Unilever’s tea production value chain is a particularly complicated one.

Unilever has an estate in Kericho, Kenya, covering over 8,700 hectares, employing 12,000 permanent workers and 4-5,000 seasonal workers, all growing tea for the different Unilever brands which is sold all over the world, such as Lipton and PG Tips. Operating in this region means having profit responsibility for the local go-to-market operations in their geographic territory.

The focus is primarily to build and develop relationships with customers, to develop the regional supply chain to deliver customer service and asset productivity, as well as to deploy brands and innovations effectively. Unilever participated in a public-private partnership to train smallholder farmers in sustainable tea cultivation through special field schools, offering a hands-on experience, encouraging farmers to talk about common problems, find their own solutions and devise field experiments to identify sustainability best practice.

Of course, Unilever is one of the world’s biggest companies, so even without their involvement with local personnel and markets, their production and distribution procedures would be complicated. Nevertheless, it highlights just how complicated a value chain can become. Businesses are always searching for methods to simplify the nature and process of their value chains. Many will look at the use of disruptive technologies or team of innovators. Some are looking to intertwine the two. The knitting together of these two business practices has grown to be understood as implementing an innovation ecosystem. However, the agriculture industry hasn’t appeared to cotton on to innovation ecosystems yet. The reasons behind this vary depending on what part of the industry you investigate. However, what is clear is that there are benefits to implementing innovation ecosystems. We are on the cusp of scientific discovery that often combines the physical with the digital – the techno-fusion or merging of technologies. So, how does the agricultural industry go about these implementations and what industries can we look toward for pointers?

Open Innovation

Henry Chesbrough defines open innovation as “the use of purposive inflows and outflows of knowledge to accelerate internal innovation and expand the markets for external use of innovation respectively”. Open innovation can be understood as the antithesis of the traditional vertical integration approach where internal R&D activities lead to internally developed products that are then distributed by the firm. Collaboration is the new secret sauce for start-ups and industry leaders alike. For true disruption to take hold, old and new must work together playing to each other’s strengths.

Collaboration now trumps acquisitions or build-it-from-scratch start-ups – not just an exchange of money, or the traditional ‘equity investment’ but a real exchange of ideas and means and the vision to achieve distinct goals. To revolutionise old industries, small and big companies alike must get past competitive angst and embrace their strengths and weaknesses. These are new, unique partnership models in which corporations bring assets, the ability to rapidly test and scale as well as a deep understanding of the regulations landscape. Start-ups inject new technical expertise and venture capitalists offer funding and access to new talent.

Open innovation involves many other actors that fall far outside traditional supply chains and these participants in open innovation can be influenced but often are not actually directed or managed. By encouraging innovators to define and demonstrate their concepts concretely, the multiple options approach provides all parties in an open innovation partnership with enough information to assess value, determine additional product development requirements and reach a mutually beneficial agreement efficiently.  In the context of agriculture, two key forms of collaboration can be differentiated as: ‘vertical cooperation’ between agricultural producers and other businesses in sectors up and downstream; and ‘horizontal cooperation’ between agricultural producers.

Of course, it isn’t as simple as just putting a bunch of problem-solvers in a room together and wait for a revolutionary idea to emerge. Open innovation, like any form of innovation, comes with its own risks, particularly interdependence risks. The causes of interdependence risks are numerous. Partners may be late in completing their side of an objective because of internal development challenges, regulatory delays, incentive problems, financial difficulties, leadership crises, even their own interdependence with other parties. Applied to open innovation, knowing the risks and costs means framing conversations so decision-makers understand the future value, how much investment is needed and the associated risks of bringing an externally sourced technology or concept to the market.

A useful analogy to illustrate the multi-faceted nature of open innovation can be found in ocean reefs. In the ocean, a reef provides a structure that protects fish, provides food and creates an arena for marine plants and animals to live and thrive in.

If an organisation relies heavily on individual innovation, perhaps it ought to consider creating its own innovation reef where creative, problem-solving experts develop a network of individuals skilled in bringing new ideas together in a market-fit manner. This can also be understood as creating an innovation ecosystem. The positive element of creating a broad innovation ecosystem is that groups involved in innovative projects will reach out to each other directly to solve problems rather than requiring a central office to mediate all communications.

