Presentation by Haydn Shaughnessy at the final conference for the Measured and Mangaged Innovation Programme. Venue: Moderna Museet, Stockholm, Sweden

1. 4th December 2012
Haydn Shaughnessy

2. Agenda

3. Who are you listening to?
HAYDN SHAUGHNESSY
Began tech career at EU RACE program
managing satellite service pilots
Former partner at The Conversation
Group, the first social agency
Former editor Innovation Management,
Writer at Forbes.com, GigaOm, Harvard
Business Review
Research Fellow Center for Digital
Transformation, UC Irvine
The Elastic Enterprise – new ways to
scale businesses, new wealth creation
model
Future enterprise project 30 in-depth
CIO/Chief Innovation Officer interviews
haydn@cogenuity.com

4. What’s The Big Idea?
The human interest model is replacing the
traditional
business model

5. What’s the problem?
From your study – the low priority give to partnership innovations

6. Global 2000 companies 2012, Source: Forbes
Up
Up
8%
8%
$149 trillion assets
Up
Up $36 trillion revenues
12%
12%
Up
Up $2.6 trillion
$2.6 trillion
11%
11% profit
profit
WE UNDERESTIMATE THE ACHIEVEMENTS OF THE
ENTERPRISE – HUGELY SUCCESSFUL WAY OF CREATING
WEALTH.

7. BUT IT HAS HIT A LIMIT
Shareholder returns of
larger firms were 70%
below those of smaller
firms over a 10-year
period in USA
Source Gregory V. Milano, “Too Big to Succeed?” CFO Magazine, April 29, 2011

8. Fastest growing social
network, 50 m members
13 employees 10,000 x Library of
Congress photo library by
11.2012 – 14 billion
images
Low overhead
high scale businesses
ON THE OTHER HAND WE SEEM TO
HAVE INVENTED A NEW FORM OF
ORGANIZATION TOO

9. The old input model. Adam Smith Nail Makers Inc.
Raw materials, capital, factory, labor….. management
Manager
Manager
R&D, New
Ways to Make
Nails
Change management Innovation – the
– new culture of nail nail maker’s
making dilemma

10. The old scaling model
Predictable
scaling model
Built on well
understood factor
inputs:
1.Capital
2.Labour
3.Raw materials
4.Education or IP

11. What is the new
enterprise
operating model?

12. FIVE PILLARS
1. Platform
2. Ecosystem
3. Connectors
4. Cloud
5. Sapient leadership

13. ECOSYSTEM 1 The Forbes’
Story
Feb 2011 to Feb 2012 Opens potential for
hundreds of new revenue
Tapped into 800 streams
ecosystems
Acquisition of
True/Slant
MONTHLY
UNIQUE
VISITORS
DOWNSIDE Declining ad impression prices, leading to real time ad management

14. Competing ecosystem models
highly disciplined continuum from
hardware to software in standardized
environment
$54 billion in revenue
15,000 employees in California alone
multiple supplier and licensee
partners in fragmented markets
vs

15. The ecosystem as relationship building
100 employees
70th fastest growing company in
Long term R&D partnership Uni North America
Michigan p/e 12.5
Collaborates extensively via IP sharing About $300 million in revenue
e.g. with Synopsis,semi-conductor Net income around $50 million
design tools, on low power chips
2300 employees
P/e 6.95
Turnover $780 million
Profit before tax $290 million
CEO salary $1.200,000

16. A simple ecosystem model of
business
Information layer A new hardware
layer driven
Apps market by data
Developer network
Platform
50,000 strong
Android 48 member open Transaction engine 88,000
handset alliance articles on pebble
watch in 48 hours

17. ELEMENTS OF THE PLATFORM
1. A software or content platform has rules of
the road
2. A developer or production community
3. Ingest to a platform
4. Transaction engine
5. Information layer
6. New leadership role? ATTRACTION, attracting resources –
managing the external world
7. Reinventing product around
connections

18. Elements of the ecosystem
1. They gather around a platform – like iTunes, Android, quirky
2. Represent highly scaled partnerships, a forum for
millions or tens of thousands of developers, or producers
and billions of calls via APIs
3. Take place in OPEN environments among peers, which has
implications for leadership
4. Represent new power dynamics around the firm,
especially in the information layer, which is now built by
everyone
5. Seem to accelerate the pace of innovation
6. Are closely related to mass differentiation, they enable
production for multiple global niches

