The Reciprocity Advantage: A New Way to Partner for Innovation and Growth

Overview

A powerful new kind of competitive advantage is now possible thanks to technological and social disruptions that are already occurring. These disruptions revolutionize how companies can partner to create new growth. The Reciprocity Advantage shares a model for creating that growth: define your right-of-way (the underutilized resources you already own that you can share with others), partner to do what you can’t do alone, experiment to learn, and scale the new business at low ...

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The Reciprocity Advantage: A New Way to Partner for Innovation and Growth

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Overview

A powerful new kind of competitive advantage is now possible thanks to technological and social disruptions that are already occurring. These disruptions revolutionize how companies can partner to create new growth. The Reciprocity Advantage shares a model for creating that growth: define your right-of-way (the underutilized resources you already own that you can share with others), partner to do what you can’t do alone, experiment to learn, and scale the new business at low risk.

Reciprocity and advantage are words that are not normally seen together, but reciprocity—giving now to get later—will become a normal part of winning in the future. The Reciprocity Advantage shows you how to leverage new forces like digital natives and cloud-served supercomputing now into massively scalable, profitable, incremental growth for your business.

Provocative and pragmatic, leading ten-year forecaster Bob Johansen and experienced business developer Karl Ronn describe how to lean in to disruptions to create new growth for your business. They include actual cases showing early successes for a range of companies and nonprofits like IBM, Microsoft, Google, Apple, and TED. They then provide key exercises to define your promising new ideas and nurture them into healthy new businesses.

Their recommendations are based on practical experience in managing the problems of new business creation and many years of helping others see the future more clearly. Distilled from hands-on work, this book gets you started today on creating your own reciprocity advantage.

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Editorial Reviews

From the Publisher
“In a world where the pace of change is accelerating, this book is required reading for business leaders trying to connect foresight into insight and insight into action.”

—Carlos Brito, CEO, Anheuser-Busch InBev

“In this groundbreaking work, Bob Johansen and Karl Ronn set forth nothing less than a blueprint for the future. The Reciprocity Advantage is an up-to-the-minute analysis of what business has to abandon and what it has to embrace to achieve success in a world where disruption is increasingly the norm. The book is indispensable reading for business leaders whose survival depends on staying ahead of the curve. In other words, all of us.”

—Bruce D. Broussard, President and CEO, Humana Inc.

“Read The Reciprocity Advantage if you want to understand how to leverage the disruptive technologies and ideas of the network age to design the winning businesses of the future.”

—Tim Brown, President and CEO, IDEO

“The Reciprocity Advantage presents a provocative new recipe for innovation and sustainable growth. Instead of guarding all of your assets, you should give some of them away. With rich cases and practical recommendations from a futurist and an innovator, this excellent book sets the stage for companies to learn more and profit more.”

—Adam Grant, Professor of Management and the Class of 1965 Chair, The Wharton School, and author of Give and Take

“For a longtime believer of giving and reciprocity in my personal life, it is very encouraging and refreshing to see how reciprocity is becoming a business advantage. A must-read!”

—Guangyu Li, Senior Partner, McKinsey & Company, Greater China Office

“Johansen and Ronn grabbed and held my attention with wonderful cases ranging from Apple’s App Store to the Global Food Safety Initiative. They blend these cases with their decades of deep experience to provide a playbook of concrete and tested methods for putting the reciprocity advantage to work in your organization.”

—Robert I. Sutton, Professor of Management Science and Engineering, Stanford University, and coauthor of Scaling Up Excellence

“This is a thinker’s book that will make companies and leaders face the future with potential answers rather than uncertainty. A practical read from start to finish.”

—Nigel Travis, Chairman and CEO, Dunkin’ Brands

“If your business is squeezed by ever-tightening margins and confronted daily by disruptive forces, understanding your reciprocity advantage will open you to the potential of nontraditional partnerships as a path to large-scale growth.”

—Donald Hall, Jr., CEO, Hallmark

“Few industries have been more disrupted by the Internet than news media and print publishing. This new ‘how to’ guide provides a road map that can allow publishing companies to become disruptors and create a bright future for themselves and the people they serve.”

—Bill Toler, CEO, Swift Communications

“In The Reciprocity Advantage, Ronn and Johansen provide a new golden rule for business: give to grow and share to scale. A must-read.”

