This is the inaugural edition of a blog series in which I will cover a variety of topics related to the big transformations that are happening for organizations and their leaders since we entered the digital age. Every two weeks I will share reflections and stories about the many conundrums of the 21st century organization: digital transformation, organizational innovation, customer centricity, ambidextrous leadership, transformational learning architectures, the interplay of organization and society, human centered organizations, corporate citizenship – you name it. All in the spirit of Peter Drucker, who was a visionary on these issues in many ways.
To kick things off, I will focus on a topic which has been at the heart of my research and that is equally close to the heart of many senior executives and companies have been working with: How to thrive in the new ball game of business ecosystems.
It is a new ball game indeed. Over the last two or three years, the concept of business ecosystems has gained significant prominence, to the point that it is about to replace “digital transformation” as the buzzword du jour. The buzz is not surprising. As digital technologies disaggregate existing industries and value chains, companies face transformation challenges and growth opportunities that requires them to ‘jump’ across conventional boundaries that used to define their ‘space’. They are forced to form novel alliances and partnerships to complete a value proposition, design a compelling business model, or gain access to a new market. In short – they have to become ecosystem players.
Once companies start to engage in business ecosystems, they soon realize that they have unleashed a beast that challenges the very cornerstones of their strategy and organization. Ecosystems require massive cross-boundary collaboration, within and beyond an organization. This does not bode well with the silo culture we often witness in large corporations. Ecosystems shatter industry boundaries and the entrenched assumptions of the “rule of the game” – an assault on the cognitive maps of industry leaders. They require agile structures and decision rules that empower the periphery of an organization, leaving the corporate center in an enabling role. They create a new level of leadership challenges as ecosystem governance follows very different rules than corporate governance which is regulated by an established legal framework. The list goes on.
This is why I think that the challenges related to business ecosystem leadership and organization are a perfect topic for the launch of a newsletter about the Future of Organization. Over the next few weeks, I will share with you the cornerstones of a capability framework for business ecosystem leadership and organization that we recently developed at our Center at the Drucker School of Management.
But first things first. To begin the conversation, let’s create a shared understanding what we mean when we talk about business ecosystems.
A Working Definition of Business Ecosystems
As it often happens with fads, a term tends to get picked up and used in a variety of contexts, without a clear definition or shared understanding. This is even more the case if the term becomes a buzzword. The notion of the term reaches from ecological metaphors (i.e., balanced systems of natural equilibriums) to a synonym for complex interdependent value-creation relationships, and from platform business models to collaborative architectures at large.
Having a shared understanding of foundations is critical for any dialogue about a subject. So here is the definition we have been working with: We define a business ecosystem as an interdependent value-creation network whose members collaboratively contribute to the creation and delivery of products and services. Such a network may include customers, suppliers, distributors, technology partners, joint ventures, strategic alliances, government agencies, research institutions, financing agencies, industry associations, and others who play a critical role in providing the value proposition to the market.
This definition implies:
- Interdependence and horizontal network structures are key features of ecosystems, which distinguishes them from traditional linear value chain models.
- Platform businesses are just one form of ecosystems. Ecosystems may include platform elements or not.
- Subsystems of an organization (such as functional areas, business units, projects, etc.) may act within ecosystems and/or create their own sub-ecosystems.
- Ecosystem analysis is complex and a matter of perspective; it reaches from understanding micro-relationships within and between ecosystem stakeholders to the recognition of global inter-industry dynamics. All levels of analysis are of strategic importance.
- Ecosystems are moving targets. They are fluid and dynamic. New entrants with new technologies may significantly change power equations.
I do not claim that this definition is better or more appropriate than others. However, as issues related to business ecosystem management continue to attract both scholarly research and practitioners’ attention, it is important to establish a shared understanding of the subject. Let me know if you agree with how we framed it.
So far for a first taste of the subject. In my upcoming newsletters, I will walk you though the framework, which consists of three dimensions and nine subdomains. Structured along ecosystem strategy, organization, and relationships, those domains form a powerful combination of elements that provide a guideline for companies who want to thrive in the new ecosystem ball game. I hope you will join me on this journey.