Ecosystems Thinking, An Enduring Model or Passing Fad?
Ecosystems thinking is a mental model that borrows from the biological metaphor of “ecosystems”. British botanist, Arthur Tansley coined the term in a 1930s publication. The term has now found currency in business parlance. James Moore first applied it to business in his articles in the Harvard Business Review. The concept has now been popularised in business modelling and seems to be no passing fad.
Business has borrowed metaphors from other disciplines from time immemorial, for example, strategic management comes from military and war studies. Along similar vein, ecosystems thinking extrapolates symbiosis, synergy and mutually beneficial co-existence and co-evolution from biological ecosystems to the business environment.
The concept echoes Peter Senge’s Systems Thinking Theory and both concepts draw their overarching metaphor from biology and ecology. A biological ecosystem refers to a community of living and non-living elements interacting, and influencing each other within a shared biosphere. The permaculture model farming harnesses co-existence advantages and ecosystems thinking has parallels with that. The big idea behind ecosystems thinking is that, “the more the relationships and networks, the more productive over time, and the less susceptible to catastrophe and risk.”
What exactly is Ecosystems Thinking? The concept has been defined variably as, “A mental model that envisages business networks of mutual benefit and synergy.”
“Business approach that fosters collaboration and competition for mutual benefit.”
“A dynamic and collaborative approach to management for co-evolving communities of diverse players who create and capture new value through increasingly sophisticated models of both collaboration and competition”
The key elements of ecosystems thinking are:
- Establishing or identifying networks
- Identifying synergies, symbiosis and mutual benefit in these networks
- Identify grounds for collaboration
- Collaboratively exploit new opportunities and scale existing ones
- Agility and velocity in such exploitation of opportunities
- Identifying competition in these networks
- Identifying commonalities and shared environmental circumstances, shared resources
- Agile, innovative, creative and adaptive response to constraints and risk factors
An ecosystem thinking mind-set seeks to attract resources towards business solutions, drawing together the following:
To create cooperative, collaborative networks for mutual benefit.
Ecosystem collaborations can be around:
- Joint product or service development, to meet customer needs;
- Shared service delivery along a product or service value chain.
Ecosystems can be internal ecosystems within a business for the offering of a series of products or services that offer customers a seamless customer service experience across a variety of services or it could be external ecosystems across businesses for the offering of a variety of services across a product or service value chain.
The business models so created, establish collaborative ecosystems of co-existence and co-dependence much the same way a biological ecosystems. In agriculture, the permaculture model exemplifies this perfectly, by companion planting for soil nutrient replenishment, addition of water features to attract pollination agents and keep away bugs, etc.
To create robust and agile business ecosystems, a lot of groundwork needs to be done in the form of thorough situational analysis, competitive field analysis, internal and external environmental scan with tools like Five Forces, SWOT and PESTEL etc. This helps establish respective competitive advantages of the collaborating partners for engagement.
Ecosystems thinking as a model has been adopted by businesses across industries but chiefly in technology and financial services sectors. What benefit and advantage have those that adopted it reaped? What leverage has been gained?
