Difference between revisions of "Business Ecosystem"

Revision as of 15:01, 16 July 2021

A business ecosystem is the network of organizations — including suppliers, distributors, customers, competitors, government agencies, and so on — involved in the delivery of a specific product or service through both competition and cooperation. The idea is that each entity in the ecosystem affects and is affected by the others, creating a constantly evolving relationship in which each entity must be flexible and adaptable in order to survive, as in a biological ecosystem.^[1]

The Origins of the Business Ecosystem Concept^[2]
The concept first appeared in Moore's May/June 1993 Harvard Business Review article, titled "Predators and Prey: A New Ecology of Competition", and won the McKinsey Award for article of the year.

Moore defined "business ecosystem" as: "An economic community supported by a foundation of interacting organizations and individuals — the organisms of the business world. The economic community produces goods and services of value to customers, who are themselves members of the ecosystem. The member organisms also include suppliers, lead producers, competitors, and other stakeholders. Over time, they co-evolve their capabilities and roles, and tend to align themselves with the directions set by one or more central companies. Those companies holding leadership roles may change over time, but the function of ecosystem leader is valued by the community because it enables members to move toward shared visions to align their investments, and to find mutually supportive roles."

Moore used several ecological metaphors, suggesting that the firm is embedded in a (business) environment, that it needs to co-evolve with other companies, and that “the particular niche a business occupies is challenged by newly arriving species.” This meant that companies need to become proactive in developing mutually beneficial ("symbiotic") relationships with customers, suppliers, and even competitors. Using ecological metaphors to describe business structure and operations is increasingly common especially within the field of information technology (IT). For example, J. Bradford DeLong, a professor of economics at the University of California, Berkeley, has written that "business ecosystems" describe “the pattern of launching new technologies that has emerged from Silicon Valley”. He defines business ecology as “a more productive set of processes for developing and commercializing new technologies” that is characterized by the “rapid prototyping, short product-development cycles, early test marketing, options-based compensation, venture funding, early corporate independence”. DeLong also has expressed that the new way is likely to endure “because it's a better business ecology than the legendarily lugubrious model refined at Xerox Parc — a more productive set of processes for rapidly developing and commercializing new technologies”.

Mangrove Software, The Montague Institute, Kenneth L. Kraemer, director of the University of California, Irvine’s Center for Research on Information Technology and Organizations and Stephen Abram, Vice President of Micromedia, Ltd., Tom Gruber, co-founder and CTO of Intraspect Software, Vinod K. Dar, Managing Director of Dar & Company, have all advocated this approach.

