December 2009

In order to implement change by innovation, co-creation needs to be implemented as disruptively as necessary and as non-disruptively as possible.”

2009 LSE Enterprise team that included Patrick Humphreys, Alain Samson, Thorsten Roser, and Eidi Cruz-Valdivieso

While the concepts of value co-creation and business ecosystems have become dominant, there is a lack of conceptual clarity as to the role of co-creation projects in a business ecosystem. The objective of this article is to provide concrete examples of co-creation projects in vendor neutral ecosystems using lessons learned from operating the Lead to Win ecosystem.

The article is organized into four sections. The first section defines vendor neutral business ecosystems and co-creation projects. The second section provides a short description of the Lead to Win ecosystem. The third section uses concrete examples to illustrate the lessons learned about co-creation projects in vendor neutral ecosystems. The fourth section describes key takeaways based on our five months experience operating the keystone of the Lead to Win ecosystem.

Business Ecosystems and Co-creation Projects

A business ecosystem is comprised of agents (companies, individuals, academic institutions, government agencies, or any other organization) that use a community oriented out-of-the-box platform (components, tools, rules, processes, and values) to create and deliver value to their customers. In a healthy ecosystem, agents concurrently collaborate and compete in the marketplace.

A business ecosystem can be organized into four types based on whether or not it is dominated by a single supplier or whether or not it is open to those who meet a specific criteria which is transparent to the public. A vendor neutral business ecosystem is one where no vendor dominates and membership is open to all individuals and/or organizations that meet specific criteria.

A keystone is an organization that provides the out-of-the-box platform for individuals and organizations to carry out projects. These projects can be organized in terms of their participatory model into: contributory, collaborative, co-creation and co-option. All projects entail a planned program of work that requires a large amount of time, effort, and planning to complete.

Three features distinguish co-creation projects from the other project types. First, the initial framing of a co-creation project originates in a partnership of agents rather than the keystone's staff. Instead of the keystone staff saying, "We want a portal for startup companies, please collaborate with us to make it happen", one or more agents approach the keystone staff seeking assistance to realize a project using the keystone platform and services. Keystone staff may or may not participate directly in the co-creation project.

Second, the outcomes and process of a co-creation project reflect the expectations, preferences and working styles of the creators more than those of the keystone staff. Creators feel more ownership overall over the process and the final outcomes than do the keystone staff.

Third, individuals engaged in co-creation projects perceive the keystone staff as individuals who serve the needs of creators rather than providers of services that are perceived by the keystone as valuable. Co-creative projects are demand-driven in the most rigorous sense of the term, and they often require keystone goals to take a backseat to creators' goals.

Lead to Win

Lead to Win is a business ecosystem designed to create technology jobs and attract investment into technology companies that operate in Canada's Capital Region. As of the end of November, 2009 a total of 101 founders of 71 technology startups were part of the Lead to Win ecosystem. Lead to Win has been operating as a vendor-neutral ecosystem since early April, 2009.

To be part of the Lead to Win ecosystem, founders of a technology company must pass three gates. Each startup in the ecosystem: i) is expected to create a minimum of six technology jobs in Canada’s Capital Region; ii) can use the keystone's infrastructure to co-create value with its customers, partners and other organizations; and iii) has access to a variety of services designed to help companies grow.

The 2009 launch of Lead to Win built on the outcomes of a joint industry-university research program on open source projects and vendor neutral ecosystems and on the success of the alumni of a tech entrepreneurship course offered in early 2002. The research was carried out by faculty and students in Carleton’s Technology Innovation Management program and their industry partners.

Canada’s Capital Region stretches out on both sides of the Ottawa River to include parts of two Canadian provinces, Ontario (to the south and west) and Quebec (to the north and east). Canada’s Capital Region contains two major cities, Ottawa and Gatineau, and has a population of 1.081 million as of 2000. Canada’s Capital Region is one of Canada’s most bilingual communities, with nearly half a million people speaking both English and French. The region is home to a large number of talented individuals owing to the presence of several major Federal government research agencies.

Reasons Lead to Win was Launched

Lead to Win was launched as a response to the recent and dramatic economic downturn. The downturn's effects included loss of technology jobs, withdrawal of venture capital, the break-up of the largest local private sector technology company (Nortel), and the need to adjust to the realities of the new economy.

According to Statistics Canada, technology-sector employment in Canada’s Capital Region decreased from 72,400 in May 2000 to 53,100 in August 2009, a 30% drop. Over the last 12 months, 8,600 technology jobs were lost. Venture capital investment decreased from $1.3 billion in 2000 (74 deals) to less than $24 million in 2009 (1 deal).

For years, Nortel employed the largest number of research and development (R&D) personnel in the region and was the largest R&D spender in the country. Nortel was a telecom giant that was a source of great pride for Canadians in general and the technology community in Canada’s Capital Region in particular. On January 14, 2009, Nortel filed for bankruptcy protection. The company’s demise shook the technology community across the country.

It is widely acknowledged that the world is entering a new economy and that we are experiencing shifts as profound as those experienced when the world moved from the agricultural to the industrial economy. Canada’s Capital Region has certainly changed drastically in the last seven years.

