I am starting off 2023 with a new project. Step by step last year’s projects come closer to version 1.0, gold status. After the realization of the joint Gaia-X whitepaper with TQ folks (see here) I’m happy to announce to be close to completing the teaching case to be published by Edward Elgar Publishing Ltd. And finally, the first working paper (at the same time being the first dissertation chapter) has been submitted for this year’s conferences. Fingers crossed. With further dissemination comes more iterations to arrive at a well-rounded paper, step by step.
And most of this from Frankfurt am Main for a large part of the year. There I was kindly “adopted” by TechQuartier for my secondment abroad Radboud’s campus in Nijmegen. Besides the academic “ivory tower”, a bit of “boots-to-the-ground” business life. In the TQ workspace, I had the pleasure of meeting fascinating people who worked either at TQ or at one of the start-ups based there. This environment helped me gain various insights relevant to my work. On the one hand, being physically present at TQ enabled me to co-author the ecosystem white paper and facilitated progress on the teaching case. On the other hand, I was sitting directly among all these different entrepreneurs gaining further insights into the development of high technology (in high technology industries). From small chats to more in-depth discussions, I was able to gain glimpses of the entrepreneurs’ work, their mindset and the way they develop (new) business models to take advantage of the opportunities created by technological developments.
Overall, I appreciate this enjoyable experience and am grateful for the open and warm welcome I received.
Gaia-X aims to build a new generation of transparent, controllable, and interoperable services that implement a common set of rules shared by hundreds of European and non-European players in the market to bolster the European sovereignty in digitalisation and the data economy.
However, can one orchestrate such an ecosystem? And if so, who should be the orchestrator and how should one go about it?
In our contribution to the Gaia-X newsletter, Luisa Kruse, Sebastian Schäfer – both from our FINDER partner TechQuartier – and I deep-dived into the project safe Financial Big Data Cluster (FBDC) to extrapolate answers for such an approach of open innovation.
We find that innovation hubs are in a prime position to take over the role of an orchestrator of a publicly funded ecosystem. To make most of the complementary, modular actors within such an ecosystem we suggest a hybrid orchestration form. Finally, it is important to mention that a successful ecosystem not only needs orchestrators but also contributors to create something new and valuable. At best, these should be innovative and have the capability to lead the ecosystem to new perspectives and products.
The complete version of our contribution is available to download below:
The success of the safeFBDC depends on our understanding of the underlying mechanisms (and technologies) which determine its modes of operation. While the liability study already has shed light on the IT infrastructure the underlying mechanisms of interaction between participants have not been fully outlined yet. Identifying and understanding these would help to leverage and manage relevant partners. Since such a project lives on from its members, the collaboration between TechQuartier and FINDER contributes directly to the long-term success of the safeFBDC.
“If we are to make strategic sense of innovation communities, ecosystems, networks, and their implications for competitive advantage, we propose that a new approach to strategy [called] ’open strategy’ is needed.” – Chesbrough and Appleyard, 2007: 58[1]
An important underlying idea of innovation is its reliance on competition and thus the intertwined nature of both innovative and competitive behaviour.[2][3][4][5] While this idea has prevailed for a long time the predominance of competition has been slowly losing ground to the idea of cooperation.[6] In that light the concept of business ecosystems gains in prominence in both research as well as its application in business. Before diving into the underlying mechanisms of ecosystems we first should line out what we can understand under such a concept.
Back in school ecology taught us that ecosystems are systems of living and non-living interacting components within the same environment. So how can we apply that concept to business? An innovative reader (as innovation is also the application of an established idea to a new context[7]) may think about something in the line of the following:
“Business ecosystems are a network of firms with differing interests bound together as a collective whole such that the fate of its members is bound to the structure of that network and the roles played by its members.” – Tan, Tan & Oh, 2007: 2[8]
In case of the safeFBDC the set of goals, its mission defined by its value proposition, binds together the consortium. The distinction is an open approach of formulating the mission – in other words their strategizing. That openness allows cooperation, a joint engagement in a strategy process of different organizations instead of their competition.[9] Following the literature, we can therefore define the safeFBDC as an ecosystem-as-structure.[10] For such structural approaches of ecosystems a keynode member with central positioning is of importance.[11] Such keynode members, already generally addressed in a blogpost by my colleague James, have three major tasks.