WHAT ARE THE BASIC TYPES OF ECOSYSTEM? There are two basic types of business ecosystem that can be observed in practice: solution ecosystems, which create and/or deliver a product or service by coordinating various contributors, and transaction ecosystems, which match or link participants in a two-sided market through a (digital) platform. Solution Ecosystems. In its most basic form, a solution ecosystem has a core firm that orchestrates the offerings of several complementors. During the development of a new solution, suppliers to the core firm or to important complementors can also be part of the ecosystem because they are independent and their innovation activities must be coordinated with the other players. Once the basic innovation is accomplished, such suppliers may be restricted to a reduced role in a hierarchical supply chain. In solution ecosystems, the customer is typically not an active member but has a big impact by selecting and combining the offerings of the core firm and the complementors. In addition, intermediaries (such as retailers and other sales agents) may participate in the ecosystem because their activities must be aligned with the other players (not shown in Exhibit 1). Consider semiconductor lithography—the process by which circuit designs are imprinted on a semiconductor wafer—as a simple example of a solution ecosystem. At the core of the ecosystem is the lithography tool, which includes an energy source and a lens system. For the lithography tool to create value, it needs two complements: a circuit mask, which holds the circuit design to be replicated, and a chemical resist, which reacts when exposed to the energy source to replicate the circuit image on the mask onto the silicon wafer. The enormous advances in semiconductor lithography over the past six decades, which enabled the doubling of the number of transistors that can be placed on a chip approximately every two years, required technology revolutions in all components of the semiconductor lithography ecosystem and close collaboration and co-innovation among the independent companies. 2 Other examples of solution ecosystems include credit card systems (linking merchants, consumers, and banks), smart home solutions (combining climate, lighting, entertainment, and security products and services), and 3D printing (integrating providers of printers, substrates, software, and services). Transaction Ecosystems. Transaction ecosystems are characterized by a central platform (today in most cases facilitated by digital technology) that links independent producers of products or services with independent customers. Examples of such platform businesses are abundant. Think of eBay, which links independent sellers and buyers; Uber, which links drivers and riders; and Upwork, which links freelance workers with companies. Transaction ecosystems are two-sided markets that benefit from direct and indirect network effects. Direct network effects occur when participants value the offering more as the number of other participants on their side of the market grows (such as users of fax machines or social networks). More important, indirect network effects emerge when the value of the ecosystem for the participants on one side of the market increases with growing numbers of participants on the other side. For example, an increasing number of drivers attracts additional customers to a ride-hailing platform, which in turn will attract even more drivers, resulting in a positive feedback loop. In this way, and in contrast to solution ecosystems, customers are an integral part of transaction ecosystems. They not only create one side of the market but also contribute data and feedback to the ecosystem. Sometimes, customers even switch into the role of producers—for instance, when viewers on YouTube post their own videos or when tenants on Airbnb offer their own homes on the platform. The two ecosystem archetypes differ not only in their structural form and types of members, but also in their purpose, success factors, and value creation mechanism. The purpose of a solution ecosystem is to create a coherent solution. The core firm is an orchestrator that must motivate and coordinate the innovation activities of the complementors, ensure continuous improvement of the overall product, and safeguard fair value sharing among ecosystem members. Value is created by identifying and removing bottlenecks in the overall system and by exploiting supermodular complementarities (which exist when more of component B leads to increasing returns for component A). Solution ecosystems typically capture the value they create by selling their solution as a product or service.

By contrast, the purpose of a transaction ecosystem is matchmaking: identifying the best fit between the specific needs of a customer and the specific offering of a producer, and facilitating the subsequent transaction. Value creation in a transaction ecosystem is thus driven by the number of successful transactions and their benefits to both sides of the market. For example, a ride-hailing platform creates value by finding the nearest driver for a given passenger, establishing trust between the two through curation and insurance, and performing financial settlement. In addition to establishing and facilitating the matchmaking mechanism, the role of the platform orchestrator is to manage access to the platform, establish standards and rules, and set incentives for both sides of the market in order to grow the ecosystem and exploit network effects. Monetization of transaction ecosystem value is frequently based on transaction fees, charging for advertising, or both.

When you consider building or joining a business ecosystem, you need to be clear about what type would be the best way to realize your value proposition. Sometimes both solution and transaction ecosystems are viable, and we increasingly see shifts between the models and hybrid forms. For example, the Apple iPhone started as a solution ecosystem, with Apple as core firm coordinating a coherent solution with component suppliers, app developers, and telecom providers, but after the introduction of the App Store, it also became a platform and marketplace for selling apps. On the other hand, Airbnb was established as a transaction ecosystem but has recently started to build a solution ecosystem by inviting outside developers to integrate additional applications and services into the platform (such as tools to make travel arrangements or to simplify guest check-in, cleaning, or linen delivery). Similarly, LinkedIn has moved toward a solution ecosystem model after its acquisition by Microsoft.

