When Is an Ecosystem an Ecosystem? Or: How to Save Time and Effort

The term ecosystem is currently on everyone’s lips and is becoming increasingly relevant as more and more companies discover the new value creation opportunities that arise from participating in ecosystems. According to Pidun, Reeves & Schüssler (2019), the word ecosystem is now used thirteen times more frequently in annual reports of large corporations than it was a decade ago. Increasingly, ecosystems are becoming part of a company’s own corporate strategy, but in implementing them many companies also encounter some challenges, as the concept is often still poorly understood. An ecosystem is a dynamic structure of various interdependent, yet autonomous, actors that align their complementary activities toward a common goal, the co-creation of value (Betz, 2020). Ecosystems are much more extensive than strategic partnerships because many different actors bring in their own individual strengths and provide services largely independently. Despite this independence, however, the individual players are often closely interlinked, not least based on modern information and communication technologies.

A central characteristic of an ecosystem is a changed value creation logic that focuses on joint value creation and active mutual support. On the one hand, access to supporting resources and capabilities must be created for individual actors, and on the other hand, complementary services must be brought together in a meaningful way to form an overarching offering that, in its entirety, creates greater customer value than any one offering alone.

In addition, ecosystems are often highly dynamic in terms of the continuous further development of services. Co-innovation plays an important role here: a new technology or service from one company will only benefit the network if the ecosystem partners have the necessary technological prerequisites (e.g. standards) to use it[1]. This means that dependencies must be identified and resolved early on. (Adner, 2013).

What Distinguishes Ecosystems from Other Forms of Cooperation?

Various other concepts already exist that describe cooperations or network structures, but these are by no means ecosystems:

Clusters can be described as groups of locally interconnected companies within an industry that lead to more efficient production processes through horizontal and vertical relationships between organizations. Clusters can be illustrated by looking at Silicon Valley. Various IT companies (Apple, Facebook, Google, etc.) and start-ups are centered in Silicon Valley due to the location advantage of proximity to renowned research institutions such as Stanford University, suppliers, partner companies or access to venture capital.

A virtual organization is an organization that reacts flexibly to market opportunities involving other units via a central, customer-oriented integration company. Information technology is needed to support communication between employees. Examples include management consultancies that rely on laptops and smartphones as hardware and use Microsoft Teams, Skype for Business or WhatsApp as software for internal and external communication. 

Strategic alliances are cooperation agreements between several independent companies that are often in direct competition with each other. Here, the terms of cooperation are explicitly regulated in advance by contract. One such strategic alliance is the Star Alliance. The Star Alliance is an aviation alliance consisting of 26 airlines that attempts to achieve efficiency gains by coordinating or sharing certain activities or infrastructures, such as flight times, spare parts ordering or lounges. Members include Lufthansa and its subsidiaries, such as Swiss or Austrian Airlines. Various competitors such as Singapore Airlines and Air Canada are also involved in the alliance. 

Supply chains, for example in the automotive industry, represent systems that are involved in the creation and delivery of a product or service to end customers. They involve highly sequential production processes and contractually strictly regulated procedures that resemble almost vertically integrated organizations. In the production of a VW passenger car, for example, various small and large suppliers are involved, such as the Swiss EMS-Chemie, which supplies high-tech plastic products or mechanical components. (Burkhalter, 2020; Sherer, 2005; Mowery et al., 1996).

8 Criteria for the Identification of Ecosystems

Since the ecosystem approach is often accompanied by a high degree of complexity, it is necessary to define when the concept should be applied. For this reason, 8 criteria are discussed here, on the basis of which an ecosystem can be identified:

Conclusion

The criteria for identifying ecosystems provide a conceptual framework for distinguishing these specific network structures from other structures, so that each company can select the appropriate form of cooperation for itself and, above all, apply the appropriate tools and measures. Not every network construct is the same as an ecosystem and not every business model has the complex characteristics that we encounter in ecosystems. After discussing the individual criteria, it becomes clear that the Amazon marketplace can certainly be described as an ecosystem, especially because of its multilateral relationships, its complementary services, and its less hierarchical structures. Nevertheless, the criterion of the Shared Value Purpose is debatable. Strictly speaking, the Amazon example is about the vision of one company and not of the entire network. However, Amazon also employs actors that bring the company closer to its vision. As a result, the vision is supposed to be paid attention to in the entire network, so that the company vision can still be considered a Shared Purpose due to the network orientation – however, this is contestable due to the individual company perspective. In contrast to Amazon, other marketplaces, such as Walmart’s online store or Zalando, which act as pure intermediaries, can be clearly distinguished from ecosystems.


[1] Examples of co-innovation risks can be found in this article. Among other things, it explains why the iPod was able to establish itself, while PAX tires, for example, disappeared from the market again.


Sources

Adner, R. (2013). The Wide Lens: What Successful Innovators See That Others Miss. New York: Portfolio Penguin.

Adner, R. (2017). Ecosystem as structure: An actionable construct for strategy. Journal of Management, 43(1), 39-58.

Burkhalter, M. (2019). Allocentric Business Models. Dissertation Universität St. Gallen.

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Jacobides, M., Cennamo, C. & Gawer, A. (2018). Towards a theory of ecosystems. Strategic Management Journal.

Mowery, D. C., Oxley, J. E., & Silverman, B. S. (1996). Strategic Alliances and Interfirm Knowledge Transfer. Strategic Management Journal, 17 (Winter Special Issue), 77–91. https://doi.org/10.1002/smj.4250171108

Normann, R., & Ramirez, R. (1993). From Value Chain to Value Constellation: Designing Interactive Strategy. Harvard Business Review.

Pidun, U., Reeves, M. & Schüssler, M. (2019). Do you need a Business Ecosystem? https://www.bcg.com/publications/2019/do-you-need-business-ecosystem

Sherer, S. A. (2005). From Supply-Chain Management to Value Network Advocacy: Implications for E-Supply Chains. Supply Chain Management: An International Journal, 10(2), 77–83. https://doi.org/10.1108/13598540510589151

Teece, D. J. (1986). Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy. Research Policy, 15(6), 285– 305

Christian Betz

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