They consolidate disperse resources & capabilities, as e.g. knowledge, of members.
They engineer processes to initiate and grow the ecosystem.
They oversee the creation and extraction of value for members.[12]
Therefore, the first research project to be conducted will be to identify if and how the TechQuartier is fulfilling the role of an orchestrator for the safeFBDC. A network analysis will be conducted in the first step. The results – the existing ties within the ecosystem – coupled with the second step, a cluster analysis of the activities carried out, should therefore determine the TechQuartiers role as orchestrator.
With that in mind we can have a look on how the mode of operation leads to the realization of the projects objectives, namely the development of AI applications. Instead of competition the project allows the collaboration in the provisioning and usage of shared, aggregated and uniformly formatted, cross-sectoral financial data. Such a concept of open strategy offers advantages for both affiliated producers and consumers.[13] Typically benefits for producers are lowered development and launch costs, quality improvement due to a joined development environment and increased speed to market. This, in turn, translates into the benefits of consumers since the reduced costs are reflected in the price (up to being open source) as well as a direct incorporation of feedback and implementation of specifications in the development cycle.[14] Since for the safeFBDC participants are often both – provider and user of data – an open strategy, triggered by the access to data, is of high functionality.
However, there also loom disadvantages which need to be tackled. In my GAIA-X post I already highlighted the loss of established business models and hence value appropriation. Accordingly, participants engaging in cooperation within an ecosystem have to find new ways to appropriate value within the value chain to generate profit.[15][16] Data monetarisation therefore is a research object of special interest to us. Hence, building on our first research project we will investigate how the TechQuartier, in its role of orchestrator, can determine and govern a value appropriation regime.
Together, Luisa Kruse and me are looking forward to report on our progress on both research projects in the upcoming months.
[1] Chesbrough, H. W., & Appleyard, M. M. (2007). Open innovation and strategy. California management review, 50(1), 57-76.
[2] This is based on Schumpeters (1934, 1939, 1950) work who expected that innovative behaviour is based on the profit expectations during the growth of an industry as the major determinants of a firms growth.
[3] Schumpeter, J. A., & Nichol, A. J. (1934). Robinson’s economics of imperfect competition. Journal of political economy, 42(2), 249-259.
[4] Schumpeter, J. A. (1939). Business cycles (Vol. 1, pp. 161-174). New York: McGraw-Hill.
[5] Schumpeter, J. A. (1950). The march into socialism. The American Economic Review, 40(2), 446-456.
[6] McKinsey and Company, 2015, Global Media Report
[7] Martín‐de Castro, G., López‐Sáez, P., Delgado‐Verde, M., Quintane, E., Casselman, R. M., Reiche, B. S., & Nylund, P. A. (2011). Innovation as a knowledge‐based outcome. Journal of knowledge management.
[8] Tan, F. T., Ondrus, J., Tan, B., & Oh, J. (2020). Digital transformation of business ecosystems: Evidence from the Korean pop industry. Information Systems Journal, 30(5), 866-898.
[9] Gooyert, V. D., Rouwette, E. A. J. A., & van Kranenburg, H. L. (2019). Interorganizational strategizing.
[10] Adner, R. (2017). Ecosystem as structure: An actionable construct for strategy. Journal of management, 43(1), 39-58.
[11] Spigel, B. (2017). The relational organization of entrepreneurial ecosystems. Entrepreneurship Theory and Practice, 41(1), 49-72.
[12] Dhanaraj, C., & Parkhe, A. (2006). Orchestrating innovation networks. Academy of management review, 31(3), 659-669.
[13] Chesbrough, H. W., & Appleyard, M. M. (2007). Open innovation and strategy. California management review, 50(1), 57-76.
[14] Appleyard, M. M., & Chesbrough, H. W. (2017). The dynamics of open strategy: from adoption to reversion. Long Range Planning, 50(3), 310-321.
[15] Hautz, J., Seidl, D., & Whittington, R. (2017). Open strategy: Dimensions, dilemmas, dynamics. Long Range Planning, 50(3), 298-309.
[16] Chesbrough, H., Heaton, S., & Mei, L. (2020). Open innovation with Chinese characteristics: a dynamic capabilities perspective. R&D Management.
FINDER 