@@ Line 1: / Line 1: @@
-A [[business]] ecosystem is the [[network]] of organizations — including suppliers, distributors, customers, competitors, government agencies, and so on — involved in the delivery of a specific [[product]] or [[service]] through both competition and cooperation. The idea is that each entity in the ecosystem affects and is affected by the others, creating a constantly evolving relationship in which each entity must be flexible and adaptable in order to survive, as in a biological ecosystem.<ref>Definition - What is a Business Ecosystem? [https://www.investopedia.com/terms/b/business-ecosystem.asp Investopedia]</ref>
+A '''business ecosystem''' is the network of organizations — including [[Supplier|suppliers]], [[Distributor|distributors]], [[Customer|customers]], competitors, government agencies, and so on — involved in the delivery of a specific [[product]] or [[service]] through both competition and cooperation. The idea is that each entity in the ecosystem affects and is affected by the others, creating a constantly evolving relationship in which each entity must be flexible and adaptable in order to survive, as in a biological ecosystem.<ref>Definition - What is a Business Ecosystem? [https://www.investopedia.com/terms/b/business-ecosystem.asp Investopedia]</ref>
 '''The Origins of the Business Ecosystem Concept'''<ref>The Origins of the Business Ecosystem Concept [https://en.wikipedia.org/wiki/Business_ecosystem Wikipedia]</ref><br />
@@ Line 5: / Line 5: @@
 Moore defined "business ecosystem" as:
-''"An economic community supported by a foundation of interacting organizations and individuals—the organisms of the business world. The economic community produces goods and services of [[value]] to customers, who are themselves members of the ecosystem. The member organisms also include suppliers, lead producers, competitors, and other stakeholders. Over time, they coevolve their capabilities and roles, and tend to align themselves with the directions set by one or more central companies. Those companies holding [[leadership]] roles may change over time, but the function of ecosystem leader is valued by the community because it enables members to move toward shared visions to align their investments, and to find mutually supportive roles."''
+''"An economic community supported by a foundation of interacting organizations and individuals — the organisms of the business world. The economic community produces goods and services of [[value]] to customers, who are themselves members of the ecosystem. The member organisms also include suppliers, lead producers, competitors, and other [[Stakeholder|stakeholders]]. Over time, they co-evolve their capabilities and roles, and tend to align themselves with the directions set by one or more central companies. Those companies holding [[leadership]] roles may change over time, but the function of ecosystem leader is valued by the community because it enables members to move toward shared visions to align their investments, and to find mutually supportive roles."''
-Moore used several ecological metaphors, suggesting that the firm is embedded in a (business) environment, that it needs to coevolve with other companies, and that “the particular niche a business occupies is challenged by newly arriving species.” This meant that companies need to become proactive in developing mutually beneficial ("symbiotic") relationships with customers, suppliers, and even competitors. Using ecological metaphors to describe business structure and operations is increasingly common especially within the field of [[Information Technology (IT)|information technology (IT)]]. For example, J. Bradford DeLong, a professor of economics at the University of California, Berkeley, has written that "business ecosystems" describe “the pattern of launching new technologies that has emerged from Silicon Valley”. He defines business ecology as “a more productive set of processes for developing and commercializing new technologies” that is characterized by the “rapid prototyping, short [[Product Life Cycle|product-development cycles]], early test [[marketing]], options-based [[compensation]], venture funding, early corporate independence”. DeLong also has expressed that the new way is likely to endure “because it's a better business ecology than the legendarily lugubrious [[model]] refined at Xerox Parc—a more productive set of processes for rapidly developing and commercializing new technologies”.
+Moore used several ecological metaphors, suggesting that the firm is embedded in a (business) environment, that it needs to co-evolve with other companies, and that “the particular niche a [[Business|business]] occupies is challenged by newly arriving species.” This meant that companies need to become proactive in developing mutually beneficial ("symbiotic") relationships with customers, suppliers, and even competitors. Using ecological metaphors to describe [[Organizational Structure|business structure]] and [[Business Operations|operations]] is increasingly common especially within the field of [[Information Technology (IT)|information technology (IT)]]. For example, J. Bradford DeLong, a professor of economics at the University of California, Berkeley, has written that "business ecosystems" describe “the pattern of launching new technologies that has emerged from Silicon Valley”. He defines business ecology as “a more productive set of processes for developing and commercializing new technologies” that is characterized by the “rapid prototyping, short [[Product Life Cycle|product-development cycles]], early test marketing, options-based compensation, venture funding, early corporate independence”. DeLong also has expressed that the new way is likely to endure “because it's a better business ecology than the legendarily lugubrious model refined at Xerox Parc — a more productive set of processes for rapidly developing and commercializing new technologies”.
