This article dives into innovation ecosystems, exploring the different players, why they are crucial for innovation, and why it’s important to build and efficiently manage your innovation ecosystem.

The term “ecosystem” was originally coined by British ecologist Arthur Tansley in 1935 to describe the transfer of materials between organisms and their environment. Ecosystem has since been refined to “a community of living organisms and nonliving components interacting together as a system”. The different organisms in the ecosystem are linked together and rely on each other for survival. 

Just as we find ecosystems in the natural world, we also find them in the business world. These two ecosystems interact in similar ways, relying on its members for survival. This article dives into innovation ecosystems, exploring the different players, why they are crucial for innovation, and why it’s important to build and efficiently manage your innovation ecosystem.

Innovation Ecosystem: A Complex Web of Players, Stakeholders, and Community Members

To better illustrate innovation ecosystems, we’ll use the practical example of the hotel industry. Who would be part of a hotel’s innovation ecosystem? The complex web of players can include: corporations, startups, suppliers, VCs, entrepreneurs, universities, governments, etc. A member can be any entity that you interact with, especially regarding innovation.

Each partner adds valuable information, technology, and expertise to the hotel’s ecosystem. The diverse background of each member is fundamental to the ecosystem.

For instance, a university partner could provide hotel companies with important information on customer expectations and insights. The academic approach universities employ can uncover new business opportunities for the hotel industry.

Innovation vs Product-Centric: Searching for Opportunities

An innovation ecosystem is member-centric, relying on members to create value. These types of ecosystems ask themselves: What can the ecosystem accomplish? What can this group bring to the hotel industry that other groups can’t? This is where the innovation ecosystem finds new business opportunities. 

Innovation ecosystems are opportunistic, always looking for the next big thing.

On the flip side, there are product-centric ecosystems. These ecosystems are concerned with the product they sell. Where does the raw material for the product come from? Where does the product get assembled?

The Weary Tale of the Hotel Giants: When You Don’t Engage With Your Innovation Ecosystem

The hotel industry has been hit by disruptive innovators over the past two decades. First, by the introduction of online booking, and then by menacing substitutes like Airbnb. To fend off ever-growing competition, hotel giants (Hilton Hotels, Accor Hotels, Marriott International, etc.) needed to continuously innovate their offering. However, most lagged far behind. 

The industry saw little change before the dot.com boom, becoming complacent. In this context, the booking.coms of the internet era capitalized on the opportunity. On one side, by lowering hotel room prices (thanks to democratizing reservation prices) and on the other, by cutting into a hotel’s profits by charging a commission fee for each booking. 

Instead of opening up their innovation process, and asking its members what could be done, the hotel giants did little and brushed off the tech startups as insignificant competitors. Today, Airbnb has more rooms listed on its website than the top 5 hotel companies combined, along with an estimated value of $31 billion.

How Could This Have Been Avoided? 

By simply engaging with their innovation ecosystem the hotel companies would have uncovered the shift in the market – one now centered around ease of booking and use of virtual travel agents. While engaging with their ecosystem, hotels would have been introduced to members with new technologies. An opportunity for collaboration would have unfolded allowing the ecosystem to develop new innovations to meet the ever-higher demands of hotel guests.  

Another missed business opportunity was the chance to invest in the booking.coms and Airbnbs early on.

If You Can’t Beat Them Join Them: Collaboration is Essential in Today’s World

This narrative of missed business opportunities is not isolated to the hotel industry. Unfortunately, due to exponential change in technology, it’s more prominent than ever. 

Companies of all sizes must engage with their innovation ecosystems to avoid the same end. The first step for companies is to establish an internal process for their innovation ecosystem. Followed by a strategy to tap into the potential these ecosystems create. 

This strategy should include a structure to build its innovation ecosystem, and a systematic and repeatable process for tapping into the ecosystems potential.