Innovation Ecosystems

The ecosystem perspective recognises that what matters most in creating and sustaining innovation is building and strengthening interdependent links amongst ecosystem players. Moreover, ecosystem management is not just about plotting the network of partners and stakeholders relevant to the innovation. It’s about designing and executing a complex systems strategy so that innovation success with key partners set in motion a chain of success that is transmitted to the other partners in the ecosystem, for the ultimate benefit of the innovation and the ecosystem as a whole. Truly effective ecosystems manage to turn outsiders into de facto collaborators and creative virtuous cycles of external creativity, which drives internal adaptation. Success comes from exploring how to make one’s partners more valuable innovators.

Two ‘archetypes’ of ecosystems can be distinguished; centralised ecosystems, in which a company functions as a hub to connect partners while keeping them separate and forcing them to work through itself; and adaptive ecosystems, in which a company connects multiple partners and encourages them to work directly with each other. While centralised ecosystems are frequently based on arms-length transactions that keep partners separate from one another, adaptive ecosystems are structured to encourage cross-fertilisation.

Moreover, adaptive ecosystems perform best when made up of partners from outside on another’s traditional ecosystems. After defining the battlefield, orchestrators need to find and attract the right partners. Some of the most successful adaptive ecosystem strategies have been achieved when companies were able to connect with uncommon partners on the outer fringes of their industries – or even beyond the traditional boundaries of their industries.

Adaptive ecosystems are best suited to emerging industries where there are significant uncertainties and the broader environment is not yet well-defined. As such, companies use simple framework agreements that emphasise the general boundaries of cooperation and leave a lot of room for adapting to specific technological discovers and new business models as they take shape. Ecosystems need to align with an industry’s life cycle. Centralised ecosystems work for mature industries and stable contexts. Over time, a company’s ecosystem strategy will evolve – as industries that were once unsettled begin to mature and the value-creation patterns become more established, companies may move toward favouring centralised management over adaptive models. More significantly, companies engaging in ecosystem strategies are building collaboration and network muscles that will serve them well over their entire life spans. Indeed, the ability to discover and leverage new forms of value in collaboration with unexpected partners is likely to extend a company’s life span.

In an ecosystem, being ready with your component ahead of your direct rivals may not confer any advantage if your complementors are not ready when you are. Correct expectations of innovation interdependence and value chain integration may lead firms to slow their development cycle and, in doing so, both conserve their resources and benefit from opportunities to update their strategies over a longer period of time. Firms can use prototypes to generate feedback but also further expand and enhance an ecosystem. This approach also allows innovators to engage the market sooner and learn faster but, also, it supports the process of working together to co-develop the solution. Having a ‘minimum viable product’ (MVP) can enable other partners in the value chain to engage with the potential product and gauge value concretely, helping build an ecosystem focussed on the value chain.

Really challenging problems requires tapping into the tacit knowledge possessed by more than one individual in order to create new knowledge and generate a workable solution. Sharing this kind of knowledge typically requires long-term, trust-based relationships that can support the inevitable fumbling that occurs as we try to express and share tacit knowledge. Effective sharing of tacit knowledge also requires shared practices – the participants need to engage in real work to address challenging performance needs, rather than simply engaging in conversation. Beyond assessing incentives and capabilities, the firms must also address the question of ecosystem leadership. Firms face a choice between taking an active or a passive role in guiding ecosystem development. Ecosystem-builders start by connecting the most motivated and active members in their local systems – people equally passionate about the shared dream and already taking some steps toward it.

Case Study

Combining existing technologies often drives innovation in industries. Perhaps the most profound area of techno-fusion will be in areas such as healthcare. The health industry will be impacted in many ways, including the implantation and linkage between human and device, such as bionic organs and exoskeletons. Advanced pliable materials such as plastics, ceramics, metals and graphene are leading to breakthroughs in prosthetics for medicine and wearable sensors. 3D printed prosthetics improve lives in the world’s poorest regions. Millions of people have been affected by limb loss, but recent studies by the WHO indicate that only 10% of the population in need have access to prosthetic and orthotic devices. The problem of assessing such devices is more accurate in low- and middle-income countries. Even with access, many patients face an uphill battle against high costs and social stigma. Amputees in developing countries may be shunned by their communities and even their family.

