9.2.1. The production of value

The profound strategic changes mentioned in Chapter 8 have led to a change in the way value is generated [ADN 17]. Ecosystems have become privileged places of value production, in a collaborative mode, involving a great diversity of actors.

This production of value has two major consequences highlighted by Adner [ADN 06]:

• – the launch of the innovation on the market, in the logic of a first-mover advantage¹ strategy [FOS 86], is profitable for the innovation ecosystem if all the actors are ready for the launch;
• – resource allocation: for the author, outsourcing resources to partners is more efficient than using the company’s internal resources.

In this logic, innovation ecosystem actors have several ways to leverage ecosystem assets [WIL 12]:

• – by stimulating complementary investments by ecosystem actors;
• – by reducing transaction costs;
• – by designing value creation and capture mechanisms based on flexibility and co-learning;
• – by orchestrating the actors [VAL 17] and structuring their roles and activities [ADN 17].

However, these authors do not know how actors produce value in three different types of ecosystems: scientific, technological and commercial. Bharadwaj and colleagues provide some answers by suggesting that value production is based on the pool interdependencies of the actors. Here, actors must understand the impacts of digital technologies to create and capture value at all levels of the ecosystem [BHA 13].

The production of value implies the development of “structures and styles of collaboration” [ADN 17], as we have seen in the various chapters of this book. This logic forces actors to identify the main “sources” of value creation [DAV 15]. In order to understand whether the innovation ecosystem is a group of interdependent, self-managed firms or a continuously resilient ecosystem [CRE 14], let us examine the limits of the focal firm.

9.2.2. The limits of the focal firm

In most studies on the innovation ecosystem [ADN 10], the focal firm to develop an innovation based on its value proposition enlists companies. Here, the different types of organizations, which join the focal firm, have diversified roles depending on their specific business domain. For example, within the innovation ecosystem, the roles of a commercial company will not be the same as those of a university laboratory. Therefore, the roles of the actors are of concern because they are a source of conflict [PEL 16]. Two cases arise here:

• – strong reactive competition within the ecosystem leads to an imbalance in the relationships between the actors. If everyone wants, like Iznogoud, to become “caliph instead of the caliph” [GOS 78], their roles call into question the survival of the ecosystem;
• – a search for consensus among the actors in the ecosystem promotes the orchestration of actors and the coordination of their activities. Both contribute to the stability of the ecosystem.

To maintain its leadership position and improve the performance of the actors, so that they are mutually beneficial, the focal firm seeks to increase competition among its partners [PEL 16]. This “competition–consensus” combination creates a strong interdependence between the actors. This interdependence will be even stronger for partners in a situation of co-specialization.

Here, the value creation will be:

• – either appropriated, equitably, by the actors if the focal firm manages to develop strong interdependencies based on relationships of trust between all the actors in the ecosystem [ADN 19];
• – or captured by the power and control of the assets generated by the ecosystem if the focal firm does not manage to eliminate asymmetric power relations between its partners and to control the opportunism of some of them [VAL 17].

The production of value will be perceived as attractive by a participating actor if the latter is able to understand the situation that enables it to capture value and contain the risks inherent in co-dependency relationships. Becoming a member of an innovation ecosystem implies, for the incoming actor, anchoring itself in the network of the focal firm. This anchoring can be a source of constraint or opportunity for the incoming actor:

• – it may be locked into unproductive relationships due to heightened competition within the ecosystem;
• – it may be prevented by the focal firm from joining with other partners to counteract unproductive relationships [GUL 12];
• – it can be a start-up whose network is incipient. It will take advantage of this anchorage to develop its own network.

Moreover, joining the network of the focal firm and its partners is not systematically synonymous with value creation. It can be summarized as an opportunity to create value according to the behaviors of the focal firm and its partners [HUG 07].

Miles and Snow highlight the potential of the focal firm to transform the ecosystem network into a vertically integrated functional organization. In this case, the network becomes harmful to all of its members [MIL 92].

Similarly, the focal firm standardizes interaction processes in order to achieve a standard product quality. The creativity of partners is eliminated. Innovation is locked into linear logics that hinder disruptive innovation. The ecosystem is no longer perceived as an opportunity to innovate but as a trap that kills innovation.

