Business Ecosystem Strategy: Evolving Over Time

In today’s rapidly evolving world, no major industry remains untouched by the emergence of business ecosystem strategy. From media and technology to energy and mining, these ecosystems are transforming the way companies operate and collaborate. A business ecosystem consists of a network of largely independent entities that work together to deliver complex solutions that would be impossible to achieve individually. These ecosystems generally fall into two categories: transaction ecosystems and solution ecosystems.

Types of Business Ecosystems

Transaction ecosystems revolve around a central platform that connects different market participants, such as buyers and sellers, within a digital marketplace. This model is exemplified by online retail giants that facilitate transactions between users and suppliers. On the other hand, solution ecosystems involve a core company that coordinates the offerings of multiple partners to provide a comprehensive service or product. A smart-home ecosystem, where various manufacturers collaborate to create an interconnected home environment, is a prime example of this approach.

Both types of business ecosystems strategy have the potential to generate substantial value rapidly. Since 2015, over 300 ecosystem-based startups have reached unicorn status, achieving valuations of over $1 billion.

The Growing Importance of Ecosystem Strategies

The remarkable success of these startups, along with the dominance of Big Tech companies that have leveraged ecosystem models, has propelled business ecosystems to the forefront of strategic planning for established companies. More than half of the S&P Global 100 firms are currently involved in at least one ecosystem, and a recent survey conducted by BCG among 206 executives in multinational corporations revealed that 90% of them plan to further expand their involvement in ecosystems.

Defining Your Ecosystem Strategy

Despite the clear benefits, many leaders of established companies are still uncertain about how to formulate an effective ecosystem strategy. This article seeks to address that uncertainty by offering a structured approach to developing a business ecosystem strategy. Drawing on three years of research and extensive experience working with large enterprises across various industries and regions, we’ve identified eight fundamental questions that can guide companies through the process.

These questions provide a step-by-step framework to help you understand, define, and execute a successful ecosystem strategy tailored to your business needs.

1. Should Your Business Engage in an Business Ecosystem Strategy?

While startups and tech firms are often seen as the primary beneficiaries of ecosystem-based models, established companies can also reap significant rewards by adopting these strategies. In fact, many incumbent firms have successfully leveraged business ecosystems to create substantial value.

Success Stories from Traditional Industries

Take the financial services sector as an example. DBS in Singapore and PingAn in China have both developed thriving ecosystems that have yielded impressive shareholder returns, outperforming their regional competitors by more than double between 2015 and 2020. These cases demonstrate that ecosystems aren’t just for tech companies; they can be a powerful tool for traditional industries as well.

The Risks and Realities of Ecosystems

However, it’s important to recognise that entering into an ecosystem is far from a guaranteed success. Building and maintaining an ecosystem can be both costly and risky, and the majority of ecosystems ultimately fail. Our research indicates that fewer than 15% of ecosystems are sustainable in the long term. Additionally, when examining value creation among over 50 of the largest banks from 2015 to 2020, we found no clear link between participating in an ecosystem and overall shareholder returns.

The Importance of Clear Motivations

The key to a successful ecosystem strategy lies in understanding the motivations behind your decision to participate. Before diving into the ecosystem world, it’s crucial to have a clear understanding of why you want to take this step and what specific goals you hope to achieve. We’ve identified five valid reasons for either creating or joining a business ecosystem:

1. Expanding Market Reach for Existing Products: Ecosystems can open up new sales channels for your current offerings. For example, many appliance manufacturers have joined smart-home ecosystems to broaden their market access.
2. Enhancing the Core Business with Complementary Products: Partnering with other companies within an ecosystem can add value to your core offerings. Video game console manufacturers, for instance, have created ecosystems with game developers to strengthen their platforms.
3. Protecting the Core Business from Competing Ecosystems: Engaging in an ecosystem can serve as a defensive strategy against competitive threats from neighbouring ecosystems. Some agrochemical companies, for example, have joined smart-farming ecosystems to safeguard their core businesses from the rise of precision-farming platforms.
4. Accessing Adjacent Revenue Streams: Ecosystem partnerships can help extend your business into related markets. For instance, some banks have developed ecosystems to expand from their core mortgage services into broader real estate offerings.
5. Launching New Ventures Independent of the Core Business: Ecosystems can also provide a fertile ground for launching new ventures, offering opportunities for learning, financial gains, or diversification. Allianz X, the investment arm of the German insurance giant, has built a portfolio of companies, with over two-thirds operating on ecosystem-based models.

