How to create and capture value in open ecosystems
Business value is about creating and capturing value. This is relevant for all kinds of innovation, not just the networked economy. Developing the 72 generation of rear axles for Volkswagen is known terrain where customer insights and functions are clear. But starting a connected business initiative is much tougher. At the beginning of the innovation curve, several technologies are available, and multi-options on platforms, technologies, and functionalities produce uncertainty. Too often, implicit and untested assumptions on customer expectations lead to the neglect of business value considerations. Therefore, thinking in terms of business value is of particular importance in connected business initiatives. Consider a simple definition of business value:
Business Value = Customer Value + Company Value
Every product innovation, process innovation, and business innovation should follow this basic formula to create a core business value. Without business value, innovation makes no sense commercially.
These basic business value considerations are a condition sine qua non for commercially successful innovation. However, in many areas of open ecosystems, it is not enough.
Amazon on its own would never be as successful without dealers using its platform. In other words, if Amazon’s platform wasn’t attractive enough for dealers to sell their products, there would be no value at all. It is crucial to create additional value for partners, especially when the
platform is first launched. Airbnb and booking.com are only successful because they create value for their customers and their house landlords when they use the platform.
It is only when several partners come together to co-create new products and services that a whole value chain becomes competitive. This “full business value,” as we call it, is essential in ecosystems where multi-lateral partnerships strive to create superior or new value for their customers.
Extended definition of business value in open ecosystems:
Full Business Value = Customer Value + Company Value + Partner Value
The most impactful business value can be developed through win-win situations for the customer, the company, and its partners in the ecosystem.
Thinking in terms of complex multilateral partnerships and stakeholders is becoming increasingly important for most ecosystems. Conceiving mechanisms to create value across the board for all stakeholders involved is more challenging than devising means to generate traditional business value, and it will become increasingly important in the future. This broad creation of value has been a demand of the stakeholder perspective for many years. A company should not only create value for its shareholders but also for its employees, customers, suppliers, and all partners including society as a whole. In the modern ecosystem, this ethical stakeholder perspective has been reformulated into commercial thinking. Without at least long-term fair value creation and distribution to all relevant partners in an ecosystem, the innovation will not be sustainable.