-Mangrove [[Software]],The Montague Institute, Kenneth L. Kraemer, director of the University of California, Irvine’s Center for Research on Information Technology and Organizations and Stephen Abram, Vice President of Micromedia, Ltd., Tom Gruber, co-founder and CTO of Intraspect Software, Vinod K. Dar, Managing Director of Dar & Company, have all advocated this approach.
+Mangrove Software, The Montague Institute, Kenneth L. Kraemer, director of the University of California, Irvine’s Center for Research on Information Technology and Organizations and Stephen Abram, Vice President of Micromedia, Ltd., Tom Gruber, co-founder and CTO of Intraspect Software, Vinod K. Dar, Managing Director of Dar & Company, have all advocated this approach.
+WHAT ARE THE BASIC TYPES OF ECOSYSTEM?
+There are two basic types of business ecosystem that can be observed in practice: solution ecosystems, which create and/or deliver a product or service by coordinating various contributors, and transaction ecosystems, which match or link participants in a two-sided market through a (digital) platform.
+Solution Ecosystems. In its most basic form, a solution ecosystem has a core firm that orchestrates the offerings of several complementors. During the development of a new solution, suppliers to the core firm or to important complementors can also be part of the ecosystem because they are independent and their innovation activities must be coordinated with the other players. Once the basic innovation is accomplished, such suppliers may be restricted to a reduced role in a hierarchical supply chain. In solution ecosystems, the customer is typically not an active member but has a big impact by selecting and combining the offerings of the core firm and the complementors. In addition, intermediaries (such as retailers and other sales agents) may participate in the ecosystem because their activities must be aligned with the other players (not shown in Exhibit 1). Consider semiconductor lithography—the process by which circuit designs are imprinted on a semiconductor wafer—as a simple example of a solution ecosystem. At the core of the ecosystem is the lithography tool, which includes an energy source and a lens system. For the lithography tool to create value, it needs two complements: a circuit mask, which holds the circuit design to be replicated, and a chemical resist, which reacts when exposed to the energy source to replicate the circuit image on the mask onto the silicon wafer. The enormous advances in semiconductor lithography over the past six decades, which enabled the doubling of the number of transistors that can be placed on a chip approximately every two years, required technology revolutions in all components of the semiconductor lithography ecosystem and close collaboration and co-innovation among the independent companies. 2 Other examples of solution ecosystems include credit card systems (linking merchants, consumers, and banks), smart home solutions (combining climate, lighting, entertainment, and security products and services), and 3D printing (integrating providers of printers, substrates, software, and services).
+Transaction Ecosystems. Transaction ecosystems are characterized by a central platform (today in most cases facilitated by digital technology) that links independent producers of products or services with independent customers. Examples of such platform businesses are abundant. Think of eBay, which links independent sellers and buyers; Uber, which links drivers and riders; and Upwork, which links freelance workers with companies. Transaction ecosystems are two-sided markets that benefit from direct and indirect network effects. Direct network effects occur when participants value the offering more as the number of other participants on their side of the market grows (such as users of fax machines or social networks). More important, indirect network effects emerge when the value of the ecosystem for the participants on one side of the market increases with growing numbers of participants on the other side. For example, an increasing number of drivers attracts additional customers to a ride-hailing platform, which in turn will attract even more drivers, resulting in a positive feedback loop. In this way, and in contrast to solution ecosystems, customers are an integral part of transaction ecosystems. They not only create one side of the market but also contribute data and feedback to the ecosystem. Sometimes, customers even switch into the role of producers—for instance, when viewers on YouTube post their own videos or when tenants on Airbnb offer their own homes on the platform.
