An ecosystem brings a great deal of value, flexibility and capability to the members and their customers, but keeping diverse and independent members engaged and moving in the same direction requires diligent organization or governance.
By having rules, processes, frameworks and agreed-to guidelines in place, there’s a clear and accepted path forward between all partners. Especially valuable when an ecosystem spans cultures, legal systems and industries, governance can not only be a reference and agreement, but a structure for quickly resolving disagreements.
At AB InBev’s Beer Garage, a tech innovation lab, we know the importance of good governance. We’ve developed a valuable ecosystem that unites high-potential startups and corporate partners, bringing advances in artificial intelligence and machine learning, IoT, cloud and data analytics, blockchain, augmented reality and automation.
Through this collaboration and value creation, it has been clear, structured governance, in addition to an obsessive curiosity of technology, that has created tremendous outcomes for startups, consumers and AB InBev.
When our team considers effective ecosystem governance, we focus on 3 clear goals.
Ecosystem Governance Goal 1: Value Creation
If an ecosystem isn’t creating value, there’s no chance it will attract members or remain intact for long. So, the governance should support recruiting, motivating and retaining partners, aligning interests, strategies and actions. In other words, the ecosystem should be a place partners want to be, joined together by mutual interests. By identifying what will attract and retain partners, long-term success is more likely.
Value creation can be defined differently for every ecosystem, but the important detail is that each partner sees the value of being involved, investing valuable financial and human capital into the venture.
Ecosystem Governance Goal 2: Risk Management
Uniting so many actors under one umbrella can create risk, however, effective governance will identify and address those risks. Importantly, the governance model should ensure partners comply with laws and norms, ensuring it’s accepted by consumers and regulators alike to avoid legal or reputational damages.
Additionally, market or regulatory risk should be considered and minimized. In the case of antitrust violations or other legal and ethical challenges, they are best addressed proactively.
Ecosystem Governance Goal 3: Value Distribution
Fairness and equity may sound like concerns from childhood, but they’re very real considerations in an ecosystem. If one partner is getting the majority of the benefit, this lopsided value distribution is going to upend the entire network, so defining how, when and how much each partner earns in value is key, whether that’s revenue, profits or customer reach.
For long-term cooperation, governance should ensure proper profits and even non-financial compensation for everyone involved. While some may join the ecosystem for revenue, others may be there purely for the PR or corporate responsibility value.
With these goals in mind, the partners would get to work creating the ecosystem governance framework, a 5-part system that creates consensus, cooperation and value across the ecosystem.
Mission, Purpose & Culture:
Uniting partners within an ecosystem means connecting individual values, missions and cultures into one cohesive format. Creating this consensus proactively identifies who is or is not a fit for the ecosystem while aligning the stakeholders.
For example, a valuable but hyper-aggressive partner that makes waves with consumers and regulators may not be a fit for a collaborative, conservative ecosystem. Or, if the ecosystem is all about challenging the status quo, perhaps they’re the perfect option.
When it comes to aligning purposes and culture with our ecosystem at Beer Garage, we look for risk-taking partners with deep curiosity, those who are leveraging technology to do something bold and impactful. When we see those shared values in a potential partner, we know it’s worth exploring next steps through our pre-established consideration and entry system.
Entry & Commitment:
By defining who is allowed to enter the ecosystem and what will be required of them once they join, the stakeholders create clarity over who is a fit—and can even eliminate those who are not willing or able to meet these commitments. This step can prevent conflicts of interest, problematic or high-risk partners and show a clear path for what it takes to be accepted.
If you think back to a group project during university, you probably recall how important it was for each person to be committed and engaged. Otherwise, you have several people doing all the work while the others reap the benefits! The same is true in a business ecosystem.
For a large-scale ecosystem like ours, one challenge to entry and commitment is simply organizing and processing every potential player, getting them to the point of being considered for entry. To address this, we’ve introduced SwitchPitch to better map a robust startup and VC ecosystem and their connections to AB InBev.
Participation, Decision Rights, Transparency and Conflict Management:
Within the ecosystem, there will be high-value, far-reaching decisions that need to be made and, naturally, conflicts that arise. By understanding who has the rights to specific decision making and establishing transparency, conflicts can be mitigated through established methods.
Within Beer Garage Brazilian Hub, we carefully map partners’ technology maturity level, an opportunity to create new innovations while identifying potential conflicts. With greater understanding of each partner’s participation abilities, we can create the most value.
Conduct, Input Control, Process Control and Output Control:
With standardized controls and processes in place to regulate partners’ inputs and outputs, an ecosystem creates clear expectations and requirements for each stakeholder. It’s helpful to have processes in place to measure what’s expected and have plans to address any failings.
Within Beer Garage’s Incubator Program of 2020, a company was found to be producing resources that indicated they were unqualified to continue building an algorithm. Fortunately, having output controls in place that defined expectations, we not only transitioned to a new company, but also offboarded the partner with fair compensation. Because Beer Garage could adequately measure and act upon the information, what might have been a challenging scenario turned into a well-managed resolution.
Data Rights and Property Rights:
In a productive ecosystem, valuable data, intellectual property and even physical property are created, some with incredible competitive and financial value. In the Beer Garage ecosystem, the discoveries and their value are often tremendous. Whether it’s a machine learning project that identifies variables that impact beer’s quality score to a partnership with IBM to verify supplier information using blockchain, Beer Garage has governance in place to clearly outline who retains rights and how data or value is shared.
At the beginning of an ecosystem when the value may not be clear, it could be tempting to sort out who owns what later on. However, at the first sign of valuable data or property, disagreements and in-fighting may begin, which could have been solved by proactively deciding value distribution.
4 Things Every Ecosystem Model Should Have
Despite the complexity of an ecosystem, the vital components can be broken down into four elements that generally indicate a healthy and valuable ecosystem: consistency, fairness, effectiveness and flexibility.
Without consistency, ecosystem progress will be sporadic. Decisions might be second-guessed or disagreed upon if established processes and guidelines are selectively enforced or followed.
Without fairness, the ecosystem will have winners and losers, not a mutually beneficial connection. Eventually, partners will leave—and it will become challenging to recruit new members.
Without effectiveness, the ecosystem will be an unprofitable, resource-draining waste of time. If there’s no impact, there’s no point in the ecosystem.
Without flexibility, new developments, ideas, technology and partners will be ignored in favor of the status quo, a death sentence for innovation focused ecosystems.
However, when these 4 defining factors are present, the ecosystem has a far better chance of success—an understanding that heavily influences the Beer Garage ecosystem and our governance.
How have you seen governance used effectively in an ecosystem—or have you seen it used improperly?