Open management and the enterprise ecosystem

nGenera Insight All-Member Meeting

Open Management and the
Enterprise Ecosystem:
A new management paradigm and its
metrics

Haydn Shaughnessy, Cogenuity
July 26-28, 2010
Park Hyatt Aviara Resort
Carlsbad, CA

Agenda
Changing Externalities

The Ecosystem as Solution

A Sector Example

Case Study

Measuring Innovation in Ecosystems

Lessons

2 | © 2010 nGenera Corp. All Rights Reserved.

Changing Externalities


The era of unprecedented economies of scale

Competition just got very tough. China and India enjoy
unprecedented economies of scale:
• The $2,000 Auto in India
• India mobile market headed towards 1 billion +
subscriptions
• 30% price reductions in telecommunications
infrastructure equipment globally (delaying
introduction of next generation Internet, IPv6)
• China supercomputer industry – 10 new
supercomputer centers THIS YEAR


The growth of system-wide challenges
Debt de-leveraging at enterprise and national levels, hyper-
competition, energy issues, the empowered consumer.

These types of issues create systemic or sector-wide problems beyond
what one enterprise can address – the innovation focus is autos, cities,
mobile, logistics, silicon….

The innovation crisis

Remarkably, the return on assets (ROA) for U.S. firms has
steadily fallen to almost one-quarter of 1965 levels
–John Seely Brown and John Hagel, The Shift Index 2010

Developed world Developing world
The $20,000 infant incubator The $7 infant incubator

The $20,000 auto The $2,000 auto

15,000 UK bank branches 17,500 mobile money
agencies in Kenya

500 million Facebook users 560 million China Mobile
subscribers


India’s $35 laptop

Unveiled 23.07.10


New frontiers in innovation

Global
3 sold per innovation in
second technology and
banking

Hypergrowth
New business
models

One sold every
three seconds

The ecosystem is becoming the model for powering growth and
extensibility.

The Ecosystem as Solution


The growth of the new ecosystem conversation

90000
80000 Business
70000 Ecosystem
60000 Business
50000 Ecosystem (w/e)
40000
Open Ecosystem
30000
20000
10000 Open Ecosystem
0 (w/e)

Comparison of Business Ecosystem blog references using exact term and using
“all the words” (excluding all ecological references)

80,000 blog posts a year reference
ecosystem and business together
in the same post

Source: Cogenuity May 2010 10 | © 2010 nGenera Corp. All Rights Reserved.

Open ecosystems and the future of management

Old
The old ecosystem
1995 - 2007
New
The new ecosystem
2008….
• The old idea of ecosystems: “glocal” • Investing your business future in the
partnerships relationship cloud

• Tight corporate focus • Focus on externalities

• Glocal search for cheap labor • Global search for free labor and talent +
revenue generating micro-partnerships

• Labor market dis-alignment • Value re-alignment process

• Central planning and reporting • PLANNING FOR RANDOMNESS

• Corporate value focused • Value-diverse and customer-centric

• Communications driven • Perception driven


Why randomness?

We are speaking of a

significant societal shift — from

organizations leveraging technology to accomplish their goals TO
individuals leveraging technology to accomplish THEIR goals.
MUNDANE
And their goals are

They are ABSURD
And they areanything BUT rational
—Blogger Sean Howard, June 28, 2010


Enterprise objectives

The ecosystem can be defined as a need or approach to
radically improving the external environment and as a
consequence changing the enterprise, driven by the need to:

To overcome industry or sector bottlenecks
Disrupt the product roadmap or current business models
Use open source to reduce cost and extrapolate innovation outside the
organization
Integrate customer ecosystems to refresh customer service offerings and respond
to empowerment


A Sector Example


Ecosystems and competition in the mobile sector

mobile phone subscriptions to 2013 A significant growth
sector estimated at 5
1.1. billion
billion online devices
by 2014 (CISCO)
50% growth

720 million
315 million

10% growth
Projected
285 million Device and equipment sales in this
Current
industry – a model
for
USA India challenges and solutions
elsewhere


Major open source initiatives in mobile

Android – the Google-led alliance developing an open
operating system based on Linux

Limo – an alliance to build a Linux based operating
system for mobile

Symbian – the Nokia operating system pitched into open
source in 2010

MeeGo – an Intel – Nokia open source project for
premium phones

Moblin – an Intel driven project for open source mobile
interfaces, across phones, netbooks and similar devices


From open source to open ecosystem

Incremental gains
from service to
product to apps to Price,
ads market share,
market range Extending
the Google
business
model

Three innovative players:Three current strategies beyond open source


Transforming the external environment

A partial view of Hardware-
the mobile OS Tools
software Apps
interface developers developers
ecosystem developers

Function
developers
Ecosystem brands
Mobile
advertising
Supply revenues
Nokia End-user
chain Services communities
Ovi
Apple
Apps Geodata/AR
store Content
Location AR
Google Maps based content developers
Apps services
Operators

Solutions
ecosystem
Extensibility: new Embedded Home
Device device
business models, sales
device
markets markets
activities and markets

Case Study: How do you migrate
from business as usual to a new
organizational form?


