The future of ecosystem businesses

More and more business leaders assert that firms—their own and others—won’t survive without adopting an ecosystem model. But most large corporations have no idea what an organizational ecosystem is and would likely lack the flexibility to put one in place. 

Asset-heavy organizations, typically value-chain firms are organized as hierarchies with important tasks grouped from sourcing to design, manufacturing, and marketing. Conversely, platform companies facilitate transactions (think Uber, Netflix, Door Dash, and Amazon). They create experiences and provide connected services.

Platforms have the advantage of scaling faster and at lower costs than value-chain firms but run the risk of being copied and may not benefit from broader networks when their demand is local.

What any ecosystem can do is address a broader variety of customer needs. Partnering with other firms or business units to provide complementary products or services while sharing data collected on the platform. 

The Interaction Field: The Revolutionary New Way to Create Shared Value for Businesses, Customers, and Society, a book by strategy consultant Erich Joachimsthaler, says the ecosystem model of management is “intentionally organized to generate, facilitate, and benefit from interactions rather than transactions. It is designed to facilitate communication, engagement, and information exchange among multiple people and groups—from partners, suppliers, developers, and analysts, to regulators, researchers, and even competitors—not just the company and its customers. Unlike interactions that, say, match a buyer to a seller or offer a product in exchange for money, these interactions don’t always focus on just one outcome.”

Individuals and groups are referred to as participants in the interaction area because they engage, share, contribute, remark, benefit, and learn. They are not profit-maximizing targets or partners. They’re active contributors to value creation and can engage with one another through solid interactions.

While partner recruitment isn’t uncommon in the formation of an ecosystem business, participants often join freely because they recognize the value for themselves and that as others enter the field, the value creation strengthens. 

“Intentionally organized to generate, facilitate, and benefit from interactions rather than transactions,” says the interaction field company. It is intended to allow communication, engagement, and information exchange across a variety of people and groups, not just the company and its customers—from partners, suppliers, developers, and analysts to regulators, researchers, and even competitors. Unlike interactions that, for example, match a customer with a vendor or supply a product in exchange for money, these interactions may not always have a single goal.”

The ecosystem model has three essential components:

Problem-solving, value creation, and shared prosperity are key to the ecosystem mindset. Rather than gathering partners under one roof to leverage, regulate, and optimize them individually, the ecosystem works to establish connections with ecosystem players and market makers.

Teamwork, group participation, and sharing are key to success. Attacking one’s competitors, defending assets, safeguarding brands, erecting barriers to entry, or seeking protection for practices and markets are not in the cards. Rather than pushing items and images onto the market, the ecosystem uses gravitational attraction to lure people and partners into its field.

The structure is adaptable. Structured as a network, the ecosystem invites players from well beyond its typical organizational boundaries and fosters interactions among them. By accepting other participants with varied offerings, customer reach expands along with added value.

A vertical hierarchy of authority is incompatible with an ecosystem, which is one of the major roadblocks for traditional businesses attempting to transform into ecosystems. Most traditional businesses lack the agility to implement a business ecosystem and have yet to transition from a hierarchical authority structure to a collaborative network. Over time, however, organizational dynamics will need to change to keep active and sustainable in the market mix.

For more information on ecosystem businesses, visit https://www.workspan.com/ecosystem-business-management-definition/.