"How do you get people to come together over extended periods of time, working together, contributing different perspectives, different experiences and skill sets, to jointly problem solve over an extended period, and learn from each other in the process and scaffold towards new sets of knowledge that just are not available today?"
John Hagel III
The Ottawa Centre for Research and Innovation (OCRI) and Carleton University have envisioned the creation of a keystone anchoring a global deal-generating business ecosystem centered in Ottawa, Canada. Through the support and common resources of the ecosystem, small and medium companies located in five international capital cities will be better able to construct and close more transnational deals through a process of collaborative and open co-creation. This is the Open Global Commerce (OGC) value proposition: "Deals Without Borders."
There is as they say, a “Big Shift” underway; the notion is that we are no longer a world where static pools of knowledge and simple transactions lead to success. We are now in a world where participation in knowledge creation and complex trust based relationships determines success (Hagel, 2009). This means that the basis of competition is shifting away from cost driven linear chains of production (a model of experience curves and diminishing returns) and simple transactions to one of characterized by rapid learning through diversity, new knowledge co-creation, and trust-based relationships (a model of positive network effects and increasing returns). A manifestation of this shift may be seen in the “spikiness” in an otherwise flat world (Florida, 2003); we have mega-centres of extreme density, diversity, and economic opportunity where there is a dynamic confluence of innovators, implementers, financers, and consumers.
This shift has not suddenly appeared and has not gone unnoticed by regional development organizations, many of which had embraced a model of regional economic development based on the clusters concept of Michael Porter. While perhaps successful from the point of view of regional development, the tangible benefits to firms has become less clear. A recently published study by Sal Kulkakis shows that semiconductor and pharmaceutical firms located in industry clusters do not financially outperform their peers; in fact, there were no significant differences seen between clustered and non-clustered firms in the early stages of the industry life cycle and they actually performed worse than their peers in the latter stages of the life cycle or during periods of industry contraction.
The OGC Value Proposition
OGC exists to make it easier, less expensive, lower risk, and faster to develop and close trade, investment, and research related deals on a global basis. OGC will deliver increasing returns to all members through their investment in the relationships grounded in global deal creation.
OGC solves what is said to be missing from regional cluster models: an effective means for the clustered companies to effectively link to complementary firms outside their geographic region in a manner that drives opportunities for partnership and collaboration. In this regard, the limitations of the locally bound networks that are central to the regional cluster model are quite apparent. OGC builds on the concept of “global pipelines” that has emerged: channels of communication from regional cluster firms to players outside the region (Bathelt, Malmberg, and Maskell, 2002). These pipelines are recognized to be rich sources of new ideas, innovations and perspectives (Andersen and Lorenzen, 2007). It is also acknowledged that forming these trans-local relationships requires hard investments, compared to local “buzz” networking; they do not naturally emerge in any meaningful density or become well established without effort.
However, going back to the premise of the Big Shift, we can see that it is important not to get caught up in the metaphor of global pipeline. Global pipelines give the impression of smooth flowing, linear, point-to-point supply chains or sales channels. But what is needed is a multi-player collaboration network with bursts of activity driven by new opportunities. Also for a global ecosystem like OGC, the global network should be a resource for all members to share, develop, and support for the common good. This is the network that forms the foundation for collaboration and a cooperative environment. This is where co-created solutions are developed with the new knowledge openly shared to members of the community in trust-based relationships.
This leads us to the core value propositions of the OGC business ecosystem: OGC exists to enable the co-creation of deals through the sustained collaborative efforts of a global network of trusted partners with superior and diverse knowledge. This value proposition includes commercial, trade, investment, or research deals.
The OGC platform works because it is based on the principles of open innovation, where the emphasis on knowledge sharing and co-creation both demands and enables an environment rewarding high trust among its members. This itself is linked to the common or shared risks and benefits that are central to partnering on a business deal. In this manner, the partnering network in the OGC ecosystem gets stronger with every deal closed. In short, OGC delivers increasing returns to all its members through their investment in the relationships grounded in global deal creation. So not only does the ecosystem get stronger with every new player added, it gets stronger with every new deal closed. This investment in the value of the partnering network leads us to the second core value proposition for the OGC ecosystem: OGC exists to enable the execution of deals more rapidly, more cost effectively, and at lower risk than outside the network.