Nokia heads for the ecosystem

February 4th, 2010
April 2009 Almost 40 million lines
Mid-2008 Foundation of code open-sourced
2007
Nokia creates Symbian launches
Nokia decides to open
Foundation and open officially
source its smart phone
source project
operating system,
announced
Symbian, the most
widely distributed
smartphone OS
globally

NOKIA’S KEY TENSION POINT:
Its core culture is not
adapting to the new realities,
particularly customer
centricity and “openness”


Symbian’s mission

To create an open
management paradigm
• Realign IT/engineering and other departments like design, marketing,
ideation
• Liberate the strategy process from the roadmap
• Grow an ecosystem where innovation is systemic though
unpredictable
• Respond to a world where openness is an expectation
• Deal with complexity


4 Steps to open management values

Values and creativity
help staff to bring values and creativity
to work

Participation
be a participant, e.g., open up the
sustainability plan, don’t dominate the
ecosystem; all staff to participate via
blog and twitter

Future worlds
orient not just to the future but to
transformed environments
Excellence
set the highest standards


Symbian’s open management, open ecosystem tools

• Developer community
• Apps community (horizon.symbian.org)
• Ecosystem Ideagora – (ideas.symbian.org)
• Open research community
• Volunteer community
• Ecosystem blog platform (blog.symbian.org)
• Get satisfaction


An open ecosystem ideagora

Pushing the openness agenda, by ideating
 The management of the foundation
 The operating system
 The future of mobile


Growing externalities at Nokia

Rural
Ovi -
Nokia development co-
MeeGo, OS services
life investments
tools India

Symbian Nokia
money

Point and find Technology
(ads/search) Institute
Brazil

Qt Interface
tools NOKIA Business
solutions
community

Forum
Nokia Mobile brain bank
Operators Africa
Device
Navteq,
supply
maps
chain


The Symbian ecosystem

Operators, OS component Chipset
e.g. specialists, e.g. makers, Texas
Vodafone Sun Hard- Instruments
ware/soft-
OS ware
OEMs, Sony Tools
interface
Ericsson, redesign
Nokia
Members Developer
(200 community
Consultants, enterprises)
e.g. Accenture

Ideagora

Apps Academia/
community open
Volunteers innovation


Measuring Innovation in
Ecosystems


Measuring innovation

• How successful has Nokia/Symbian been?
• The headline 2008 – 2010 is the iPhone
− And the sub-heading is Android


Measuring innovation
Time

ROI
Patent Brand equity
Scaling a business
quantity development

Pipeline Some kind of
balanced Internal
metrics
scorecard for New ideas attitude
(2,5, 10 year
knowledge changes
product flow) production

Certainty

Conventional measures of innovation balance certainty against time:
by the time you can really measure the
output it’s too late to change

Measuring innovation: Principles

“ Make room for qualitative and subjective measures
Measure iteratively rather statically
Measure the stack – firm, industry, sector, nation, region….
Pilot new metrics”

—Secretary of Commerce,
January 2008

Source: www.innovationmetrics.gov/ 30 | © 2010 nGenera Corp. All Rights Reserved.

An approach to ecosystem innovation metrics

Strategic
Socio- • Transformational
• Acceptance
• Alignment economic narrative
• Consistency • Price • Positioning (e.g.
• Platform incumbency)
• Trust deployment • Market conditions
• Extensibility • Innovation dynamics • Acquisition of low cost
• Value conversion inputs
• Values/perception • Engagement • Presence
• Acquisition of ideas
• Diversity • Messaging
• Friction reduction • Tangible value
Socio- Market conversion investments
cultural • Geographical growth
curve

In search of a balanced scorecard approach to judging future value


Ecosystem metrics: Acceptance

Developers ‘very interested’ in developing for each platform N = 2773

Tier 1 iPhone (iOS) 90%
iPad (iOS) 84%
Android Phone 81%
Android Tablet 62%
Tier 2 Blackberry 34%
Windows Phone 7 27%
Tier 3 Symbian 15%
Palm Pre / Pixi 13%
Meego 11%
Kindle 6%
% 20 40 60 80 100

Developers characterizing their commitment to these platforms
Source: Appcelerator, Inc., 06/2010 32 | © 2010 nGenera Corp. All Rights Reserved.

Ecosystem metrics: Alignment with business values

The core
connections are
from brand to
device and user
features

Business
performance is
distant from brand

The culture of the ecosystem is developer-centric
Source: Cogenuity 2010 Date range All time 33 | © 2010 nGenera Corp. All Rights Reserved.