Gates

To be a part of the Lead to Win ecosystem, founders of a technology company must gain acceptance into: i) Day 1 of a three day opportunity development program known as Phase II; ii) Day 4 of the second three days of the opportunity development program; and iii) Phase III.

Founders apply online by completing a form that provides information on the applicant and the applicant’s business. Qualified applicants are invited to meet with one of various Lead to Win recruiting committees. At the first gate, founders are selected to be part of Phase II based on their experience, commitment, motivation, and the ecosystem’s capability to add value to the founder of the startup. A startup can focus on the development and sale of technology, components, products, services and solutions.

In Phase II, founders participate in an intense six day opportunity development program where they harden and strengthen their opportunity. The first three days of Phase II emphasize development and clear articulation of customer and partner (ecosystem) value propositions. The second three days of Phase II focus on other aspects of entrepreneurship including financing, legal considerations, attracting talent, and the like. External reviewers examine these opportunities on Day 3 and Day 6. Day 3 reviewers assess whether or not proponents of a business opportunity can: i) clearly articulate their customer and value propositions and the key differentiators for which customers are willing to pay and ii) are ready for Days 4-6. Day 6 reviewers assess the strength of the business opportunity and participant's readiness for Phase III.

Day 3 reviewers assess an opportunity in terms of three of the seven dimensions used by Day 6 reviewers. This means that being successful in Day 3 does not guarantee success in Day 6. While there is some overlap between the mix of Day 3 and Day 6 reviewers, the intent is to maximize reviewer diversity. The objective is for external reviewers with diverse experiences to select the participants who move through two gates: i) move from day 3 to Days 4-6 and ii) move from Day 6 to Phase III.

In the third phase, a variety of incubation services are provided to participants to launch and grow their technology businesses.

Lessons Learned

We summarize the lessons learned about value co-creation within the Lead to Win program.

Lesson 1: In a business ecosystem, an agent engages in co-creation projects for the purpose of delivering value to its own customers, its partners, itself, and the keystone’s customers. The Lead to Win ecosystem has four paying customers:

  • one federal government program that supports small- and medium-sized enterprises in communities across Canada

  • one Ontario municipality

  • a business development organization in Ottawa

  • a business development organization in Gatineau

When one of the 71 companies in the Lead to Win ecosystem engages in co-creation projects that result in new technology jobs and investment flowing into Canada’s Capital Region, the company delivers value to the ecosystem's four customers.

Lesson 2: For a co-creation project to be considered successful, the four keystone customers and the project creators must derive greater benefits from the project than without it. Two dimensions are used to assess keystone customer benefits:

  • the number of technology/knowledge jobs created in Canada’s Capital Region

  • the amount of direct investment attracted to Canada’s Capital Region

These dimensions distinguish the ecosystem approach from other economic development initiatives that might be measured on the basis of seats-filled and sessions-delivered. The Lead to Win ecosystem is a response to demand and consequently is measured on the basis of realized benefits.

Each agent in the business ecosystem will use its own metrics to assess the benefits derived from co-creation projects.

Founders of startups in the Lead to Win ecosystem are known to measure benefits in terms of their capacity to sell to first customers, raise funds, and attract and retain talent. For these founders, attractive co-creation projects are those that:

  • reduce time to cash

  • increase the number, size and quality of opportunities in the deal flow pipeline

  • reduce time to harden and strengthen a business opportunity

  • decrease gaps between what they know and what they need to know to grow their business

  • increase size and diversity of the network they use to obtain resources, reputation and expertise

  • increase motivation and confidence

Lesson 3: Agents of different types can engage in co-production projects. A total of 115 organizations, including the four customers and 71 technology startups, are agents who collaborate in the Lead to Win ecosystem. Table 1 shows the breakdown of these organizations.

Table 1: Breakdown of Organizations in Lead to Win Ecosystem

Table 1

The organizations that can engage in co-creation projects are quite different from each other.

Lesson 4: In Lead to Win, individuals can undertake co-creation projects that produce:

  • market offers

  • content

  • skills, attitudes and goals

  • quality relationships

  • startups' assets (code, content, hardware designs) and business development collateral

  • keystone’s assets, best practices and business development collateral

While market offers are an important portion of outcomes co-created in an ecosystem, agents also can co-create requisite resources, processes and values.

Lesson 5: Agents co-produce resources, processes and values, not just market offers. Consider the case of the 12 service providers that are part of the Lead to Win ecosystem. Two are among the largest professional services firms in the world and among the four largest auditors in the world. A third is a local firm that provides similar services. These three firms collaborate with the other agents to launch and grow successful technology companies in Canada’s Capital Region while at the same time compete to secure these technology companies as clients.

Similarly, take the case of the 7 capital suppliers engaged in Lead to Win. They also collaborate to launch strong technology companies while competing for their business.

