Competitive pressure to innovate is driving companies to seek new ideas well beyond their own walls. But sponsoring the occasional hackathon or having one-off, uncoordinated interactions with a startup accelerator won’t contribute much to boosting an organization’s innovation capabilities. Many companies are missing an opportunity that’s close to home by overlooking or failing to effectively tap innovation ecosystems in their regions.
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These ecosystems occur where innovation and entrepreneurship activity are highly concentrated. As we define them, ecosystems are places that engage five stakeholder types — research institutions, entrepreneurs, corporations, investors, and governments — linked by a strong social fabric of mutual interest, complementary needs and resources, and trust. (See “Complementary Stakeholders in Innovation Ecosystems.”)
Our research shows that new innovation ecosystems are emerging globally, beyond well-known hubs. While often smaller or more specialized than, say, Silicon Valley, these clusters of activity are expanding the regional opportunities for corporate engagement in new locations. Meanwhile, digital interactions enable wider participation across geographic boundaries.
To achieve their goals for innovation, companies need to take a systematic approach to identifying and securing competitive advantage from working with these innovation communities.
The framework we present here, developed from our global work with hundreds of corporate leaders, provides a practical approach to such strategic engagement.1 It helps leaders avoid the common pitfalls of deciding how and where to engage before they have identified what they need, and of deciding with whom to engage before they have determined which ecosystem players are essential for relationship-building.
Flawed Approaches to Tapping Ecosystems
Many corporations seeking to reap the benefits of innovation ecosystems fall into a series of traps and end up having little to show for their efforts. Besides causing considerable internal frustration, the following missteps — which typically arise because executives haven’t established clear goals for their interactions — often mean reduced benefits for corporations and lost opportunities for the ecosystem as a whole.
First, we find that corporate leaders spread their efforts too thinly — across not only different locations but also different activities. They engage in a flurry of superficial activities that often feel transactional and performative to startups and providers of risk capital.
1. We have taught, and gratefully learned from, corporate leaders in MIT Sloan’s Executive MBA program, MIT’s global Regional Entrepreneurship Acceleration Program, and MIT Sloan Executive Education, especially our corporate innovation courses.
2. B. Aulet and F. Murray, “A Tale of Two Entrepreneurs: Understanding Differences in the Types of Entrepreneurship in the Economy,” PDF file (Kansas City, Missouri: Ewing Marion Kauffman Foundation, 2013), www.issuelab.org; and P. Budden, F. Murray, and O. Ukuku, “Differentiating Small Enterprises in the Innovation Economy: Start-Ups, New SMEs & Other Growth Ventures,” MIT Lab for Innovation Science and Policy working paper (Cambridge, Massachusetts: MIT Sloan School of Management, January 2021), https://innovation.mit.edu.