—Scott Anthony, Managing Partner, Innosight, and author of The First Mile and The Little Black Book of Innovation

“Every winning strategy is based on a compelling insight, and The Reciprocity Advantage is loaded with insight. Capturing a reciprocity advantage will be the next strategic advantage.”

—William G. Pietersen, Professor of the Practice of Management, Columbia Business School, and author of Strategic Learning

“Bob Johansen and Karl Ronn have produced a book that offers masterful insight into one of the defining features of today’s world: advantage through reciprocal value creation. Our old win-lose models are no longer fit for purpose. The best businesses today are aiming higher, succeeding in the marketplace while also combatting global challenges like climate change. Bob and Karl’s vision will help any leader unlock new forms of value with new thinking.”

—Aron Cramer, President and CEO, Business for Social Responsibility

“The Reciprocity Advantage is required reading for my Marketing for Social Profit students. They desire to think beyond financial profit and learn how to develop socially responsible and sustainable enterprises and market offerings that thrive with reciprocity as an important element. This unique book gives readers at all levels of business experience perspectives and actionable information to enhance business and innovation results prepare for the challenges ahead. Anyone interested in growing and making a positive collaborative impact on tomorrow should read this book.”

—Linda L. Golden, Marlene and Morton Meyerson Centennial Professor in Business, The University of Texas at Austin

“With their uncanny knack for seeing the future, Bob Johansen and Karl Ronn offer a priceless gift—a fresh, practical strategy for collaboration that can advance both margin and mission in organizations of all kinds. Leaders at every level will benefit from their wisdom.”

—John R. Ryan, President and CEO, Center for Creative Leadership

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Product Details

  • ISBN-13: 9781626561069
  • Publisher: Berrett-Koehler Publishers, Inc.
  • Publication date: 9/15/2014
  • Edition number: 1
  • Pages: 216
  • Sales rank: 680,095
  • Product dimensions: 6.10 (w) x 9.30 (h) x 0.90 (d)

Meet the Author

Bob Johansen is a distinguished fellow at the Institute for the Future in Silicon Valley, where he helps top leaders around the world prepare for and shape the future. He works with corporations such as McKinsey, Tesco, UPS, Kellogg, Disney, and McDonald’s—as well as major universities and nonprofits. This is Bob’s ninth book.

Karl Ronn is the managing director of Innovation Portfolio Partners. Based in Palo Alto, he helps Fortune 500 companies create new businesses and helps entrepreneurs start category-creating new companies. Previously, he was vice president of research and development and general manager of new business for Procter & Gamble, where he was one of the key innovators behind Febreze, Swiffer, and Mr. Clean Magic Eraser.

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Read an Excerpt

The Reciprocity Advantage

A New Way to Partner for Innovation and Growth


By Bob Johansen, Karl Ronn

Berrett-Koehler Publishers, Inc.

Copyright © 2014 Bob Johansen and Karl Ronn
All rights reserved.
ISBN: 978-1-62656-106-9



CHAPTER 1

Reciprocity Right-of-Way

In which the complex notion of right-of-way is unpacked and put into play in search of growth and scale.


Right-of-way has multiple meanings. In law, it means a basic exclusivity where one person has permission to do something others cannot do. In California, Oregon, and some other states, pedestrians have the right-of-way over cars. According to Dictionary.com, right-of-way is defined as

1. a common law or statutory right granted to a vehicle, as an airplane or boat, to proceed ahead of another;

2. a path or route that may lawfully be used;

3. a right of passage, as over another's land;

4. the strip of land over which a power line, railway line, road, etc., extends.


Right-of-way is an unrealized opportunity space where you can create a new large-scale practice of exchanging with others for mutual benefit. Right-of-way is the space within which you can create your reciprocity advantage. Indeed, a reciprocity advantage becomes possible only within your right-of-way. For example, consider the evolution of IBM over the last 30 years.


IBM's Right-of-Way Reimagined

When Bob began his career in the 1970s, IBM (or Big Blue, as it was then called) had a very strong right-of-way selling big computers. Actually, big computers were the only computers then.

Institute for the Future, in those days, had Silicon Valley offices on Sand Hill Road (now referred to as the Wall Street of Silicon Valley) in Menlo Park, California, and IBM was IFTF's neighbor.

