Interview highlights from ‘How your digital ecosystem can increase corporate innovation success by 10X’

Diagram showing a vertically integrated company with core and non-core offerings under one roof going to a digital ecosystem where the company focuses on its core assets and third parties build everything else. A better way to do corporate venture capital.

In August, I was fortunate to be interviewed by Omar Valdez-de-Leon of Latitude 55° Consulting in Copenhagen about a better way to do corporate venture capital by aligning with corporate innovation strategy and digital ecosystem goals. Omar is a known practitioner of digital transformation, having advised companies such as Ericsson, CGI, Honeywell, Cemex, Bosch, Vodaffone, Bell Canada, and more. He is an authority on digital ecosystems, authoring papers about how to develop digital ecosystems, organizing for digital, and the Digital Maturity Model.

Earlier this year, I introduced myself to Omar and informed him that his definition of digital ecosystems serves a foundational role in my 2020 book, Innovation Casino. Omar’s paper, “How to Develop a Digital Ecosystem: a Practical Framework,” defines digital ecosystems as having three key elements: (1) a platform, (2) network effects, and (3) market expectations. To summarize Omar’s arguments, building a platform is table stakes. The hard part is jumpstarting network effects and market expectations. This is what my book solves for. Omar had great questions about the book which you can read in our interview.

Innovation Casino introduces the idea of an ecosystem innovation fund, abbreviated “EIF,” to help you meet the challenges of growing network effects and market expectations in a digital ecosystem. With an EIF, your large company invests in startups. In exchange for investment, startups build new products and services on your platform. The concept of an EIF combines best practices from corporate venture capital and the US government’s Small Business Innovation Research grant program.

An EIF is for corporate initiatives that are not part of your core business. There are valid reasons for supporting non-core ideas, especially if they drive demand for your core business. However, using internal teams is not the way to go. If a non-core idea would cost $1 million to build internally, Innovation Casino proposes funding 20 startups with $50,000 each to build the same idea. The funding would come with strings attached, namely that funded startups build on your platform. This accomplishes two goals. The first is innovation, which gives your customers new reasons to buy and refer others. The second is fueling network effects and growth expectations of your digital ecosystem.

An EIF differs from independent and corporate venture capital in that it only aspires to return principal. Gains come from the overall growth of your digital ecosystem, which eventually boosts your firm’s competitiveness and stock price. Innovation Casino is the eponymous metaphor of my book. The metaphor says large firms with digital ecosystems are better off playing like the “house,” making 2,000 small bets with an EIF. Continuing with the metaphor, independent and corporate venture capital are like “players,” often concentrating their capital into less than 20 investments in hopes of generating huge returns.

Diagram showing the process of a corporate venture capital fund making 100 investments and pooling half of each with 19 other funds to gain exposure to 2,000 startups.

Omar asked me the following questions in our interview:

  1. Tell me more about the idea of an ecosystem innovation fund.
  2. Why should companies adopt this corporate innovation strategy?
  3. How does an ecosystem innovation fund differ from corporate venturing?
  4. How can corporates adopt the idea of an ecosystem innovation fund, and how can this improve results from corporate innovation?

Head over to the Latitude 55° Consulting blog to read the full interview: https://latitude55.consulting/how-your-digital-ecosystem-can-increase-corporate-innovation-success-by-10x 

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