9.2.3. Between opportunism and reciprocity

In view of the limits of the focal firm, the actors seek a balance between maintaining existing interrelationships and expanding their number, while knowing that any interrelationship will have an interdependent effect on the performance of the ecosystem [VAL 17].

The integration of an actor in the innovation ecosystem network is a source of opportunism insofar as the ecosystem is a vector of opportunities:

• – actors access information, resources, knowledge, markets and technologies;
• – they also have access to the production of innovations and to technology transfers. Access to the market is facilitated [NOS 07];
• – they share risks and outsource the different stages of the innovation process, achieving economies of learning, scale and scope [RAB 15];
• – they take advantage of the benefits, brought by co-specialization, that favor a co-evolution of pool and reciprocal interdependencies, reinforcing the collaboration;
• – they develop their interpersonal and other capacities to mitigate the risks associated with opportunism.

Studies conducted by Gulati and colleagues highlight the formation of long-lasting relationships and the strong strategic character of companies that become members of innovation ecosystems [GUL 00]. In the same vein, some authors show that network actors do not limit themselves to developing relational capacities specific to the dyad [BOS 09]. They also seek to promote ecosystem-wide norms in order to mitigate opportunistic behavior [WIN 10] and increase reciprocity.

The main objective of the actors involved in an innovation ecosystem is to achieve its goal. However, the diversity of the actors involved means that the interests of each actor are not systematically aligned with the common objective. The innovation ecosystem faces a major challenge created by the absence of a direct link between the efforts of individual actors and the collective benefits [BER 06].

To develop the iterative network and the integrated value chain, actors commit resources and knowledge that will enable the achievement of the common goal. However, reciprocity is not systematic and free-rider risks are numerous [VAN 09]. For example, the commitments of one actor may be reciprocated by a third party within the innovation ecosystem [BER 06]. In the same way, discrepancies between the commitment of resources and knowledge and reciprocity encourage free-riding and complicate the evaluation of the efforts made by the other actors in the ecosystem [POW 01].

In response to this governance problem, the actors seek to construct a reciprocity capable of mitigating opportunistic strategies and fighting free-riding [BER 06] through the development of shareable norms. The norms of reciprocity, established by the actors, are an alternative to contractual governance in multiparty collaborative strategies inducing shared efforts [WIN 10] to bring the innovation process to a successful conclusion.

These shared norms encourage reciprocity and reduce free-riding by functioning as a strong informal governance mechanism that encourages collaborative behavior [BER 06] at the expense of opportunistic strategies. The absence of these informal norms opens the door to opportunism, reduces reciprocity [WIN 10] and hinders value creation.

9.3.1. Value creation through value constellations

Normann and Ramirez [NOR 93] introduced value constellations in order to break the linearity of the value creation process, which is mainly supported by the industrial value chain model developed by Porter [POR 85]. Customers are at the heart of value creation. The most attractive and profitable offers come from the mobilization of the resources and skills of the different constellations of customers, suppliers and salespeople.

For these authors, innovative value constellations “identify economic actors and link them together in new patterns which allow the creation of new businesses that did not previously exist, or change the way certain types of value are created” [NOR 01]. Here, value creation is a complex iterative process in which economic and institutional transactions between suppliers, service providers and customers are intertwined.

Unlike Porter, competitive advantage lies in the ability to design this ecosystem and make it work to produce value. The main objective of value creation is to innovate for and through the customer [APP 17]. This vision moves away from the sequential approaches favored by Porter to a collaborative approach to building value among participants.

Value constellations are part of an interorganizational network that develops when an isolated company is unable to produce and disseminate value alone [AUT 14]. They are particularly appreciated for developing business logics [MIC 08]. The grouping of actors into constellations allows each one to capture a part of the global value generated by the innovation ecosystem in order to justify its role within it [LIN 10].

