Business ecosystem

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An ecosystem in the economic sense describes a group of companies (typically three to about ten) that are aligned with a common added value by an orchestrator . From the customer's point of view, the performance of the entire ecosystem exceeds the sum of the individual contributions of all those involved.

origin

The term ecosystem comes from ecology . In an economic context, it was first introduced in 1993 by James F. Moore in an article in the Harvard Business Review (Predators and Prey: A New Ecology of Competition).

Increasingly more homogeneous products, increased risk from new market entries or stagnating markets mean that many companies are entering an increasingly competitive environment. To this end, Moore describes how companies, in their classic approach, fight for market share at an individual company level. But in order to assert themselves in this new situation, according to Moore, companies have to increase their innovation performance. This goal can be achieved, for example, through the targeted networking of companies in ecosystems. Moore states that companies should therefore not be assigned as members of a single industry, but rather as members of a cross-sector system made up of networked companies (ecosystem).

The development from autonomous companies to ecosystems is increasingly being intensified by digitalization. Digitization reduces transaction costs between companies, which makes cooperation between companies more and more attractive and blurring industry boundaries. This trend means that the classic corporate image is permanently changing. Companies and industries are increasingly structuring themselves to a higher level of aggregation beyond the classic industry boundaries. This new level of aggregation is typically an ecosystem.

What is really new about a business ecosystem is characterized by 1) communal consumption (sharing), 2) platforms for information exchange (news services, social media), 3) digital marketplaces and 4) the networking of physical and virtual objects (IoT).

Delimitation of the term

The term “ecosystem” is not used uniformly in specialist literature and in practice. Basically, depending on the relationship, a distinction can be made between three approaches: Knowledge Ecosystem, Platform Ecosystem and Business Ecosystem (BES). However, these approaches differ in terms of their logic and requirements.

  • Knowledge ecosystems have long been known in business. They are mostly loose company groups that are mainly limited to the exchange of knowledge between those involved.
  • Platform ecosystems aim for network effects through a large number of partners. For example, all those involved in a platform such as an app store are grouped together as a platform ecosystem. It is characteristic here that adding partners hardly increases the costs.
  • Business ecosystems are the dominant form in practice and in specialist literature when ecosystems are mentioned. In practice, the terms ecosystem and business ecosystem are often used synonymously. Therefore, the entire entry is mainly limited to the business ecosystem approach.

Characteristics of a business ecosystem

Corporate groups must meet a number of requirements in order to qualify as a business ecosystem. They only fulfill these if all partners are geared towards a joint value proposition . This value proposition should be superior to the individual. Either by satisfying a comprehensive customer need or by superior performance of a single customer need.

In addition, the individual partners of the ecosystem must be closely networked with one another through a large number of multilateral relationships. This cross-company networking is referred to in the specialist literature as alignment. The alignment in the corporate group is supported by a central orchestrator. A business ecosystem is thus a group of companies that is aligned to a common value proposition by an orchestrator and thereby achieves more than just the sum of the individual contributions.

Implications for companies and customers

Implications for participating companies

By participating in a business ecosystem, companies and their cooperation partners can generate superior added value in the form of products or services. In addition, business ecosystems enable companies to open up new markets or to gain competitive advantages over traditional competitors in markets that are already represented. They can also use their network of companies to gain new customer contact, skills or resources that they do not have themselves. With access to competencies outside the company, everyone involved can focus on their core competencies. The factors mentioned lead to a competitive advantage, which can be expressed in increased sales.

However, with increased partner cooperation, a corresponding dependency is visible, which increases with the degree of networking. Depending on the fungibility of the partners, in the worst case the loss of a partner can also collapse the value proposition and thus also the ecosystem. On the other hand, the alignment between partners involves orchestration effort in the form of intensive coordination and coordination. In contrast to classic network platforms, adding new partners also leads to higher orchestration costs, which is reflected in increased coordination costs.  

When managing business ecosystems, the focus must be on achieving a superior value proposition, mastering the orchestration effort and being dependent on partners. In the course of digitization, modern information and communication technologies made it possible to reduce the effort of orchestration to such an extent that a business ecosystem makes economic sense. 

