It’s not (only)what you know…
Successfully scaling innovation depends on working with value networks
Innovation is a multi-player game. The image of the lone hero innovator is a myth. Even celebrated soloists like Thomas Edison or James Watt had their army of assistants working behind the scenes. Alexander Bell wouldn’t have been able to bring the telephone to the world without being able to demonstrate the device by having Mr Watson on the other end of the line when he famously told him to come in from the next room….
Ask any entrepreneur and they’ll tell you about the networks they needed to bring their ideas to life; creating a valuable solution isn’t a simple lightbulb moment but a complicated journey drawing in resources, ideas, time and energy, (not to mention money), most of it coming from other people. Deconstruct any successful start-up and you soon have a cast of characters on stage, taking their bows as the audience recognise the shared creativity which has made the performance possible.
And once we get beyond the initial pilot, the hard work really begins. The journey to scale is a tough one, takes time and has to negotiate some uncertain conditions on the way. The evidence is very clear, it’s a team effort and it needs plenty of external help.
‘Complementary assets’ is the technical term for the answer to the question of ‘who else and what else do you need to scale your innovation?’. The key point about them is that they lie beyond what you can bring to the party. By their nature they represent resources you need to find and work with; the trick is in assembling suitable partnerships to deliver them.
That’s something we’ve known for a long time. Consider Welsh entrepreneur Pryce Jones back in 1860 who used a mail order model to connect his woollen goods business to a wider market building on the nascent logistics and communications infrastructure of postal services and railways. The offer was simple; place your order via mail and it will be delivered the next day (effectively anticipating Amazon’s Prime service by 150 years!)
His idea paid off; by the 1880s he had an international operation, counting amongst his patrons the royal houses of Austria, Britain, Denmark, Germany, Hanover, Italy, Naples, and Russia. Importantly he inspired others, like Messrs Sears and Roebuck to extend and refine the model; they used their catalogue to bring ever more exotic goods to the doorsteps of the most far-flung farm or homestead across the United States.
But theirs wasn’t a single component innovation; to make it work they needed to build an ecosystem. Selling was only a part of the story; realising their value proposition depended on paying attention to a host of other elements, things like capturing and processing orders, procuring stock, storage and distribution, handling logistics over a large area and managing the cash flows so that they had the money upfront in order to fund the whole operation. It was like a giant jigsaw puzzle and it took them a couple of years before they managed to wrestle the right pieces into place.
Above all they were smart enough to recognise that they didn’t need to own or control everything as long as they could orchestrate and co-ordinate it. They built the platform and then partnered with a host of players like domestic appliance makers, finance houses, and shipping companies to create a win-win model in which everyone was able to take a share in the rapidly growing market. From dolls to power tools, bicycles to fur coats, seeds to automobiles the model linked millions of people in a market square the size of a continent. And it was a platform on which innovation flourished; once the basic model was established it became a breeding ground for new goods and services, new ways of creating and providing value.
Scaling innovations like these is far from a solo act — it’s putting together a group of entities which can work together to create shared value at scale. Value networks don’t just happen; they involve three key challenges — finding, forming and performing. Working out the ‘who else and what else do we need?’ question isn’t simply a matter of creating a shopping list — you’ve got to find the relevant players and make sure you aren’t missing any. And then you’ve got to find ways of bringing them alongside, engaging them as partners with a stake in helping you create the shared value you seek. And finally you have to orchestrate the whole, engage them so that together they deliver ‘emergent properties ‘, something which is greater than the sum of the parts.
So how do you go about working with value networks to deliver innovation at scale? There are multiple potential partners but we’ve found it useful to think about some key complementary roles which are usually played.
First you need to think about your ‘bookends’ — these represent you as a value creator and the consumer for whom you are trying to create it. But it also involves others who form part of the creation process and who are looking to capture some kind of value from doing so — whether it is financial, experience, learning, reputation or whatever.
Movers do what the name suggests — they help moving value around the system you’re creating. They may be passive channels — like the internet or, in those early days of mail order, the embryonic postal system. Passive, yes — but without them you might be in trouble. Conveyors are more active, giving impetus to your innovation, spreading the word and helping convince adopters. And then there are co-ordinators, enabling the whole to operate; think, for example of the ways in which today’s platform business act as co-ordinators to bring different creators and consumers together.
Shapers are the third group, setting out the space within which you can operate your value network. Competitors can’t be ignored and competition comes in many different forms, from head on challengers to other ways in which you might find your innovation fighting for resources or attention. Cartographers set the rules of the game, mark out the playing field and generally shape the way in which value can be created and shared. And complementors influence the value, providing necessary positive (or sometimes negative) input to shape the environment in which your innovation is trying to scale.
