The concept of business ecosystems
E2 chapter 1
Market is a place where 2 parties meet to exchange goods and services.
The parties involved are called buyers and sellers.
Market can be physical – Eg: retail outlet
Market can be online – Eg: Web shopping portal
BUSINESS MODELS TO REMEMBER:
1. PESTEL
2. Porter’s 5 forces
3. Porter’s 3 generic strategies
Technology is changing traditional market system.
DRIVERS OF DIGITAL REVOLUTION
Mobile and
Connected Data analytics
internet
devices and cloud
penetration
User Global Increasing
interfaces acceptability urbanisation
BUSINESS ECOSYSTEMS
Connected Simple and Fast and
and open intelligent scalable
• A business ecosystem can be defined as a network of organisations (suppliers,
distributors, customers, competitors, government agencies, etc.), who are involved in
the delivery of a specific product or service through both competition and
cooperation. This network of organisations and individuals will collaborate and
evolve roles and capabilities to build value and increase efficiency.
• Business ecosystems are broad by nature, potentially spanning multiple geographies
and industries, including public and private institutions, and consumers.
Organisations will therefore come together to create value.
• In a less-competitive ecosystem, groups such as a government, charity and a
community group might collaborate on health or public policy because each entity
has a shared interest and goal.
Fundamental
characteristics
Orchestration Mutuality
the formal or informal coordination of
interactions or collaborations among
reflects an enhanced level of coordination
participants within the ecosystem i.e. the
with formally or informally shared ideals,
coordination, arrangement and
standards, or goals.
management of these complex
environments.
A business ecosystem consists of a network of interlinked companies that dynamically
interact with each other through competition and cooperation to grow sales and survive. It
includes many different stakeholder groups e.g. suppliers, distributors, consumers,
government, processes, products and competitors.
Streamlining flow of ideas, talent, capital
throughout the system
Creating entry barrier
Mechanisms to leverage technology
Goals of ecosystems Driving new collaborations
Reducing costs
Accelerating learning process
Creating new ways of adressing human needs
and desires
• In traditional markets, value creation is linear.
• In ecosystems, value creation is mutual and networked.
Methods of
value capture
in ecosystems
Direct value Indirect value
capture capture
Organisations can capture value directly organisations may capture value indirectly
through transactions that occur within by transfer from an
the ecosystem. Participants facilitate an orchestrator (which captures value directly
exchange of value for goods or from consumers) for goods or
services rendered, for example, when they services.
buy a ticket on public transport. Consumers will pay an orchestrator for
Value capture is instantaneous and goods and services (pay to play), and
corresponds with the transaction. the orchestrator will then allocate payment
to participants within the ecosystem
thereby incentivising them to continue
participating in the ecosystem e.g. buying
a pass for all public transport in a city for
unlimited trips on trains, trams, buses
or subways within a defined time
These 2 methods can be consolidated and used together.
Strategies to
capture value
Complexity Orchestration
Complexity:
Complexity is a function of the number and diversity of participants, the
sophistication of activities within the ecosystem and the range and nature of
relationships that exist within that ecosystem.
High complexity – an environment in which barriers to entry are high and
the threat of new entrants is low. It suggests that a participant’s role in the
ecosystem is relatively secure as their particular capabilities are typically
difficult to replicate e.g. nuclear power, or oil exploration.
Low complexity – an environment in which barriers to entry are low and
the threat of new entrants is high. In this environment, a participant’s
position in the ecosystem is vulnerable, as their capabilities are typically
easy to copy e.g. production of consumables (bakeries), retailing
(individual boutiques), fitness instruction etc.
Orchestration:
Orchestration depicts the extent of an organisation’s influence over others
within an ecosystem, the formality of ecosystem interactions and the degree of
enforceability and compliance.
Tight orchestration reflects an environment in which orchestrators have an
ability to influence behaviour or actions across the entire ecosystem.
For example, financial services, in which transactions are governed by
stringent and regulated rules of privacy, security and compliance.