Deciding to Engage

If one of these motivations aligns with your company’s strategic priorities and you’re prepared to invest in the long term, including embracing experimentation and learning from failure, exploring the ecosystem opportunity is a wise move. Should multiple motivations apply, prioritise the one most critical to your business goals, as this will guide your subsequent strategic choices and actions.

2. How to Identify Viable Opportunities for Business Ecosystem Strategy

At the heart of every thriving business ecosystem lies a compelling value proposition—one that addresses a clear and pressing business problem. Therefore, when seeking out potential ecosystem opportunities, it is essential to adopt an outside-in perspective that focuses on market needs, rather than an inside-out approach driven by your company’s existing assets and capabilities.

Finding Opportunities in Customer Frictions

The most effective way to pinpoint viable ecosystem opportunities is by closely examining the customer journey to uncover market frictions—those frustrations, unmet needs, and desires that are too complex for a single company to address alone. Focus on frictions that not only cause significant challenges for customers or suppliers but also represent substantial opportunities. This will help justify the investment and effort needed to build a successful ecosystem.

Common Market Frictions that Indicate Ecosystem Potential

1. Fragmented Demand: Ecosystem platforms excel at aggregating the demand of numerous small customers, making them accessible to suppliers in an economically viable manner. For example, online food delivery platforms enable restaurants to reach a highly fragmented customer base efficiently.
2. Fragmented Supply: Platforms can also consolidate the offerings of a large number of small-scale suppliers, simplifying the search and transaction process for potential buyers. Alibaba’s initial success stemmed from connecting large corporations with small and medium-sized Chinese suppliers who had previously been difficult to locate.
3. Matching Issues: Ecosystems can facilitate real-time matching between the two sides of a market, ensuring that a transaction takes place. Ride-hailing platforms, for instance, resolve this friction by quickly identifying the driver best positioned to serve a particular rider and facilitating the transaction.
4. Trust Deficit: Business ecosystems can foster the trust needed for transactions between parties unfamiliar with one another, thereby mitigating the risk of fraud or misconduct. Airbnb, for example, establishes trust by vetting guests and securing payments, making it feasible for homeowners to host strangers.
5. Supplier Coordination Challenges: Ecosystems can deliver coherent customer solutions that require the careful coordination of various independent suppliers. John Deere’s smart farming platform is a prime example, bringing together suppliers of seeds, fertilisers, crop protection, equipment, and data to enhance farm productivity.
6. Need for Co-Innovation: Sometimes, resolving market friction requires multiple companies from different sectors to innovate in a coordinated manner. Intel addressed performance bottlenecks in the personal computer industry by orchestrating an ecosystem of PC component developers through its Intel Architecture Lab, ensuring that innovations aligned for maximum impact.

Evaluating the Ecosystem Approach

Once you’ve identified a promising market opportunity and a compelling value proposition, it’s important to assess whether an ecosystem is the most effective way to deliver the solution. Ecosystems are typically most successful when they involve solutions that are highly modular—where components can be easily combined and require significant coordination to manage interfaces, align innovation efforts, or identify and match partners. In situations where these conditions are not met, alternative business models, such as vertically integrated structures, hierarchical supply chains, or open-market models, might be more appropriate.

Assessing Your Company’s Role in the Ecosystem

If the opportunity seems both attractive and suitable for an ecosystem model, you need to evaluate whether your company has the necessary assets and capabilities to play a leading role. Ask yourself the following questions:

• What can your company contribute to the solution? Consider the unique assets and capabilities you bring to the table. Do you have critical resources, such as data, that could serve as a foundation for building an ecosystem?
• Do you own underutilised assets that could add value in another ecosystem? Perhaps your company has underexploited assets that could become valuable components of an existing ecosystem.