LimbForge, a Seattle based firm, was established in 2014 to address the needs of the approximately 35 million people around the world who live with limb loss. Bringing together experts in prosthetics, 3D printing, software development, health policy, social change and design, they aimed to create an accessible solution that anyone could learn to use. Today, this not-for-profit organisation develops software, devices and training to explore new approaches to prosthetic manufacturing. By creating devices to match a patient’s specific needs and social context with the right skin tone, fit and functionality, it would impact not just the amputee but their families, their communities and even their countries by reducing the negative impact of limb loss.

The LimbForge Upper Limb System is designed as modules for the upper arm, elbow, forearm, wrist and hand, with options for different proportions and functionality. Each module is configured to an individual using LimbForge’s purpose-built software, then sent to a 3D printer to be fabricated in a plastic material in a range of skin tones. The LimbForge software was built with the Autodesk Forge developer platform to connect the process of creating a prosthetic limb from design through 3D printing. It employs the powerful CAD capabilities of Fusion 360, honed down to the essentials for the task they’re presented with. The team created a simplified user interface to make it accessible to users with a variety of skill sets.

LimbForge trains a number of organisations and professionals, such as NGOs, clinicians and prosthetists, to operate the LimbForge system. They’re trained in 3D scanning, 3D printing and printer maintenance, as well as basic CAD (computer-aided design) work and materials. LimbForge partnered with Healing Hands for Haiti in Port-Au-Prince and now the local clinicians there are trained in the system. LimbForge have also found a powerful partner in Doctors Without Borders, working with conflict victims and refugees in the Middle East to test the LimbForge system. In turn, Doctors Without Borders offers learnings from the field that help LimbForge refine the tools and designs. As the organisation empowers local caregivers with LimbForge’s manufacturing technology, the clinicians in return provide feedback about tools that will better meet local needs. By training people who themselves become trainers, they’re also building the capacity to deliver continuing care to patients.

So LimbForge have managed to expand the value chain within prosthetics to include digital and industrial designers as well as software designers. They have also had a profound effect upon the people who suffer from limb loss and their relations. They’ve done all of this by fusing the utility of two different technologies together to create prosthetics: CAD software and 3D printing. Furthermore, they’ve also achieved this by instilling a collaborative culture throughout the value chain. Software developers and operators, as well as 3D printing specialists, share their knowledge with one another, train each other and subsequently provide useful and necessary feedback. As we have seen whilst observing innovation ecosystems, these kinds of interactions require trust-based, long-term relationships, so it seems as though LimbForge have managed to transform a value chain not just in the immediacy but with a view to the long-term future of the prosthetics industry.

In terms of agribusiness, there are makers of fertilisers and pesticides who are applying drones, climate software and other technologies to create new value. Enhanced crop yields portend benefits for farmers who can identify plant disease earlier using drone cameras. So far, however, not enough companies are embedding digital connectivity across the supply and value chain to enable new levels of end-to-end visibility, traceability, transparency and data-driven insights. Hence this article – the agriculture industry ought to pay some thought toward how best to implement an efficient innovation ecosystem all across the value chain, from farm to fork.

Conclusion

Innovation ecosystems are seductive. It is easy to overestimate the potential for value creation because so many players are combining capabilities. At the same time, it is easy to underestimate the challenges, since surmounting many of them can seem like someone else’s problem, not yours. As mentioned above, along with new opportunities, innovation ecosystems also present a new set of risks – new dependencies that can brutally derail a firm’s best efforts. Creating strategy that explicitly accounts for the delays and challenges that are inherent in collaborative networks is the key to succeeding in ecosystems. In many ecosystems, intermediaries are positioned between the innovation and the final customer. The further up the value chain an innovation resides, the larger the number of intermediaries that must adopt it before it can reach volume sales. As the number of intermediaries increases, so does the uncertainty surrounding market success.

Choosing how to trade off the size of the market opportunity and the magnitude of the inherent ecosystem risk – how to prioritise the possible options – is the essence of innovation strategy. By not restricting to their usual partners, an ecosystem can leverage on the knowledge and insight of customers, NGOs and undergraduate students amongst many others, thus becoming more innovative. An ecosystem will be stronger if its members have shared values and goals, becoming more meaningful for its members. Just like in an organisation, collective intelligence can only work if it is goal-oriented, if the ecosystem has an ultimate purpose that is shared and recognised by all stakeholders.

These common values need to be identified and communicated in an ecosystem in the same way that it is done within an organisation, so as to create an inter-organisational culture that binds its members by their common purpose. When it comes time to harvest the actual value of an innovation, everything depends on how well the solution has been implemented across all steps of the value chain.