Implications for the customer

Because Ecosystems combines competencies from different stages of the value chain, customers can benefit from better products and services. Either by offering an entire bundle of services along the customer journey through the BES instead of a single service. Another possibility is that a single step of the customer journey is mapped, but better than it was previously the case by individual companies, because new competencies can be accessed.

On the other hand, it should not be ignored that customers who obtain a higher-level service from a business ecosystem are becoming increasingly transparent. Customer data can now be collected via more extensive contact points along the customer journey. It is all the more essential that data transparency is created along the process and at the interfaces between the ecosystem and the customer.

Merging the implications

Bringing together the implications of the company and the customer perspective is one of the central building blocks of a business ecosystem. This can only succeed if the focus is placed on the customer and their needs are satisfied as far as possible through a series of value-adding activities. From the company's point of view, this requires a clear positioning based on needs. The appropriate positioning of a company can be supported by using one of the so-called "strategy maps". On the one hand, companies can determine the role and position of the company to meet customer needs and adapt them if necessary.

The logic of value creation is broken up with an ecosystem. The linear process, which begins with the manufacturer and ends with the customer, is replaced by joint service provision. The customer becomes part of a dynamic added value. The company on the other hand can diversify with an ecosystem strategy by providing cross-sector services.

Macroeconomic Implications

Both academics and practitioners seem to agree that increasing digitalization and increased competition are driving organizational change that no company can escape.

This also enables small, specialized companies and start-ups to compete with large corporations. The described change inevitably forces companies to adapt their business logic and increasingly align them with the concept of the business ecosystem. In the future, companies will no longer think in terms of separate industries and products, but will focus on overarching customer needs. With this fundamental change, the logic behind management decisions must be aligned from the company level to a higher level of the business ecosystem on the aggregation scale. This changed perspective affects areas such as market entry strategies, marketing, customer acquisition or company evaluations. This means that competition is also shifting from the corporate level to the ecosystem level.

Individual evidence

  1. ↑ a b c d e Bernhard Lingens, Oliver Gassmann: The age of ecosystems begins - how are they changing the economy? St. Gallen 2018.
  2. ^ A b M. G. Jacobides, C. Cennamo, A. Gawer: Towards a Theory of Ecosystems . In: Strategic Management Journal . tape 39 , no. August 8 , 2018.
  3. ^ A b James F. Moore: Predators and Prey: A New Ecology of Competition . In: Harvard Business Review . No. 93309 , June 1993, p. 75 .
  4. ↑ James F. Moore: Predetors and Prey: A New Ecology of Competition . In: Harvard Business Review . No. 93309 , June 1993, p. 76 .
  5. ^ Daniel Fasnacht: The ecosystem strategy . Ed .: Journal for Leadership and Organization. No. 03 . Schäffer-Poeschel, Stuttgart May 2020, p. 168-173 .
  6. ↑ R. Adner: Match your innovation strategy to your innovation ecosystem . In: Harvard Business Review . No. 31 , April 2006, p. 98-107 .
  7. ↑ M. Ceccagnoli, C. Forman, P. Huang, DJ Wu: Co-creation of value in a platform ecosystem: the case of enterprise software . In: MIS Quarterly . No. 36 , 2012, p. 263-290 .
  8. ^ A. Gawer, MA Cusumano: How companies become platform leaders . In: MIT Sloan Management Review . No. 49 , 2008, p. 28-35 .
  9. ↑ DJ Teece: Explicating dynamic capabilities: the nature and microfoundations of (sustainable) enterprise perfomance . tape 28 , no. December 13 , 2007, pp. 1319-1350 .
  10. ^ R. Adner: Ecosystem as Structure . In: Journal of Management . tape 43 , no. 1 , 2017, p. 39-58 .
  11. ^ P. Williamson, A. De Meyer: Ecosystem Advantage: How to successfully harness the Power of Partners . In: California Management Review . tape 55 , no. 1 , September 2012, p. 24-46 .
  12. ↑ Denis Krechting, Julian Kawohl: Positioning successfully in the ecosystem . In: ZOE Organizational Development . Issue 04. Handelsblatt Fachmedien GmbH, Düsseldorf October 12, 2018, p. 76-79 .
  13. ^ Daniel Fasnacht: The ecosystem strategy . Ed .: Journal for Leadership and Organization. No. 03 . Schäffer-Poeschel, Stuttgart 2020, p. 168-173 .