Building ecosystems in Asia

Building ecosystems in Asia
Photo by Minh Minh / Unsplash

For many multinational corporations (MNCs) with headquarters outside of Asia, the region is a crucial component in their growth strategy. Not only does it hold immense sales potential, but it's also a vital way for these companies to stay on top of leading-edge innovation trends, evolving industry norms, and sustainability trajectories. However, conventional efforts that have fueled local innovation efforts for decades won't cut it in an era where innovation ecosystem-led businesses offer a paradigmatic shift in sourcing new growth drivers.

Leaders of successful ecosystem businesses understand the importance of balancing resolve and resilience while simultaneously embracing uncertainty by working with people outside the company walls to co-create new value.

In November 2020, we explored this topic during an Asia Growth Exchange session with Mark Greeven,  Professor of Innovation and Strategy at IMD. Professor Greeven and a small group of business, digital, and innovation leaders and senior managers shared insights on the type of strategy, leadership, and teams required to adopt an ecosystem-driven approach to innovation, digital transformation, risk, and resilience. The key takeaways from the breakout sessions are summarized below.

Talent & Leadership Breakout Takeaways

  • The future is ambidextrous: Change is accelerating in many parts of the business, from customers to competition to supply chains. Managing this change requires becoming an agile and ambidextrous organization. Rethink processes, retrain teams, and restructure incentives.
  • Culture first: Employees need help to leave the comfort zone of legacy businesses and accept the risk of business model innovation. Typically, only 10-20% of a team will embrace this challenge. Cultural change should proceed or go in tandem with new initiatives. Otherwise, most of the team will be passive at best and will become bottlenecks to new initiatives at worst.
  • Invest in trust: Headquarters must learn to trust their regional teams before they empower them with the autonomy to pursue innovation initiatives. Local teams can build trust by actively communicating about local ideas and market insights, supporting global initiatives, and seeking low-risk, low-investment quick wins. And remember to promote your triumphs and successes!
  • Build your internal ecosystem: Before you build an external ecosystem, you need a solid internal ecosystem. Invest in internal tools to engage colleagues in ideation generation, exploration of solutions, and agile collaboration. Once these tools and the related mindset are in place, colleagues will naturally welcome cooperation with ecosystem partners.

Ecosystem Breakout Takeaways:

  • Ecosystem requires ownership: Many companies need to establish responsibility for the exploration part outside of the organization. Organizations may need more exploration opportunities or can create internal friction and confusion. Assigning a team to manage ecosystems systematically will smooth the process.
  • New > existing: Ecosystem efforts primarily focus on new business opportunities outside existing core competencies. Ecosystems help explore and validate new opportunities before they decide to prioritize that area for internal investment.
  • Small > big: Small teams with a high level of autonomy are most effective in engaging ecosystems. Set up a new organizational structure and define team responsibilities, goals, and incentive structures.
  • Agile meets waterfall: Engaging an ecosystem is relatively easy. Get the 'core' to engage in innovation activities.
  • Rethink IP management. IP ownership is a common bottleneck to ecosystem collaboration. IP evaluation done upfront avoids conflict later in the partnership. Seeking ownership of foreground IP and building on a partner's background IP can provide win-wins. However, IP ownership is less important than speed and agility in software markets. New IP ownership standards may need to be established based on project type.

Experience sharing from various companies highlighted the importance of leadership support, organizational design, and innovation practices in building a successful ecosystem-driven approach. For example, Ping An, an HR service provider, has made a fast-growing exploratory organization on top of its traditional insurance business, with over a third of its business coming from outside its incumbent operations.

The chairman provided a clear mandate for the exploration business units to create opportunities far outside their comfort zone. Accordingly, they invested in many teams to explore disruptive ideas, using a rigorous process to validate and swiftly "kill" most ideas to focus resources on the most promising scale-ups.

Other companies such as T2 Automotive Supplier, Specialty Chemicals, Industrial Engineering, and Shipbuilding are also moving beyond conventional approaches and adopting open-innovation and localization strategies. They are using lean startup processes, collaborating with globally dispersed talents, and shifting their focus to user experience rather than technology. Additionally, they are moving decision-making mandates into Asia and working on short projects with local customers to learn and innovate around customer needs. However, they also need help with things such as differences in working styles between headquarters and regional teams and building trust between the regional and head offices.

Overall, it's clear that adopting an ecosystem-driven approach to innovation requires a shift in mindset and a willingness to experiment with new strategies, organizational designs, and practices. It's also important to re-evaluate IP management, build trust, and foster an agile, ambidextrous culture. By embracing these principles, companies can stay ahead of the curve and tap into the vast potential of the Asian market.