Business ecosystems are increasingly becoming a part of everyday business across industries. In this new world, former foes are fast becoming friends with digital platforms and data sharing fueling new partnerships that accelerate innovation. But turning a business ecosystem into a viable and sustainable revenue generator is easier said than done.
Below we take a look back at the origin of the business ecosystem while offering up some strategic guidance to help keep your ecosystem—and your place in it—strongly positioned for future growth.
Now, properly defining this often-overused buzzword requires digging a little deeper to uncover its true meaning—and value. The term “business ecosystem” can be traced back to a 1993 Harvard Business Review article, titled Predators and Prey: A New Ecology of Competition, by James F. Moore. In the article, Moore first introduced the concept, defining it as follows:
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.
Fast forward to today, and the definition still holds true. Albeit many of today’s most disruptive ecosystems involve some form of digital transformation. This includes interdependent companies that share common technology platforms, applications, and users, as well as new business models that leverage data sharing across participants and even competitors. Uber, Facebook, Amazon, and even established players in the auto industry are forming new collaborations. In fact, the rise in digital business is driving a shift to growth driven by these ecosystems. According to IDC’s recently released 2020 Worldwide IT Predictions, by 2025, 20 percent of revenue growth will come from “white space” offerings, which combine digital services from previously unlinked industries.
So, how you can ensure that your ecosystem is an engine for long-term growth?
A recent Harvard Business Review (HBR) article makes the case that simply building an ecosystem is not enough. Rather, success requires companies to “sustainably monetize” it. As a result of their work studying company ecosystems, the authors of the piece, Peter Williamson, Professor of International Management at the Cambridge Judge Business School and Arnoud De Meyer, University Professor at Singapore Management University and Chairman of the Stewardship Asia Centre, uncovered three common things companies can do to create a “sustainable profit stream” from their ecosystems. They include:
- Identify a keystone contribution: According to the HBR article, firms must determine the unique role or element that it controls or even owns within its ecosystem. This keystone contribution must be something that generates value and is essential to the long-term growth of the ecosystem.
- Establish a “tollgate” to collect revenues: Companies must have a clear view and mechanism for collecting revenue. This can include license fees, royalties, or commissions on transactions within the ecosystem.
- Leverage the ecosystem to innovate again: Leading companies find ways to keep improving—and growing—by using reliable and ethical channels to accumulate data on the activities of partners and customers and to establish processes for innovating on insights gleaned.
To learn more, read the entire HBR article.