+The two ecosystem archetypes differ not only in their structural form and types of members, but also in their purpose, success factors, and value creation mechanism. The purpose of a solution ecosystem is to create a coherent solution. The core firm is an orchestrator that must motivate and coordinate the innovation activities of the complementors, ensure continuous improvement of the overall product, and safeguard fair value sharing among ecosystem members. Value is created by identifying and removing bottlenecks in the overall system and by exploiting supermodular complementarities (which exist when more of component B leads to increasing returns for component A). Solution ecosystems typically capture the value they create by selling their solution as a product or service.
+By contrast, the purpose of a transaction ecosystem is matchmaking: identifying the best fit between the specific needs of a customer and the specific offering of a producer, and facilitating the subsequent transaction. Value creation in a transaction ecosystem is thus driven by the number of successful transactions and their benefits to both sides of the market. For example, a ride-hailing platform creates value by finding the nearest driver for a given passenger, establishing trust between the two through curation and insurance, and performing financial settlement. In addition to establishing and facilitating the matchmaking mechanism, the role of the platform orchestrator is to manage access to the platform, establish standards and rules, and set incentives for both sides of the market in order to grow the ecosystem and exploit network effects. Monetization of transaction ecosystem value is frequently based on transaction fees, charging for advertising, or both.
+When you consider building or joining a business ecosystem, you need to be clear about what type would be the best way to realize your value proposition. Sometimes both solution and transaction ecosystems are viable, and we increasingly see shifts between the models and hybrid forms. For example, the Apple iPhone started as a solution ecosystem, with Apple as core firm coordinating a coherent solution with component suppliers, app developers, and telecom providers, but after the introduction of the App Store, it also became a platform and marketplace for selling apps. On the other hand, Airbnb was established as a transaction ecosystem but has recently started to build a solution ecosystem by inviting outside developers to integrate additional applications and services into the platform (such as tools to make travel arrangements or to simplify guest check-in, cleaning, or linen delivery). Similarly, LinkedIn has moved toward a solution ecosystem model after its acquisition by Microsoft.
@@ Line 15: / Line 25: @@
 <div style="column-count:2;-moz-column-count:3;-webkit-column-count:3">
 [[Business]]<br />
+[[Business-to-Business (B2B)]]<br />
+[[Business Application]]<br />
+[[Business-Driven Development (BDD)]]<br />
+[[Business-to-Business Gateway]]<br />
+[[Business-to-Consumer (B2C)]]<br />
+[[Business Accelerator]]<br />
+[[Business Activity Monitoring (BAM)]]<br />
+[[Business Analysis]]<br />
+[[Business Analytics]]<br />
+[[Business Application]]<br />
+[[Business Application Programming Interface (BAPI)]]<br />
+[[Business Architecture]]<br />
+[[Business Asset]]<br />
+[[Business Capability]]<br />
+[[Business Capability Modeling]]<br />
+[[Business Ethics]]<br />
+[[Business Case]]<br />
+[[Business Centric Methodology (BCM)]]<br />
+[[Business Continuity Management (BCM)]]<br />
+[[Business Continuity Plan (BCP)]]<br />
+[[Business Continuity Planning (BCP)]]<br />
+[[Business Cycle]]<br />
+[[Business Diversification]]<br />
+[[Business Driven Technology]]<br />
+[[Business Drivers]]<br />
+[[Business Ecosystem]]<br />
+[[Business Environment and Internal Control Factors (BEICF)]]<br />
+[[Business Excellence]]<br />
+[[Business Expansion]]<br />
+[[Business Function]]<br />
+[[Business Function Model]]<br />
+[[Business IT Alignment]]<br />
+[[Business Impact Analysis (BIA)]]<br />
+[[Business Incubator]]<br />
+[[Business Insurance]]<br />
+[[Business Integration]]<br />
+[[Business Intelligence]]<br />
+[[Business Interruption Insurance]]<br />
+[[Business Life Cycle]]<br />
+[[Business Logic]]<br />
+[[Business Management System (BMS)]]<br />
+[[Business Model Innovation (BMI)]]<br />
+[[Business Model for Information Security (BMIS)]]<br />
+[[Business Motivation Model (BMM)]]<br />
+[[Business Objects]]<br />
+[[Business Operations]]<br />
+[[Business Oriented Architecture (BOA)]]<br />
+[[Business Mission]]<br />
+[[Business Vision]]<br />
+[[Business Model]]<br />
+[[Business Goals]]<br />
+[[Business Objective]]<br />
+[[Corporate Structure]]<br />
+[[Corporate Social Responsibility (CSR)]]<br />
+[[Chief Executive Officer (CEO)]]<br />
+[[IT Strategy (Information Technology Strategy)]]<br />
+[[IT Governance]]<br />
+[[Enterprise Architecture]]<br />
+[[IT Sourcing (Information Technology Sourcing)]]<br />
+[[IT Operations (Information Technology Operations)]]<br />
 </div>

Difference between revisions of "Business Ecosystem"

Revision as of 15:01, 16 July 2021

See Also

References