19. The Idea of Ecosystems
Shifting from oligopoly to
ecosystem-based business
Scale via Scale via partnership and
specialization and spontaneous peer activity
supervision
Scaling is a Scale is
disproportionate proportionally lower
cost cost
Partnerships are Partnerships are
formed by bilaterally friction free
negotiated contracts
Attraction
Command
The information layer is
The information layer is content push
self-forming
Mass market
Mass differentiation
Internalized Externalized
Employed labour in decline

20. Why aren’t more companies doing ecosystems?

21. Why aren’t more companies adopting this model?
1990-92 2000-03 2004-06 2007 - 10
Services
Services Employees
Employees The CEO
The CEO Risk
Risk
Finance
Finance
China
China
Global
Global
Random
Random
INTERNALITIES EXTERNALITIES
Transition Transition
point point
A Semantic Analysis of 20 years of business writing in The Harvard Business
Review, source Haydn Shaughnessy

22. Gravitating to externalities

23. What is Externalizable?

24. Consequence?
Most companies straddle the first two models
and are simply not cognizant of the larger
trend

25. CLOSE UP
Lab-based, driven by Attempts to interpret Externalization drives
oligopolies that shape and adapt to the and leverages new
new markets service economy strategies
Old fashioned
Massive activity
double entry Data about “the
logging
world”

26. The New Emotional Capitalism
– The Human Interest Model

27. Shift from the business model to the human interest model
features of externalization: PEERS not bosses, Social
Reputation, social network, sharing economy
ECOSYSTEMS, Unpredictability, BYOD, randomness,
social business, work-life integration,
customer ecosystem
crowd
Crowdfunding
crowdsourcing

28. Example: The peculiarities of crowdfunding
VC Model – Surplus Capital Crowd model – emotive captialism
1.Company based, must scale 1.Project based, no growth
requirement
2.Assumption of high failure rate 2.No assumption about failure
3.High stress for proposers, barrier to 3.Self-imposed outcome burden,
entrepreneurs supports entrepreneurism
4.Antagonistic to cultural production 4.Culture-friendly and ideal for
or lifestyle building emotional outcomes
5.Peer and social network based,
5.Extractive, the money is taken out potentially with a positive loop for
resources
6.Utilitarian 6.Emotional connections through
“extras”

29. As labour and capital
is changing: What are
We Trying to Produce
in the New Wealth
Creation System?

30. The new global middle class
The new global middle
class creates massively
differentiated needs for
low cost, good enough
goods
900 million – 2 billion people
by 2030 = x 3 or x 7
1 single, global labor pool
and converging incomes

31. The priorities that capital has driven:
Scale, customer acquisition, the
1%
Are now losing ground
•Trust on the brink of collapse
•An unworkable surplus of capital
driving up asset prices

32. So what are we trying to create?
New values –
we are wrestling with a post capitalist value system
New human capabilities
- This is a capability building era both on the input and
output side
New experiences
- That compensate for income insecurity
New shared emotions in work and at home
- That give recognition to consumer-employee-home
continuum

33. The new economic factors

34. Kickstarter project
New online magazine for serious, emotive journalism
Crowdfunded, build audience through buzz
Delivering what its audience/funders already endorsed.

35. Summary:
NEW ENTERPRISE: Platforms and ecosystems give us a means to
scale and to serve globally differentiated niches at low additional cost
NEW ECONOMY: They drive externalization of enterprise processes,
in extreme cases leaving an enterprise with one role – relationship
building
In all cases relationships are more important as our lives converge as
customer, employee, home-maker
Even capital is becoming ecosystem-centric and people-dependent and
possibly non-extractive, moving away from surplus capital model
NEW VALUES: We seek a new value system, the human interest
model, to frame this new world and allow us to function within it.

36. In short:
Nordic culture is extremely well placed to benefit from
this emerging economy
Partnership thinking is the missing link – in an
externalized economy partnership is everything.

37. THE END
HAYDN SHAUGHNESSY
Fellow Centre for Digital Transformation,
UCI Irvine
Blogs/forbes.com/haydnshaughnessy
haydn@cogenuity.com