A post-pandemic global marketplace will see businesses prepare for and respond to future changes in a way that is leaner and more effective than ever before. Central to this approach is the concept of business ecosystem development, which encourages both innovation and growth. In this article, we learn the importance of ecosystem development, and the top roles to consider for business ecosystem development.
The importance of a business ecosystem
The idea of a business ecosystem is nothing new. Last year we highlighted the concept when discussing business continuity in the face of numerous lockdowns brought on by the global pandemic. We learned that the new business landscape is fraught with change, with numerous trigger events potentially impacting your business.
To help businesses navigate through this era of ongoing uncertainty, the concept of business ecosystems allows us to adopt principles from ecology to help make sense of and find opportunities for creating and capturing value.
James F Moore first coined the term ‘business ecosystem’ in this HBR article: Predators and Prey: A New Ecology of Competition.
“In a business ecosystem, companies co-evolve capabilities around a new innovation: they work cooperatively and competitively to support new products, satisfy customer needs, and eventually incorporate the next round of innovations.”
A business ecosystem is therefore like any biological system, it co-evolves. Your business actually benefits from the existence of other businesses, making a business ecosystem so much more than your suppliers and customers.
It’s not just a network
This is one of the important considerations when it comes to developing your own ecosystem. There is a big difference between an ecosystem and a network.
In Robert Kim Wilson’s book They Will Be Giants: 21st Century Entrepreneurs and the Purpose-Driven Business Ecosystem, Wilson explains that a network is a particular grouping of elements of commerce that are, in one way or another, connected to a central (or common) connection point. In other words, a business network of an interlinked collection of individuals. In some respects, it’s quite static.
A business ecosystem is more dynamic. It is a set of companies with complementary and synergistic relationships that build strategic partnerships to deliver value for end-user or customers. The smartphone business ecosystem is a good example. Several hardware and software manufacturers competing with one another vertically, while complementing each other horizontally along the value chain to deliver economic value [Source: Nima Torabi].
Designing a business ecosystem
Considering its dynamic nature, and the independencies of a business ecosystem, designing your own brings its own set of challenges. But to understand the important roles in your ecosystem development, it would be prudent to understand where role development fits within the wider context of ecosystem design.
Giles Morgan, Fortune500 advisor and Entrepreneur in Residence at Etch Horizon, breaks this down to his Octagon of ecosystem design:
- What does the problem you're trying to solve look like?
- What companies need to be part of your ecosystem to make it tick?
- Can a competitor be part of your ecosystem?
- Who in your organisation will handle the governance of the ecosystem?
- How do you capture value?
- Where is the value exchange in the ecosystem?
- What is the chicken-or-egg problem?
- How fluid is your ecosystem so that it can evolve over time?
"A lot of old-world consulting firms talk about business ecosystems being made up by 'important players'; it is indeed important to craft your ecosystem correctly, but I believe the most 'important' part of an ecosystem is the value exchange between the partners and their ability and appetite to grow. There's no point in having an ecosystem partner who doesn't have the same aspirations as you. Each organisation has a role and responsibility, but more importantly, there should be alignment."
"The latest catastrophic example of ecosystem failure and not understanding your ecosystem is the European Super League debacle. The top football clubs in the world thought they could disrupt their world for the better without a thought for the ecosystem around them. Had they had open discussions with all parties, I am sure that it could have had a positive outcome rather than a negative one. They could have done a minimum of five things;
- Shared the revenues across the lower leagues supporting grassroots football from bottom to top.
- Made the competition open so that clubs could be relegated and promoted into the new league.
- Negotiated with the TV networks to stabilise the flow of advertising funds across the European competitions.
- Discussed variable options with the UEFA Champions League so that the competitions complemented each other.
- Tested the ideas with their 'customers', the fans.
“I'm not saying these are the right or wrong answers, but I hazard a guess that none of this was actioned. It's no surprise to me that it failed. As I said previously if the value exchange is one-sided then you're doomed to failure."
The top 5 roles of business ecosystems
When understanding who the partners in your ecosystem will be, the initial design starts with mapping a target value exchange plan or 'TVEP' to understand the activities and exchange flow required to deliver the value proposition, the links between each partner, and therefore the responsibilities of the various organisations.
According to Giles Morgan, the 'TVEP' is the model for assigning responsibilities to the various partners, each with its own positives and negatives. Here we highlight the top five roles and what they mean to your ecosystem development.
The company sitting at the centre of the ecosystem that has developed and owns the value proposition for the customer. The architect designs and builds the ecosystem, they encourage others to join and defines the governance.
The Eyeball Partner
The company that provides the core customers needed to create the value around the value proposition. Multiple eyeball partners that work together with the architect helps businesses to innovate in highly volatile and uncertain environments. They help to create an adaptative ecosystem.
The operations. This is a partner that supports the facilitation of the ecosystem that could include digital, data or technology expertise. Enablers are companies with unique capabilities allowing the ecosystem to operate or achieve a competitive advantage.
The Partner’s Partner
Whilst the partner’s partner is not critical for the value proposition, they can add additional value to the proposition. These are the actors who produce complementary products and services that contribute towards the architect’s value creation.
The Market Partner
A partner or group of partners that can 'bundle' the value proposition as part of their own product or service. They tend to be companies with a customer segment, be it small or large, that can benefit from the ecosystem’s offering.
Understanding the role your business plays within an ecosystem helps to explain the importance of business ecosystem development. Much more than a network, this is an ever-evolving organism that benefits all businesses along the value chain. More resilient and adaptable to external threats and triggers, business ecosystems are integral to innovation and growth.
And much like in any effective team, there are roles to be played. As Morgan points out, every business must be aligned in its aspirations. Being part of a business ecosystem will be your organisation's strength, whatever role your business plays.
James Perrin was speaking to Etch Horizon Lead, Giles Morgan. For more information about business ecosystem development, and the role of your business in your ecosystem, get in touch.