9.3.2. Value creation through the network and value chain

Value creation through networks is part of the value constellation movement [AUT 14]. Stabell and Fjeldstad studied the “value network” [STA 98]. Here, the creation of value is entangled in several value chains [HUE 06], bringing additional structural dimensions through the creation of multiple interdependencies. Value creation, traditionally produced by the firm, moves from traditional value chains to dynamic value networks offering more flexibility and agility [KÄH 12]. The strengthening of interdependencies is the key to value production, shifting traditional relationships and networks to value-creating networks [ALL 08].

The creation of value is based on the collaboration and combination of capacities and skills [BOV 00] possessed by all the actors of the ecosystem. This “networking” of knowledge, resources and multidisciplinary skills accelerates the production of value at all levels of the ecosystem. Weiner and colleagues were the first to propose increasing value creation by combining the value network and the value chain. Here, value networks emerge, in an ecosystem, when the assets of the value chain break down and no one organization controls them all [WEI 97].

In the innovation ecosystem, value creation is articulated between the iterative network and the integrated value chain, where the activities of the actors of the three ecosystems are accounted for in a “shared value” logic [POR 11]. The creation of value is no longer oriented solely towards the focal firm, in an opportunistic logic, but towards the three ecosystems, thus creating “multiple benefits” [UPW 16] for all the actors in the innovation ecosystem.

9.4.1. Definition of net value

Strategies are evolving from an approach centered on the focal firm and the search for its performance to a broader approach, anchored on knowledge [ALL 03]. The iterative network of the innovation ecosystem plays the role of a value network [WIN 06]. This creation of value by the value network is called “net value” [PAR 99]. It is defined as “a dynamic, flexible network comprising the relationships between its actors who create value through collaboration by combining their unique and value-adding resources, competences and capabilities” [KÄH 12].

Net value is a set of activities that create value for end customers [PAR 99]. In this case, net value is “a compromise between benefits and sacrifices” [WAL 01] where “the process by which the capabilities of the partners are combined so that the competitive advantage of either the hybrid² or one or more of the parties is improved” [GAD 10]. Here, the value network comprises a group of actors who unite to exploit a specific opportunity in the form of a value proposition. The strategy is based on the management of experience. Once this opportunity has been seized and transformed into a value proposition, the value network tends to dissolve under the effect of opportunistic strategies and free-riding [WIN 10].

In this context, sustainability of the value network becomes impossible. This may explain the lack of interest of researchers in the creation of net value in the innovation ecosystem. Yet, it is likely that net value is a key element of value creation in the innovation ecosystem. Let us look at the evolution of the value chain towards net value and its characteristics.

9.4.2. Evolution of the value chain towards net value

Net value was developed from Porter’s work on competitive advantage via the value chain. For the author, an organization builds a competitive advantage “by performing these strategically important activities more cheaply or better than its competitors” [POR 85].

In this logic, this competitive advantage is only possible if “every firm is a collection of activities that are performed to design, produce, market, deliver, and support its product” [POR 85].

Work on networks shows that organizations are moving towards value creation systems that integrate several entities [NOR 93]. Strategies based on intelligence of exploration break away from individual enterprises and privilege exploration at the expense of the exploitation of knowledge accumulated through experience. Here, actors analyze creative activities by exploring the links that unite them [KOT 01] via the iterative network and the integrated value chain.

These links are crucial for the creation of net value [KÄH 12]. The perspective that an individual organization develops net value is no longer conceivable today. Here, the value network replaces Porter’s value chain. It becomes the “context” for creating value and managing the interdependencies of the actors.

Actors in the innovation ecosystem favor flexible networks in which they combine strategies capable of creating net value shared by all the actors. These actors are detractors of Porter’s industrial value chain [PRA 04]. For them, the net value creates value for all the actors of the ecosystem, by the valorization of the discovery, the invention and the innovation which will be adequate for the needs of the end user.

9.4.3. Net value characteristics

The modeling of the innovation ecosystem presented in Chapter 3 shows that value creation is strongly dependent on the iterative network and the integrated value chain. Parolini describes a value-creating ecosystem as a set of activities that create value [PAR 99].

In the ecosystem, the set of activities has been studied in the form of “structure” [ADN 17], which is at the origin of the birth of the integrated value chain. In an innovation ecosystem, and more precisely in the innovation process that supports its reason for existence, a great diversity of knowledge and resources is mobilized in the realization of the activities carried out by the actors in the different phases of the innovation process.