Lesson 6: The most important source of the value of the outcomes from co-creation projects is the quality of the relationship among the creators. Individuals with strong relationships with each other co-create high value outcomes. It is extremely important to focus on the quality of the relationships of the people engaged in co-creation projects rather than just the features and characteristics of what is to be co-created. Furthermore, the experience of recruiting startups for Lead to Win has demonstrated that relationships are far more effective in identifying superior candidates than advertising or other generic outreach mechanisms.

Lesson 7: The keystone, collaborative structure, market structure, members, and health enable and constrain co-creation projects. The role of the keystone staff in co-creation projects can’t be overlooked. The keystone of the Lead to Win ecosystem is the Talent First Network, a Carleton University project funded by the Ministry of Research and Innovation. Lead to Win must abide by all the rules set forth by Carleton University and the Ministry. These rules concurrently enable and constrain co-creation projects.

A set of interacting niches defines the collaborative structure of the Lead to Win ecosystem. A niche is a self organizing action group that performs a distinct function which i) addresses a need and ii) adds value to the overall ecosystem. A niche operates within the ecosystem’s vision.

A niche can reflect a role or function, common element used in various target markets, and distinct attributes of a target market. The set of niches in the Lead to Win ecosystem that define the collaborative structure include:

  • Role or function: recruiters, startup founders, faculty and guest speakers, opportunity reviewers, service providers, and contractors

  • Common element: communications enabled applications, software application, content

  • Distinct attribute: language processing, mobile applications, applications for small and remote communities

An agent may be part of one or more niches and relationships are expected to evolve as agents move through their life cycle. All niches derive value from contributing to the ecosystem. Each niche links to other niches in the ecosystem. The strength of a link between two niches varies.

The market structure of the Lead to Win ecosystem is defined by global competitive markets. The ecosystem adjusts to the market realities of the companies that depend on it.

Members in the Lead to Win ecosystem are of two types: strategic and associates. Strategic members pay cash for the keystone to service the needs of the startup companies in the ecosystem. The strategic members of the Lead to Win ecosystem include seven organizations: the four keystone customers, the university where the keystone functions, and two small companies that contributed cash to the keystone.

Associate members include all organizations that make in-kind contributions to the co-creation activities of the ecosystem. While there are a variety of in-kind contributions, one critical aspect is supplying the talent to deliver the content of Phase II to the agents and to perform the Day 3 and Day 6 reviews.

The keystone headquartered at Carleton University is responsible for the health of the Lead to Win ecosystem. The following metrics are used to assess Lead to Win’s health:

  • number of technology jobs in Canada’s Capital Region created by startups in the Lead to Win ecosystem

  • amount of private and public investment raised by startups in the Lead to Win ecosystem

  • number, diversity and rate of introduction of market offers

  • amount of keystone’s revenue

  • number of new niches created

Lesson 8: New niches increase diversity in outcomes of co-creation projects. When a new niche is created in the Lead to Win ecosystem, it increases the variety of opportunities for the agents to co-create resources, processes and values. Variety of outcomes of co-creation projects also increases the ecosystem’s ability to absorb external shocks and produce innovation.

Lesson 9: Outcomes of co-creation projects result from interactions of agents in a niche or agents in various niches. Outcomes of a co-creation project may map to a customer of an agent in the ecosystem, a specific function that is required to satisfy the needs of keystone customers, a common element found in various opportunities, advocacy interests of a segment of a group of agents, suppliers that address horizontal needs of customers in various target markets, and customers who purchase from suppliers that address different target markets.

A niche can be populated by agents that carry out co-creation projects to address the needs of a target market. In Lead to Win, various startup companies and service providers co-create assets and services to satisfy the needs of small and rural communities as well as municipal governments and health care organizations.

Lesson 10: Decreasing the number of co-creation projects in certain parts of the ecosystem may enable new co-creation projects in other parts. While it is imperative that new types of co-creation projects arise, it is not imperative that old types of co-creation projects persist. The collapse of a large co-creation project may give rise to a variety of other co-creation projects.

Lesson 11: Facilitation of co-creation projects needs to be improved continuously. Facilitation of co-creation projects can become a source of competitive advantage for the ecosystem's agents. Just enabling co-creation is not enough. Knowledge of how to improve the resources, processes and values that enable effective co-creation projects is of critical importance.

Lesson 12: The customers of the outcomes of the co-creation project should always be engaged as creators. Each co-creation project has outcomes and these outcomes must benefit customers who are either internal or external to the ecosystem. To decrease the time to produce the outcome of a co-creation project and increase the value of this outcome, the customer of the outcome must be actively engaged in value creation.

In the Lead to Win ecosystem, particular attention is given to incorporate the customer of the outcome in co-creation projects.

Takeways

The key takeaways based on our five months of operating the keystone of the Lead to Win ecosystem are:

  • co-creation projects are core to the health of the ecosystem

  • co-creation projects must add value to creators and keystone customers

  • outcomes of co-creation projects include: assets, skills, attitudes and goals, relationships, processes, and best practices

  • outcomes of co-creation projects result from interactions among individuals that operate in one niche or across niches

  • new niches increase the diversity of the outcomes from co-creation projects

  • enabling co-creation projects is not good enough, we need to continuously improve the way we facilitate co-creation projects

 

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