Business Ecosystems

What Is a Business Ecosystem?

Much like real-life ecosystems, a business ecosystem is the network of organisations which fulfils a particular role of contributing to a system's overall success. It is a pool of mutually-dependent systems, interconnected by various members, including suppliers, distributors, customers, competitors, government agencies, and other stakeholders. 

As rightfully explained by Harvard Professor Marco Iansiti, the business ecosystem includes companies whom one outsources the business functions. As a larger company, you may want to hire another company to provide assistance with financing, or to help you technically to make your business more tech-savvy.  

The makers of the products which are used to run your company are also a part of the business ecosystem. This vast network of systems also includes competitors and customers. Each of their reactions and feedback ultimately has an impact on the products or services you deliver and the processes you built. 

Notably, the business ecosystem also comprises entities such as media outlets, government agencies and regulatory bodies. These entities perhaps will not have an immediate effect, but their influence leave a powerful impact on the business in the long run.

Therefore, each entity in the ecosystem is directly or indirectly connected to each other and affects each other. This world's living organisms in the business world continually create an evolving relationship among each other. The business ecosystems are based on a robust framework, which allows the entities to be flexible and adaptable to survive in the competitive market. 

Why a customer's role is gaining importance in the business ecosystem? 

Previously business ecosystems paid little attention to the role of customers. Their participation in the business ecosystem was not accounted for much. The studies conducted on the ecosystem revolved around the companies as the protagonists of the entire system.

Companies are believed to be the primary keystone in the business ecosystems.  The entities which exist in the system at large are responsible for shaping the system. The business experts who developed strategies for the business ecosystem primarily created them from the business perspective. Their main objective was to build such strategies to enrich the businesses and the entire ecosystem.

However, slowly the scholars started to focus on the importance of customers. Customers gradually became the critical factor, which drives the demand for products and services and thus creates a space for the companies to participate in the ecosystem. Without customers, there would be no business, therefore it is shifting its role from sideline to the frontline.

The customers’ tastes and preferences influence every aspect of a business’s ecosystem and gives the company a push in the right direction to build a sustainable ecosystem. Hence, businesses must understand customers' role in the industry and recognise the need to cater to customers’ demands strategically.

The ecosystem, which is created as the wheel moves forward, becomes the process in which customers become active participants and not just mere spectators. Even though many experts do not consider customers a direct component in the ecosystem, they are an essential aspect one can't ignore. 

How to be a successful player in the business ecosystem? 

There are many ways to build a successful business ecosystem and participate in expanding already existing ones. 

• Long-term strategy:There are some organisations which create their own broader ecosystems with their strategies embedded to their vision and mission. Organisations like these strive to implement procedures to create a more extensive system revolving around their business and sustainable growth.

It is vital for companies to think long term; how the industry will shape up in the future and how the strategies will transform the business from its core. Each employee from top to bottom should be encouraged to participate in the business structure to turn their ideas into living partnerships. 

• Find that one void to fill in: Once the strategy is embedded with the ecosystem program, it is time to brainstorm about the potential opportunities. Here, every organisation needs to understand why they are running the business and for whom.

Organisations could also cater to market pain points while creating new ecosystems or joining the existing ones.

Another essential aspect that all businesses need to understand is the risk of digital transformation. For instance, a popular ride-sharing app could potentially change the demand for cars for sale. Here, the car company can partner with a ride-sharing platform and offer its vehicles. 

• Find the purpose: Recognise the purpose of the entire exercise, why does a business want to build or join a ecosystem in the first place? Whether it wants to make the customers' life easier or grab the attention of new customers, businesses can tap into three models.
  • First is the acquisition model wherein the organisations buy other companies to broaden their reach of activities and diversify their portfolio.
  • Second is the collaboration model, where entities can partner with other companies to launch services and products they are offering.
  • The third is the investment model, where the company can invest in small players in the industry.

How does the competition affect ecosystem?

A robust ecosystem is known to create a monopoly in the market and barred entry for new competitions. The potential entities could have a duplicate or a better product or services to offer. However, these new entrants have to compete against the entire system of the competitor business, chain of supplies, and connected firms in the network. The latest entry can be very tricky and challenging, and it can make or break the new entrant and the existing ecosystem of the competitor.