In the 1970s, IBM was a conservative company that was doing very well. IBM people were known for their conservative dress: usually dark blue suits. IBM's founder, Thomas J. Watson, purportedly said the reason IBM salesmen (they were almost all men at the time) wore blue suits, white shirts, and a red tie was because computers were so unreliable that the people who supported them had to look very reliable. Business casual came slowly to IBM, as did most everything else. Everything about IBM looked conservative. IBM offices looked conservative too.

One of the buildings IBM rented on Sand Hill Road, for example, was an especially fancy one that had been designed by an aggressively ostentatious company that eventually went bankrupt. IBM rented that fancy space anyway, but it just didn't fit the IBM image. Some of the individual executive offices had private patios, for example. When IBM moved in, they put filing cabinets in front of the patio doors in a futile attempt to make this overly fancy space feel like an IBM office. Those of us on Sand Hill Road at the time kidded that IBM's motto was "austerity ... at any price."

Then the world changed, and IBM started on a path to uncover its unrealized right-of-way. This change also came slowly, but it has been dramatic and successful.

In an iconic Super Bowl commercial in 1984, Apple Computer introduced the Macintosh that was about to hit the market on January 24, 1984. In an only slightly veiled comparison of Big Blue to Big Brother from the George Orwell novel 1984, the Apple commercial showed a female runner escaping gray guards and running up the aisle in a gray theatre with gray people sitting passively in rows watching a gray Big Brother lecture on a giant gray screen. The runner raced toward the front of the theatre and hurled a hammer through the screen. The shocked watchers gasped as they saw a flash just before a colorful message appeared on the screen announcing the new Apple Macintosh with this promise:

You'll see why 1984 won't be like 1984.


As computers got smaller and more ubiquitous, IBM found it increasingly difficult to make money selling big computers—or even small computers, although they gave that a good try. IBM's right-of-way was disrupted by the very technology it was developing. The IBM story became a happy one, however, even though it had gloomy days. While IBM continued to sell to corporate clients, their hardware business became unprofitable. IBM smartly added a new source of growth: services. This was the first step in business reinvention done by CEO Lou Gerstner and followed up by Sam Palmisano with a move from an emphasis on products to an emphasis on services in support of products.

Services had always been part of IBM's business, but not as big a part and not as profitable a part as they were to become. IBM's services became a competitive advantage. The first reinvention of IBM was to understand service as a business in and of itself. This allowed the later decision to sell the computer hardware business and focus on other sources of growth. As business dress became more diversified, so did IBM's business offerings. Now they even study "Service Science" (short for Service Science, Management, and Engineering) at their Almaden Research Center and other parts of the company. Just as IBM helped to seed and nurture the academic discipline of Computer Science, it is now seeding and nurturing Service Science.

IBM has become a vivid example of reciprocity at work. They call it "value co-creation." IBM uncovered an underutilized right-of-way that was linked to both its internal past and the external future. IBM created what we would call a reciprocity advantage.

IBM gradually realized that its core right-of-way is big data analytics and big data know-how. IBM is successfully engaged in big data management for customers around the world. IBM is now focused on custom software to manage and make sense out of your data. IBM has extensive big data analytic skills but needs very large data sets to apply those skills and draw business value from them. Since each challenge is different, IBM brings together a team that can add value for that particular situation.

IBM is creating a big data market with other people's data and then analyzing that data to achieve goals that neither IBM nor its clients could have done alone. IBM's three businesses are products, services, and software—but what it calls "software" looks like software solutions and software services to us. Through its study of services sciences, IBM is learning how to provide services in new ways through software and solutions. It is moving from what have become low-margin services to high-margin software services, some of which include IP licenses.


The Birth of Smarter Planet

Big Blue has reimagined itself as Smarter Planet, and it is grounded in the underutilized right-of-way that IBM uncovered. Grounded in its big data right-of-way, IBM is creating a new reciprocity advantage that capitalizes on the disruptions we discuss in Part Two of this book. IBM's big data expertise plus a customer's big data problem equals new businesses and new growth for IBM—plus new value for more players. IBM still has service businesses, but now they are creating new Smarter Planet businesses around the world. This is what Harvard Business School Professor Clayton Christenson recognizes as competing against nonconsumption—creating a business that had not been there before and therefore had no competitors. These new businesses are focused on big data problems that would not have been addressed if IBM didn't create new partnerships to solve them. IBM stakes out its right-of-way with these statements in its annual report:

* Big data is the planet's new natural resource.