Interactions will by necessity be rules-based, with orchestrators able to
enforce their will over others.
Loose orchestration refers to an environment in which no individual participant has
significant influence across the ecosystem. There is often an absence of strong regulation
with limited ability for any particular participant to enforce its will over others.
For example, the Internet in regimes that have freedom of speech laws. While some
content and behaviour is specifically outlawed on criminal grounds in the most part,
individuals and organizations are free to express themselves and behave any way they
want.
Based on this premise that Ecosystems are not all alike and as they differ in specific
fundamental ways there will be a number of approaches necessary to depict appropriate
strategies to deal with these differences.
These are referred to as the Shark Tank, the Hornet’s Nest, the Wolf Pack and
the Lion’s Pride:
Shark Tank – low orchestration and low complexity. Each participant will fend for
themselves, identifying opportunities, aligning capabilities and making connections.
An example of Shark Tank is the retail ecosystem of the future where new technologies will
make entry costs into retail ever lower and competition will become even more intense.
Consumers will have low switching costs, changing between products at will, while the
potential competitive threat will increase as new entrants or existing players watch on
ready to take advantage of opportunities. Search costs will become ever lower, with
multiple organisations seeking to attract and connect with consumers.
Lion’s Pride – threats of new entrants are low due to the relative complexity of the
activities in which participants are engaged. In the Lion’s Pride orchestration tends to be
formal. The orchestrator will enable and monitor activities within the ecosystem and
remunerate individuals or organisations for their participation.
An example of Lions Pride will be the future healthcare industry where an orchestrator will
facilitate and manage the interaction between patients, providers and physicians into a
fully integrated health, wellness and medical experience.
Hornet’s Nest – complexity is high, but orchestration is low. Ecosystems of this type tend to
be simpler, with most of the value being transferred directly by means of payment for
specific activities.
An example will be the future of Media and Entertainment business where will likely
become the Hornet’s Nest ecosystem where consumers will likely be unwilling to be tied to
a single system to view content. They will demand whatever content they want, on
whatever platform or device they want, whenever they want it, anywhere in the world.
Wolf Pack –low complexity and high levels of orchestration. Barriers to entry are low,
indicating that entry into the ecosystem is relatively easy.
Orchestration is however high, suggesting that while individual activities within the
ecosystem are simple, the overall environment created is potentially highly sophisticated.
An example of Wolf Pack maybe the future Energy and Utilities industry. In the future,
every home, building, facility or appliance may be both a consumer and producer of energy.
The presence of a strong orchestrator will ensure that energy flows are measured, reserve
energy is stored and networks remain in good working order.
Participants
in ecosystems
Suppliers Producer customer competitor etc
To manage the roles of the participants, we have to ask ourselves 3 questions:
1. The precise role of the participant within the environment.
2. Each participant’s reach through the environment.
3. The capability or key value proposition.
REGULATING ECOSYSTEMS
• Regulation is always contentious to some degree but in relatively slow-moving
industries the historical intent and enforcement of the rules can be understood well
enough by all involved.
• Constant, high-impact innovation is a prominent new feature in businesses that used
to advance only incrementally.
Challenges to
regulations
Speed of Innovators Ecosystems Innovations
change find are constantly cross lines of
hindered backdoors evolving jurisdiction
DIGITAL MARKETING ECOSYSTEM
Contextualised interactions
Seamless experience across channels
What does the Anytime Anywhere
digital customer Great service
want? Self service
Transparency
Peer review and advocacy
How to keep ahead of customer expectations
Design thinking Experiential pilots Prototyping Brand atomisation
instead of designing a
organisations will need
single product or
this refers to the need to design their
service that can be
to monitor how Making prototypes offerings so that they
marketed to many
customers behave and which are not 100% can be more widely
customers, there
to gain an appreciation complete to get distributed and be part
should be a shift in
of their reaction to new customer feedback of the platform that is
mind-set to designing
experiences. offered by other
many experiences for
providers
one customer.