By focusing the collaboration on delivering revenue building business deals we are delivering very tangible value back to the cluster membership. Deals are also very effective to build trust with all participating players. So by investing in efficient and prolific deal making, we are simultaneously supporting an efficient means to build trust among all players in the ecosystem. A strong network of trusted partners brings an ability to not just share risk, but reduce risk with the superior knowledge that a global network of diverse partners can bring. And the cumulative investment in the relationships both accelerates and enhances the process of co-creation among the members. Operating under a common umbrella of governance and norms brings efficiency to both formal and informal transactions between the members. These efficiencies mean that many more deals emerge and these are a better fit with the capabilities of small and medium enterprises (SMEs). In a sense, we are expanding the market for global deals, beyond that which is served by multi-national enterprises. This in turn provides the revenue opportunities for SMEs that are being looked at to provide the growth in high value jobs in many regional centres.
OGC does more to enable cost-effective and trusted-partner global deal making for smaller companies. The global network of partners establishes the environment for partnering in the co-development of new solutions that would not easily emerge without the diversity in perspective and knowledge that comes from a global network of many firms. This leads to the defining element of OGC: its global network of firms and institutions. Headquartered in Ottawa, the national capital of Canada, the OGC network initially aims to link five national capital cities: Beijing, Ottawa, Stockholm, Washington DC, and Delhi.
Why capital cities? Ottawa, given its status as the capital of Canada, has established channels of communication to many capital cities and benefits from the embassies and consulates located in the region. Global trade deals can face real or perceived barriers that could benefit from the insights of those connected to international trade policy setting.
These particular capital cities are targeted by OGC based on strong existing relationships and a meaningful overlap of their regional technology clusters (e.g. photonics, wireless, health sciences, biotech, and telecommunications). To accommodate the geographic and cultural spread, the ecosystem platform has been designed to overcome the geographic, language, and temporal challenges for such trans-global partnering. This brings us to the third and last core value proposition: OGC members will have the opportunity to access the creative knowledge flows and the new competitive architectures uncovered through direct and sustained participation in deal-based activities.
Perhaps the most challenging shift for companies to internalize is to recognize that competition is less about what you know today and more about rapidly learning about tomorrow. This thinking is still ingrained in the value of patent protection and tries to ignore the rapidly decreasing half-life value of knowledge in general. There are signals from the market that competition has shifted towards design innovation, rapid appropriation and use of new knowledge, and the need to learn faster by discovery and iteration. As stated by the OECD Open Innovation for Global Networks:
"The most important benefit of open innovation to companies is that it provides a larger base of ideas and technologies. Companies look at open innovation as a close collaboration with external partners – customers, consumers, researchers or other people that may have an input to the future of their company. The main motives for joining forces between companies is to seize new business opportunities, to share risks, to pool complementary resources and to realize synergies. Companies recognize open innovation as a strategic tool to explore new growth opportunities at a lower risk. Open technology sourcing offers companies higher flexibility and responsiveness without necessarily incurring huge costs."
OGC brings this opportunity for large multinationals to join the network and actively participate in the open innovation process in the ecosystem. By sponsoring the platform and contributing to proposals, they get insight into the flow of opportunities and can develop relationships with the companies that are developing the solutions. This first-hand learning and position of trust with the players involved puts them in a very privileged position compared to those relying on market study reports and press releases.
OGC is being created based on three value elements that are common to all members of the ecosystem:
OGC exists to enable the co-creation of deals through the sustained collaborative efforts of a global network of trusted partners with superior and diverse knowledge.
OGC exists to enable the execution of deals more rapidly, more cost effectively, and at lower risk than outside the network.
OGC members will have the opportunity to access the creative knowledge flows and the new competitive architectures uncovered through direct and sustained participation in deal-based activities.
OGC is an international trade keystone anchoring a business ecosystem that brings together players from five national capital cities in a trusted environment, centered on rapid co-creation of superior deal-winning solutions. Quite simply, OGC delivers “Deals Without Borders.”