The essence of open innovation in technology-based SMEs is creating more of an open relationship from the conventional one-on-one relationships with client companies (redefinition of relationships). In order to achieve this, I explained in my second article the importance of converting relationship-specific management resources (unique, leading-edge technology) into general purpose technology. In fact, this direction has merits from the perspective of client companies as well, and increased number of win-win relationships have been observed. An important concept for understanding this relationship is the business ecosystem.

Professor Marco Iansiti of Harvard Business School and others likened the organic partnership between companies to an ecosystem. The inter-company network, which they call the business ecosystem, consists of "keystones" that play a central role in the entire system and other "niche players" that complement each other. The role of Keystone is attracting many niche players and spreading them throughout the ecosystem. On the other hand, niche players will contribute to the diversity of the entire ecosystem with their unique technology.

Together, they create a competitive edge for the ecosystem as a whole.

If we apply the equation of (technology-based SME = niche player) & (the client company = keystone) to the ecosystem, then the client company is competing against another ecosystem (competitors are the keystone). Therefore, the keystone company will further demand unique “leading edge technology” from the niche players in its ecosystem. In this situation, the important niche players will spare no effort in sharing their product strategies and technical support, but on the contrary, SMEs that cling to their relationship particularities and do not hone their technology will be a burden within the entire ecosystem.

The shift from a fixed relationship, of having large companies and SME suppliers, to an ecosystem created by both parties, is accelerating with the progress of digitalization such as IoT and big data. A typical example is the automobile industry. The hierarchy of suppliers, with automakers at the top, is not gone. However, with the advancement of autonomous driving technology and the shift from the business of selling a single car to the mobility as a service (MaaS) model, IT platformers such as Google are emerging as competitors.

In the process, various ecosystems have launched with the goal of developing and providing mobile services. Traditional auto parts suppliers also need to thoroughly understand and hone their technology so that they can build win-win relationships as horizontal technological partners, rather than clinging to businesses that have vertical relationships with client companies. In the next article, I will explain how to proceed with open innovation with large companies.