Your value network is going to involve a combination of entities — people, organizations and resources — which span these nine core roles. Cue the need for a simple checklist when you begin thinking about scaling your innovation — can you map what you need and what you already have) in terms the roles they play in your value network?
But having mapped your value network you need to think about working with it, engaging different players in different ways. It’s not just assembling pieces on the chessboard but the moves you make with them that is going to make the difference. Not least because you are unlikely to be able to control this or order them about.
To switch analogies, your role isn’t really like that of a conductor creating something wonderful by co-ordinating all the players in an orchestra. Your band is full of players who may have their own ideas and agendas and may not always want to play by the score in front of them — it’s more like a jam session in a jazz group with extensive improvisation and depending on listening and aligning
And it’s here that life gets a little more complicated, for two reasons. First of all entities in your value network may well play more than one role at the same time. Think of an education technology innovation designed to enhance learning in schools; scaling that will almost certainly involve ministries of education acting as cartographers, setting out education policies, rules and regulations,. But they may also be conveyors, actively promoting your approach and enabling connections to schools, and becoming value captors, sharing in the overall value of enhanced learning across the population.
Conveyors may also be co-creators, not only getting your value solution to where it is needed and accelerating adoption but also creating new value alongside it. Brownie Wise played a key conveyor role in the scaling of Tupperware as an innovation but she (and her team) were also a key source of product design and improvement ideas.
Roles also change over time — and this opens up considerable opportunity in terms of shaping the way the value network evolves. For example, Lego moved from being a creator of toys to engage with many of their consumers to capture and use their ideas for future products, effectively recruiting them to be co-creators.
In similar fashion competitors can become value captors, helping grow a market in which they also operate. For example, Amazon supplies the AWS infrastructure on which Netflix has built its streaming and both Prime and Netflix have benefitted from their shared learning about growing the streaming market.
To stay with our jazz ensemble metaphor it’s as if different players are also multi-instrumentalists and can bring their different instruments to bear. That brings with it the potential for some amazing emergent properties but also a seriously unpleasant cacophony!
Once again it raises some key checklist questions as you think about scale, in particular how roles might change, which players in your network might play multiple roles — and how you might act to engage and align them over time?
One way to help this strategic planning process is to think about spheres of influence — what we term your inner and outer value network. The inner value network (IVN) represents those entities you need to keep close; typically this includes not only your consumers but also captors (the partners you need to create shared value) and key conveyors. You need to keep them close and engage with them in ways which represent a formal relationship — contracts, partnership agreements, etc.
Your outer value network (OVN) represents those entities typically outside your direct control or influence. They may be the channels which are available to you to work with or the cartographers who make the rules within which you have to operate — for example government regulations or trade standards.
The important thing here is to remind ourselves that roles can change and so there is potential for drawing players in the OVN closer, making them part of our inner network. For example, working with consumers as co-creators, drawing on their ideas and engaging them as partners in the way that Lego has done. GiffGaff is a small but highly successful player in the tightly competitive world of mobile phone networking; its excellent customer service record is in no small measure down to the way in which it has engaged its community of consumers to play this role…
Or you might work alongside regulatory bodies, building active partnerships to help promote adoption. Mobile money is still an exciting new field for apps and hardware players — yet it’s been a reality in east Africa for over a decade. M-PESA has been a transformational innovation and has scaled around the world — but its early success depended critically on the support of the central bank rather than its opposition to newcomer ideas. It helped create a fertile regulatory landscape within which mobile money could develop and scale.
And in the world of entertainment innovators behind films, books and music have realised the power of ‘fandom’ as a resource to help scaling, partnering with communities who represent key complementors. Think about the role played by communities which form around movie series like ‘Star Wars’ with its conventions, costumes and huge online presence. This is not directly controlled by the film companies but instead exists alongside it, complementing the rate and direction of development, helping create new characters and backstories which feed into the core.
‘Now when things go wrong, as they sometimes will, and the road you travel it stays all uphill…..‘ These could be the description of an innovation team’s frustration as they try to scale but they are actually lyrics from a successful blues offering by Canned Heat released over fifty years ago. It’s still a great song — and it still has some powerful advice for those travellers trying to make it up that hill, going on to remind them that ‘…together we stand, divided we fall….’ The chorus really sums it up; the key to scaling innovation is simple — ‘let’s work together’.
The challenge, of course, is working out how…
This blog is based on our forthcoming book ‘The Scaling Value Playbook’ — click here for more details and to pre-order
If you’d like to listen to the podcast version of this piece, or other episodes of my podcast, click here
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