* Advanced analytics enable us to mine it.

* Cloud computing is coming of age.

* Social and mobile create a new platform for work.


And we would add: there will be new opportunities for new businesses, based on reciprocity advantage.

IBM is now reaching out to a wide range of big data problems, such as wind energy, customer retention, cancer treatment, and city operations. Essentially IBM is going out into the world and working with a wide range of difficult problems in search of opportunities to make sense out of complex data sets. It is going into spaces where nobody else has gone. As opportunities are discovered and prototyped, the Smart Planet branding gets applied with vigor.

Nobody, not even IBM, can make a smarter planet alone. Partners are needed, and IBM now has partners everywhere, of all sizes and with all kinds of offerings. Often, customers are also partners, and sometimes even competitors are partners. In Istanbul, for example, IBM worked with local governments, agencies, and companies to study traffic patterns by doing big data analytics on mobile phone traffic patterns. Based on these results, the city re-routed public transit patterns to better distribute the traffic flow and reduce congestion. IBM is co-creating a smarter planet with customers, cities, and regional economic development groups—but it is also becoming a very successful business.

IBM'S partners are sometimes unusual. When IBM introduced Watson, the challenge was in demonstrating what was then the world's most advanced computer with artificial intelligence that could understand free-form speech . How do you introduce a product that is so exotic and unusual? IBM chose to partner with the popular television show Jeopardy! At considerable risk, IBM entered Watson in a competition against two of the most successful human participants on Jeopardy! Fortunately for IBM, Watson won.

This limited partnership between IBM and Jeopardy! resulted in a mass understanding of what Watson could do, a mass understanding that played out over just two nights—but was rebroadcast in many forms afterward. Watson had a reputation overnight, which planted the seeds for the next big question: to whom could IBM give Watson so that it could have great value in creating a smarter planet and from whom IBM could make a considerable profit in providing services to support Watson? The answer is likely to be in health care, with a whole new set of partners—large and small.

As we were finishing this book, IBM announced that, about two years after its success on Jeopardy!, it is making Watson available as a development platform in the cloud to seed new software development applications on a worldwide scale. The IBM Watson Developers Cloud began on November 14, 2013.

In Louisville, Kentucky, IBM partnered with a small startup company called Asthmapolis (now called Propeller Health) to create a healthier environment for kids with asthma. Asthmapolis has a GPS sensor inhaler that broadcasts the locations where the spray is used. IBM then does big data analysis to understand the parts of the city where the inhalers are used most frequently. This analysis gives the city an indicator of where pollution is most intense and harmful. The city then tries to get the problem corrected, but at least the kids can be re-routed around the areas of town where they will have the most trouble breathing. This kind of asymmetrical partnering (large companies with small companies or even individuals) is becoming much more possible now with the cloud, given all of the connections being drawn on a global scale.

IBM is still in the early days of building its new Smarter Planet businesses. It faces many challenges in its core businesses, but experimenting to create the future in addition to protecting the core is a robust, necessary strategy.

Ironically, since 1984, Apple has become more closed, while IBM has become aggressively more open. IBM is now one of four major players in the cloud (along with Google, Microsoft, and Amazon), and IBM is a major proponent of the shift from more closed to more open. IBM has opened its reciprocity right-of-way, while Apple has remained super-protective. Whether or not this more closed intellectual property strategy will work in the post—Steve Jobs era remains to be seen, but what is clear is that IBM has gone another way since that iconic 1984 commercial. Big Blue has transformed itself into Smarter Planet.


IBM'S RECIPROCITY ADVANTAGE IN SUMMARY

What right-of-way does IBM share with others? Big data know-how. For example, when IBM released Watson as a cloud service for developers, it began connecting app-builders with skilled professionals who could assist them in the specifics of creating a successful application for Watson in the cloud. IBM has committed more than 500 of its own subject-matter experts as part of this program, with expertise in areas like design, development, and research.

