as the network architect,

network judge, network developer, and charismatic leader (Kameshwaran, 2013). The task of the network architect is to select member companies that comprise the business network and to set objectives. The role of the network judge is to set performance standards to which the member companies must comply. Third, the task of the network developer is to develop a network’s physical and non-material assets, including knowledge acquisition, knowledge transfer across the member firms, and the creation of a strong brand image. Last, the role of a network orchestrator is that of a charismatic leader, which should take a long-term view on the relationships with its members (Kameshwaran, 2013). Orchestration can look very tempting, but there is substantial risk lurking beneath the attractive surface. For example, partners may unexpectedly become competitors (Kameshwaran, 2013). Ideally, the lead firm should aim to promote an ecosystem that combines a set of specialist niches, each of which makes a different contribution to customer value, and which create a positive spiral by generating new knowledge or additional demand as they interact (Williamson, 2012).

3. Flexibility

Through reallocation, companies can shift resources to different members of the network when faced with changes in technology, consumer preferences, government regulation, or unforeseen events. Having a wide network – and thus more options – provides flexibility when faced with industrial challenges (Iansiti & Levien, 2004a).

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Niche players, whose core operating strategy is to leverage the broad-based efficiencies offered by connecting with several players in an ecosystem, are not threatened by the replacement of one technology by another. Because interfaces in loosely coupled systems are lightweight and

noninvasive, firms can change much more easily in response to massive shifts in the

technological environment (Iansiti & Levien, 2004a). However, there is not always a situation of “loose coupling”. When part of a supply chain, the dependencies are high and different

companies share their fate. For example, the bullwhip effect (BWE) describes the phenomenon of an increasing amplification of demand variability along a supply chain (Sali, 2012). It refers to increasing swings in inventory in response to shifts in customer demand as one moves further up the supply chain. Therefore, it is difficult to forecast the amount of products needed. When the inventory is not in line with the demand of the customer, the inventory in particular locations (suppliers) will accumulate. The BWE increases further in the supply chain (Weil, 2014).

4. Connected actors

The connections between the different actors within the ecosystem are of importance to the success of the IE, especially during the leadership phase. Perhaps a neutral third party could help the ecosystem and strengthen the socioeconomic relationships (Lataifa, 2014). The connection and collaboration is needed for different actors, for example to link education to jobs, and to bridge small business to large business. To enhance innovation, new knowledge must flow easily. There is evidence to suggest that if the connections between knowledge creators and businesses are tightened, success can increase (Kanter, 2012). Another aspect of moving from knowledge to business is collaborative knowledge creation. As Kanter (2012) argues, “it is very

difficult to manage, but if you get a number of companies collaborating with a number of universities, you have a better exchange of ideas and the possibility to turn ideas into new enterprises.” New ventures operate more successfully in a stronger BE because small businesses

often need larger-company customers (Kanter, 2012). BEs create value for a new participant only when the participant is not capable of commercializing a product or service relying on its own competences (Clarysse, 2014). Every small firm benefits if it can obtain more business from large firms. Besides revenue, these small firms also gain competence and opportunity. There should be a national call to action with commitments from big companies to mentor and connect with smaller enterprises (Kanter, 2012).

Success within the innovation ecosystem : evidence from a field study : what are the critical success factors of the innovation ecosystem during the leadership phase of the business ecosystem life circle?

TABLE OF CONTENTS

FOREWORD

EXECUTIVE SUMMARY

LIST OF ABBREVIATIONS

LIST OF TABLES AND FIGURES

1.

INTRODUCTION

2.

THEORY