The focus is on the actors, on how they create value by combining their resources and knowledge as well as by developing relational capacities that improve the efficiency and use of their own capacities [ALL 08]. Here, “value nets place greater emphasis on managing overall performance rather than on each of the transactional activities, and these transactions should be carried out by whomever has the ability to execute them with superior efficiency and with the highest potential for adding value” [BOV 00].

Net value creation starts with the end user. It is focused on satisfying a real demand. It responds reliably and quickly to customer preferences [BOV 00]: “the final product or service more valuable to the end customer than it would otherwise have been” [HIN 97]. Net value does not just add value; it reinvents it for each end user [NOR 93].

This evolution of studies, from the focal firm to the creation of value by the activities of the actors who co-produce value [FJE 06], means that value is not solely added in a sequential chain, but is also co-created by all the actors. Here, tangible and intangible assets play a key role [ALL 08] in the iterative network and the integrated value chain. Unlike tangible assets, which are static, intangible assets are dynamic in nature [ALL 03]. For example, knowledge transfer is key to the success of the innovation process. The meaning carried by this knowledge is crucial for the dynamics of the innovation ecosystem.

These seminal works highlight several key factors that characterize net value. We present them in Table 9.1.

The creation of value involves the mechanisms of decontextualization and recontextualization of knowledge.

9.5.1. Decontextualization of value-creating knowledge

As we have seen in several chapters, the creation of meaning is value-creating if it is developed collectively. Since the innovation ecosystem is made up of three specific ecosystems, it is not uncommon for problems related to the contextualization of knowledge to arise. For example, knowledge developed by scientists will have a particular meaning for the scientific community and will have another meaning for the actors of the commercial ecosystem.

In this context, knowledge will lose meaning and value when it is taken out of its initial context [SZU 96]. Two situations arise here:

• – the first situation characterizes loss of value and the blocking of the innovation process: the actors do not understand the meaning of this knowledge and do not manage to codify it and implement it in the innovation process;
• – the second situation concerns the conversion of knowledge and the impulse of a new dynamic to the innovation process: the actors imagine different ways of using the knowledge [SHA 00]. They transform this loss of meaning into a key factor that reinforces their creativity on the basis of this knowledge [ZAH 11].

Here, the actors do not see the loss of meaning as a hindrance but as an added value that stimulates their creativity: they take advantage of this decontextualization to design new and often very different applications for a given knowledge [ZAH 11].

9.5.2. Recontextualization of value-creating knowledge

Once actors have invented new ways of converting decontextualized knowledge into new applications, it is recontextualized by the use they make of it in these new applications. The recontextualization of knowledge serves innovation. For example, it mobilizes contextualized knowledge; this is particularly true for actors in the commercial ecosystem who are in charge of creating products, services and knowledge related to the uses of innovations, based on inventions in the technological ecosystem. Here, the focus is no longer on the assets of the products or services but on the value of use [VAR 04], which reinforces the user experience.

This recontextualization promotes the passage of knowledge from one context to another [HAR 02]. This process, called knowledge brokering, is not always easy to implement. The knowledge brokering process faces several difficulties:

• – the actors have different knowledge, training and experience [ZAH 07];
• – knowledge and its meaning are socially constructed and can be lost during transfer in the iterative network or integrated value chain;
• – knowledge is not always divisible. It can lose meaning if it is dissected [HAR 02];
• – the carriers of knowledge are holding back. They do not share their scientific, technical or commercial secrets, which makes the interpretation of this knowledge more complex.

The links of pool interdependence prove to be value-creating because the digital platform at its heart will help to solve all these difficulties encountered in the knowledge brokering process. The common knowledge structure, the various translations and the common language that can be shared [RAU 12] via this platform are an answer to the structural and interpretative obstacles described above. The knowledge brokering process can then take place: the knowledge will be converted into value-creating applications [HAR 02], then it will be codified in order to be recontextualized, and then it will feed the knowledge reservoirs accumulated within the innovation ecosystem.