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In recent years, an increasing number of companies have moved from traditional forms of governance (e.g. vertically integrated, and mostly self-contained), to a more collaborative corporate ecosystem approach.
Driven in large part by digital technologies and increased connectivity, corporate ecosystems are enabling companies to innovate by building interconnected business networks. By connecting with partners, within and outside their industries (even competitors), these companies gain access to more resources and use them to meet customer demand in new and exciting ways.
Enterprises like Softbank, Amazon and Apple have created their own ecosystems with stellar results – leading to seamless customer experiences, higher profit margins and a considerable competitive advantage. In today’s corporate landscape, competition is no longer against a single business, but rather entire ecosystems.
Let’s take a closer look at what a corporate ecosystem is, its characteristics and how it can benefit your business.
What is a “corporate ecosystem”?
Ecosystems are collaborative networks of businesses that work together to build and distribute products and services that they couldn’t achieve on their own. The approach brings together different players, regardless of their industry, and pools their ability to learn, adapt, compete, and innovate exponentially, increasing their chances of success.
The term was coined as early as 1993, by author James Moore in the Harvard Business Review. As described in his article, Predators and Prey: A New Ecology of Competition:
“...innovative businesses can’t evolve in a vacuum. They must attract resources of all sorts, drawing in capital, partners, suppliers, and customers to create cooperative networks. I suggest that a company be viewed not as a member of a single industry but as part of a business ecosystem that crosses a variety of industries. In a business ecosystem, companies co-evolve capabilities around a new innovation…” James Moore
In other words, they enable businesses to transcend their limitations through collaboration, compete more effectively and leverage a broader set of resources to innovate.
8 characteristics of a corporate ecosystem
- Ecosystem networks include players from multiple organisations.
- Players include customers, distributors, suppliers, competitors, manufacturers and even government agencies.
- Complementary capabilities are combined to build innovative products and services.
- Contributions from players are usually customised to fit the product or service offered by the ecosystem.
- Different components within the ecosystem’s offering are built independently by different players, but they usually combine to form a whole.
- Each player can affect the whole, encouraging collaboration.
- The collaborative nature of the ecosystem helps its members grow and evolve together, resulting in relationships that change over time.
- Ecosystems are not hierarchically controlled, but there is some level of coordination, usually in the form of standards, rules and processes.
Lastly, ecosystems come in all shapes and sizes, and they exist across a variety of industries. Here are just a few examples:
- Education: Udemy, Remind
- Mobility: Uber, Lyft
- Retail: Amazon, eBay, Alibaba
- IT: Microsoft, Apple, Google
- Gig-economy platforms: Upwork, Fiverr
- Travel & hospitality: Airbnb, TripAdvisor
- Food and drink: Nespresso
How can you benefit from a corporate ecosystem?
Each of the companies mentioned above is part of a thriving ecosystem that is bringing disruptive new products and services to the market – and the results speak for themselves. Here are some of the benefits that make the corporate ecosystem approach attractive to so many companies:
Increased access to resources, capabilities and funds.
Corporate ecosystems can provide access to new resources like industry know-how, infrastructure, manufacturing facilities, and funding – exponentially expanding a company’s capabilities, sometimes overnight.
In many cases, these resources would have been outside the company’s reach (e.g. due to a lack of expertise in the industry, time and funding). For example, third-party app developers really add to the appeal of owning an iPhone. This added value would have been challenging to achieve if Apple wasn’t part of an Ecosystem.
Accelerated growth through collaboration.
Ecosystems facilitate agile growth in two ways:
- In an ecosystem, different entities have different functions. The structure is fairly modular, making it easy to add new players as the offering grows and evolves.
- With different players contributing mostly assets within their existing resources and expertise, investments aren’t as large. This makes it easier and less risky to scale.
For example, Nespresso was able to work with a network of coffee machine manufacturers like Jura, Krups and Braun to scale its operation faster than it could without them.
Increased adaptability.
An ecosystem’s collaborative nature, with different players delivering different parts of the whole, make it easier to adapt and evolve. If needed, the ecosystem can change its structure and add or subtract players without losing too much (depending on the change required). This makes it easier to meet rapidly changing customer needs or changes in the corporate landscape.
For example, Amazon works with an extended ecosystem of third-party sellers to expand its reach into different markets. This enables the company to make quick pivots based on changing demand.
Final thoughts.
Like most innovation strategies, this approach does have its challenges. Companies within an ecosystem have limited control over other players, are required to make investments and have to split the profits with the group. There is also the risk that the effort might not be successful.
Even with some of the risks involved, it’s easy to see why so many companies choose to become part of a corporate ecosystem. The approach enables companies to learn from each other, grow together, create unbeatable offerings and compete more effectively. When used skilfully, it can yield extraordinary results.
If you’d like to learn more about how your business can benefit from being part of an ecosystem, check out our latest report: How to build a corporate ecosystem.
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