Who are IBM's partners? Companies, cities, nonprofits, and others that have big data challenges partner with IBM, which looks for wicked problems and dilemmas that involve huge amounts of unstructured data. Those partners need to capture the data, analyze it, and create control strategies to make order out of chaos.

How did IBM experiment to learn? IBM experimented with a wide range of big data sources, such as stock exchanges, wind energy companies, customer retention studies, cancer researchers, and cities.

What assets does IBM give away in order to learn? Big data know-how in small chunks. It charges a lot for large chunks.

How did IBM scale? It seeks out the world's biggest problems that are occurring somewhere locally. Once the problem has been solved for an individual client, mass customized solutions can quickly be created for everyone else.

What is IBM's reciprocity advantage? The Smarter Planet Initiative has become synonymous with the IBM brand. Big data know-how embodied in software and services aimed at tackling the world's most wicked dilemmas.


So What?

In 2000, $3.3 billion of IBM's pre-tax profits came from hardware, $3.7 billion from services, and $2.6 billion from software, for a total of $9.6 billion. In 2012, software comprises $10.8 billion—larger than the whole company back in 2000—while hardware is still solid at $3.3 billion. Imagine IBM if it had not embraced the new world.

CEO Virginia Rometty says in the 2012 annual report,

To sustain an innovation model in our industry, a company must do more than accommodate major technology shifts.... [We are] becoming instrumented, interconnected and intelligent. Now the IT environment is moving from monolithic applications to dynamic services; from structured data at rest to unstructured data in motion; from PCs to unprecedented numbers and kinds of devices; from stable to unpredictable workloads; from static infrastructure to cloud services.


Smarter Planet is becoming a key strategy for growth. Since 2005, IBM has acquired 33 companies to build its big data analytics capabilities, with a focus on helping customers turn massive volumes of unstructured data into valuable business information.

The same disruptions that disrupted IBM will disrupt all industries. IBM not only uncovered its right-of-way, it named and expressed it with great clarity: The Smarter Planet Initiative. Who doesn't want to create a smarter planet? And IBM has the credibility and trust to do it. IBM can argue authentically that it knows how to build a smarter planet. If you have a right-of-way that nobody trusts, it is not a right-of-way.

IBM people are building a smarter planet. This purpose-driving strategy is very motivational. IBM has become a much more open and creative place, all under the very motivational vision of the Smarter Planet Initiative. The Smarter Planet Initiative is motivating to IBM's own people, as well as to its customers. Language is very important. If you get the language right with regard to the future, the words draw you toward the future. If you get the language wrong, you fight it again and again. IBM got the language right. Smarter Planet is very clear and very aspirational.

IBM's reciprocity advantage comes from a creative mix of openness, intellectual property, and services. Other competitors offer big data services, but it is difficult for them to compete with IBM in the space that IBM has defined as Smarter Planet.


(Continues...)

Excerpted from The Reciprocity Advantage by Bob Johansen, Karl Ronn. Copyright © 2014 Bob Johansen and Karl Ronn. Excerpted by permission of Berrett-Koehler Publishers, Inc..
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

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Table of Contents

Contents

Preface, ix,
Introduction: The New Way to Grow a Business, 1,
Part One Reciprocity on a Massive Scale, 13,
1 Reciprocity Right-of-Way, 17,
2 Partnering to Do What You Can't Do Alone, 29,
3 Experimenting to Learn: How to Make Money in New Ways, 39,
4 Amplifying to Create Scale, 51,
Part Two Future Forces That Will Demand Reciprocity, 61,
5 How the Digital Natives Will Disrupt Rights-of-Way, 67,
6 How Socialstructing Will Disrupt Partnering, 79,
7 How Gameful Engagement Will Disrupt Experimenting to Learn, 89,
8 How Cloud-Served Supercomputing Will Disrupt the Practice of Scaling, 97,
Part Three How to Develop Your Own Reciprocity Advantage, 107,
9 How to Uncover Your Right-of-Way, 111,
10 How to Find the Best Partners for You, 125,
11 How to Learn by Experimenting with Many Open Iterations, 133,
12 How to Scale Your Reciprocity Advantage, 149,
13 When the Future Is Reciprocity, 163,
Notes, 173,
Bibliography, 177,
Acknowledgments, 185,
Index, 189,
About the Authors, 195,

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