Engaging external partners has become a prerequisite for successful innovation.

“Closed” and “open” supply networks

In a more competitive world, companies face a growing need to develop products and services that use new technologies and concepts to set them apart. To achieve this distinctiveness, companies are turning to “closed” rather than “open” networks of suppliers. In such closed networks many of the technologies and concepts being applied are developed at least partially by the company orchestrating the system. A large proportion of the components made by key suppliers are unique to the final product. Open supply networks in turn are characterized by standardized components that fit together in a modular fashion and suppliers are generally encouraged to sell the same components to a range of customers.

Perhaps the world’s most successful exponent of a closed supply network is Apple. It exemplifies the notion of co-specialization by having selected key suppliers as long term partners, when developing some of its best-selling products, starting from the iPod to the iPhone and iPad. Apple has established a business ecosystem, which is superbly orchestrated, and where a network of suppliers, institutions and individuals form a community, which supports and strengthens the business interests of Apple.

New models for success

Another example of the application of co-specialization in an orchestrated ecosystem is Fisker Automotive. CEO Henrik Fisker has stated that his company has a new business model, which might be called a “fabless” car company. When interviewed for Forbes magazine spring 2009 Henrik Fisker announced that Fisker Automotive can develop a car in half the time it takes a large company for one-third of what it costs a traditional carmaker. Fisker avoided some $300 million in capital outlays by handing off manufacturing of the Karma to Valmet Automotive of Finland, which builds the car in the same Finnish factory where it has assembled Porsche’s Boxter and Cayman. Customer deliveries of the Fisker Karma began in summer 2011. In the supplier network the co-specialization has enabled the network to come up with a car, which has overwhelmed journalists  and inspired thousands of customers to sign up for pre-orders.