Business ecosystem
The term ecosystem was coined by British botanist Arthur Tansley in 1930s to describe community of organisms that interact with each-other and their environments. Later in early 1990s, James F. Moore applied the term ecosystem into business environment and used the term business ecosystem for the first time. Nowadays, the term business ecosystem is extensively used in high tech industry.
Business ecosystem can be defined as “a network of different entities that are dynamic and interact with each other to create and exchange sustainable value”[1]. Specifically, it is a network of different entities that provide greater effectiveness and capacity than the sum of its individual elements.
Alternatively, business ecosystem is “a purposeful business arrangement between two or more entities (the members) to create and share in collective value for a common set of customers.”[2]
Moore (1997)[3] divides business ecosystems into the following four stages:
1. The pioneering stage, where the ecosystem is formed.
2. The expansion stage, as the ecosystem extends to achieve maximum market coverage and critical mass.
3. The authority stage, where the ecosystem matures.
4. The renewal or death stage, where species must work together to radically improve or reinvent the ecosystem to sustain its ongoing growth.
Ecosystem creates entry barriers for new market players, because potential entrants will have to compete not only with specific products and services, but with the entire system of complementary businesses, products and services.
Business ecosystem can be divided into three large categories:
– Solution ecosystem is a type of ecosystem that produces products and services.
– Transaction ecosystem is based on a digital platform that integrates suppliers to the platform and platform users. For example, ride-hailing platforms such as Uber and Lyft connect drivers with riders.
– Hybrid ecosystem combines features of both solution ecosystem and hybrid ecosystem.
Dimensions of Business Ecosystem
Business ecosystem has the following dimensions:
1. Ecosystem strategy. Decision regarding the role of a company within the ecosystem. Companies can choose one of the following roles:
a) Orchestrator(s).
b) Core partner(s).
c) Technology enabler
d) Complementors
f) Resellers
2. Degree of openness. An ecosystem can be public, private or hybrid.
3. Engagement of diverse participants. Integration of various elements such as smart advisors and artificial intelligence into the ecosystem.
4. Types of ‘relationships’. Relationship of increasing numbers of companies within digital platforms.
5. Form of value exchange. Money is not the only form of value exchange. Other forms of value exchange within ecosystems include information, reputation, services, and other non-monetary forms of value.
6. Diversity of ‘industries’. Expansion of ecosystems promotes cooperation between organizations. Organizations from primary, adjacent or even distant industries can cooperate to offer increased value proposition.
7. Multiple ecosystems complexity. Major companies such as Amazon, Alphabet and Microsoft are involved in multiple ecosystems. Some overlapping ecosystems will create a new ecosystem, while other overlaps will highlight redundancy.
In this portal you can find ecosystem analysis of some major companies.
References
[1] Meaning of Business Ecosystem (n.d.) Wall Street Mojo, Available at: https://www.wallstreetmojo.com/business-ecosystem/
[2] Safarin, G. (2021) “What business ecosystem means and why it matters” Ernst & Young, Available at: https://www.ey.com/en_gl/alliances/what-business-ecosystem-means-and-why-it-matters
[3] Moore, J.F. (1997) “The Death of Competition: Leadership and Strategy in the Age of Business Ecosystems” Harper Business