Ecosystem metrics: Platform Deployment
No of apps
Widely criticized developers
for terms and
conditions and 41,000
high handedness

Widely envied for
10,000
developer
engagement

Criticized for cost Nokia doesn’t
and complexity but release figures
admired for
openness

Source: Cogenuity 2010 Date range All time 34 | © 2010 nGenera Corp. All Rights Reserved.

Ecosystem metrics: Value conversion - 1
Market
Mobility Enterprise
analysis
consulting mobility
offers
strategy
B2B
consulting

sell test services to
Rapid indirect monetization the ecosystem

Texas Instruments

Product creation
Value conversion in the Symbian ecosystem services


Ecosystem metrics: Value conversion - 2

OEMs use Android, Rapid direct monetization
B2C
incorporate Google and
receive ad revenue share
Operators too receive
revenue share and
OEM promote Android handsets
Operator

Apps community

OEM

Google/Android

Apps community shares
revenue from Android apps
Value conversion in the Android ecosytem market, hosted by Google;
apps promote handset


Ecosystem metrics: Price

Price sustainability is an issue with 1000s of micro-partnerships

Justified by
The iPhone astute
price product
premium focus and
hardware
revenues

Balanced by
broad
geographical Nokia driving
growth price down
opportunities to widen
market


Ecosystem innovation metrics:
Owning a transformational narrative - I
Android G1 Palm Pre
93,228 48,359
Blackberry
Storm
1,188

Apple
iPhone 3g
1,216,794

A measure of the iPhone’s influence: Online references to HTC/Android
G1 vs Apple October 2008/January 2009: Bought vs earned media

Source: The Conversation Group 38 | © 2010 nGenera Corp. All Rights Reserved.

Ecosystem metrics:
Owning a transformational narrative - 2

1.1

6.4

19.5
Online references to Symbian, Android and iPhone
in millions, April 1st 2009 to March 31st 2010


Ecosystem metrics: Alignment

Nokia/Symbian Android/Google Apple
Open   
Altruism  – –
New naturalism   
Randomness   
Individualism – – 
Collaboration  – –
Popularity –  
Alignment with emergent values

– = Not evident
 = of average relevance
 = highly relevant


Lessons


Lessons: Three styles of ecosystem strategy

APPLE, high end
single product
focus, multiple
services; high
margins, targeted
ecosystem, astute
NOKIA, global, across perception
market segments, management
income groups, price
Price bands and service ANDROID, tight
offers with diffuse interaction between
ecosystem, poor industry participants
perception for broad device
management distribution,
improving
perceptions

Models for sustainable competitive advantage

Lessons: Ecosystem strategy

Polarization - Incumbent -
uniqueness scale

Ecosystem
strategies

Chain and Facilitation -
channel reciprocation


Lessons: Management

The key tension point

Use platforms
Work with
to structure ad
Invest in the developer Strategize Create
hoc innovation
relationship meritocracies around price downstream
and revenue
cloud but create vulnerability metrics
micro-
wider values
partnerships

Managing perception
Perceptions influence becomes MORE important
relationships. An ecosystem is
a diffuse relationship matrix.

Question:

• System-wide innovation
• Access to free or very cheap labor
Does the and talent
ecosystem
• Unpredictability and random
deliver? effects in a planned environment
• Labor market value-system
realignment
• Adaptation to customer centricity
and customer ecosystems


Lessons
Free labor/
System wide Unpredictable Labor market
talent/revenue
innovation innovation alignment
partnerships

Mobile transformation Brings enterprises
1200 entries at
is global, sector wide iphone 250,000 apps closer to open source
ideas.symbian.org
and extensible values

< $8 million annual Involves content
budget, 200 company (music), maps, geo- Price reductions from Places too much
members, 40 million data, augmented $250+ to $150 to $70 emphasis on
lines of codes, 29 reality, autos, home in a year meritocracy
innovations devices, advertising

Apple passes on $1
New hardware – M-PESA, Kenya 17,000
billion in revenues to
software integration micro-partners,
micro-partners, 2008-
initiatives mobile money agents
2010

200,000 Nokia Forum Mobile brain bank, Symbian contributions
members Africa from TI, Sun,Ixonos

Some way to go with aligning the enterprise ecosystem to consumer
ecosystems or in evolving a wider emerging value set

Lessons: Summary

There is a new moral framework out there around the
preferences of labor and talent, and a new wealth creation
paradigm is evolving around ecosystems where complexity is
managed in the relationship cloud.

Competitiveness will only get more uneven and difficult.

Ecosystems have a role in helping to create system-wide
innovation, through a broader open management approach.

There are models to work from.

Haydn Shaughnessy
haydn@cogenuity.com


Open management and the enterprise ecosystem

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