Key benefits of ecosystems thinking and approach are:
- Ecosystems enable and encourage coming together of different organizations and individuals to create, scale and serve markets beyond the capabilities of any one organization or individual, increasing business throughput for all participants
- Ecosystems enable deployment of technologies, tools and resources at a larger scale, latently increasing productivity for all participants
- Shared interests, purpose and values of cooperation and collaborative enterprise sustain the ecosystem
- Creates new ways and models to address customer needs
- Creates capacity to meet future needs
- Promotes creative and innovative problem solving
- Gives a solution focused approach to business
- Gives a customer focused approach to business
- Creates business agility and velocity
- Promotes the learning organization
Ecosystems Thinking Evolution
Moving from Firm oriented thinking to ecosystems thinking
|1||Partner Cooperation||Partnership focus Vertical industry focus Traditional value & supply chain Profit orientationPlatform awareness|
|2||Task Collaboration||Task orientated connection and collaboration Narrow focus and limited usage of ecosystems modelOpportunistic and initiative orientation Loose alliances Industry blurring Platform orientation|
|3||Business Model Collaboration||Co-evolving network aggregators (service providers who consolidate multiple easy-to-use services into one ) and modular producers (plug and play producers) Firm centric, for profit orientation Broad focus and usage of ecosystem model Co-created value propositions Spirit of co-opetition (collaborative competition)Industry erosion Market fragmentation Cost reduction Horizontal value creation Rapid scaling Platform enabled|
|4||Ecosystem Model Integration||Ecosystems thinking and behavioursIndustry sun settingOrchestration of economic agents Market consolidation early stages Shift to value design: co-created value pillars of creation, delivery and capture Innovation Accelerated learning: learning organizations and learning individuals Next generation capabilities and structural changes: long range view and orientation Approaching optimum cost reduction Platform centric|
|5||Value Integration||Decentralized autonomous cooperative networks Final stages of market consolidation Finite set of ecosystems Industry demise Complex webs Purpose orientation: societal benefits and life experience Complete paradigm shift Continual innovation Optimum cost reduction Hyper productivity Platform ubiquitous: general purpose platform|
Let us look at a few organization that have adopted business ecosystems and see their evolution:
- Apple Inc.
- Mobile Tele Systems
Apple Business Ecosystem
Apple Inc. created a business ecosystem around its iOS and created “a family of products” which gives integrated and seamless customer experience. The family of products or ecosystem gives Apple a captive market for its product, guaranteeing bigger and continual streams. Apple’s iPhone, iPad, iPod, MacBook, all operate on IOS. In this family of products, Apple provides for smartphone, tablet, and laptop user needs. The Apple business ecosystem went further to include products like iTunes for music, Apple Pay and the iStore. This product ecosystem covers the full range of customer needs in terms of digital products. Apple offers the full range on the iOS to dissuade brand switching hence a locked ecosystem of products and services.
Alibaba Business Ecosystem
The Alibaba business ecosystem is pivoted on backwards and forward integration. It contrasts with the Apple business ecosystem in that it creates synergy and symbiosis with external business environment. At Ali Express, manufacturers bring their goods for marketing and selling to end users. Alibaba provides the selling platform on Ali Express, its warehouses for storage of goods as well as courier services to clients.
The ecosystem provides competitive advantage to manufactures by reducing costs e.g. inventory holding costs, allowing for bulk distribution, and mitigating language barrier of Chinese manufacturers in international trade. To the end users, the Alibaba Business Ecosystem provides advantage of single purchases on goods from the Chinese market, which had hitherto been not available. The Chinese manufacturers favour wholesale and bulk batch purchases, which the ecosystem provides. End users on the other hand are provided for with retail advantage. The ecosystem thus provides mutual benefits and collaborative advantage to partners in the ecosystem.
Sberbank Business Ecosystem
The Sberbank of Russia introduced a “family of banking products” to create a business ecosystem around product synergy. The availed adds on to their corporate banking clients in the form of salary and payroll services. Corporate clients can pay their employees through Sberbank and the bank handles the client’s whole payroll administration. The bank proceeds to extend special service packages to the employees of such corporate clients. They extend a package of special services like insurance products, life assurance products, mortgage, loans, saving and investment products. The employees of the corporate clients provide a captive market for the banking products. The Sberbank Business Ecosystem, like the Apple Inc. is pivoted around a family of related products which create a captive clientele.
The Mobile Tele Systems, MTS of Russia also created a business ecosystem around related telecoms products to create an ecosystem of captive clientele.
Amazon and Ebay have platforms that bring together buyers and sellers, much like Alibaba. While Amazon has an elaborate business ecosystem, Ebay does not have as elaborate an ecosystems as Amazon and Alibaba.
Can we map the evolution of these entities? Is ecosystems thinking as a business model still in its infancy? Has it come of age?
Is it a passing fad or it is here to stay?
Well you be the judge!