However, avoid letting your current capabilities dictate your strategy entirely. If the opportunity is compelling enough, it may warrant developing or acquiring the necessary capabilities or partnering with others to fill the gaps. As scholars Hannah and Eisenhardt noted, in complex strategic environments like ecosystems, having the right strategy can be more decisive than initial capabilities.

3. Determining Your Role in the Ecosystem

When large, established companies identify a promising ecosystem opportunity, they often assume that they should naturally take on the role of the ecosystem’s orchestrator. However, this assumption can be misleading and may prevent companies from recognising two important truths: firstly, other roles within an ecosystem can be equally or even more profitable; secondly, a company doesn’t need to stick to a single role across all ecosystems—it can vary its position depending on the context.

Understanding Ecosystem Roles

Within an ecosystem, companies can play one of three primary roles:

1. Orchestrators: These are the central figures who design, manage, and control the ecosystem. They set the rules, allocate profits, and act as the gatekeepers of the ecosystem.
2. Complementors: These participants offer products or services that directly enhance the value of other components within the ecosystem. They add value by complementing the offerings of other players.
3. Suppliers: Operating upstream, suppliers provide essential products or services to both orchestrators and complementors. They work at a distance from the end customers but are crucial for the ecosystem’s functioning.

Weighing the Trade-offs Between Roles

If there are already well-established ecosystems in the area you’re interested in, it may be more strategic to join as a contributor rather than attempt to create a new ecosystem from scratch. However, it’s crucial to carefully consider the trade-offs associated with each role.

• Orchestrators: While orchestrators enjoy significant power, they also bear the burden of high initial investments and the risks associated with launching and sustaining the ecosystem. They have the authority to shape the ecosystem but must also manage its complexities.
• Contributors (Complementors and Suppliers): Contributors face risks as well, particularly due to their limited control over the orchestrator’s decisions regarding the ecosystem’s scope, governance, and operations. There’s also the challenge of sharing valuable data and customer access with the orchestrator. However, contributors generally face lower upfront costs than orchestrators and benefit from greater strategic flexibility. They can participate in multiple ecosystems simultaneously, thereby reducing their exposure to any single ecosystem’s risks. In fact, our research shows that being a contributor can be as financially rewarding as, or even more so than, being an orchestrator. This is evidenced by the rising number of ecosystem contributors among new unicorns, surpassing the number of orchestrators for the first time in 2019.

Preparing to Be an Orchestrator

If you’re set on taking up the orchestrator role, it’s essential to ensure that your company is well-positioned and equipped with the necessary capabilities. There are four key qualifications for a successful ecosystem orchestrator:

1. Essential Member with Critical Resources: The orchestrator must be indispensable to the ecosystem and possess critical resources such as a strong brand, customer access, or unique skills.
2. Central Position and Network Connectivity: The orchestrator should occupy a central position within the ecosystem, maintaining strong connections with multiple players and coordinating their efforts effectively.
3. Capacity for Investment and Risk: The orchestrator must be capable of making significant upfront investments and managing the associated risks to reap substantial financial rewards.
4. Perception as a Fair Partner: The orchestrator should be viewed as a fair and trustworthy partner by other ecosystem participants, not as a competitive threat. It’s important to note that being an orchestrator isn’t a unilateral decision—other players in the ecosystem must also accept your leadership.

Exploring Alternatives to Sole Orchestration

If your analysis suggests that your company may not be fully qualified to act as the sole orchestrator, you might consider alternative strategies:

• Co-orchestration: You could collaborate with other companies, including competitors, to co-orchestrate the ecosystem. A notable example is the Here geolocation platform, which is owned by a consortium of major German car manufacturers, among others.
• Cooperative Orchestration: Another approach is to co-orchestrate the ecosystem in partnership with other contributors. An example of this is Stocksy United, a stock photography and video platform owned by its contributing artists. However, be mindful of the added governance challenges that come with this approach, as they can be burdensome when rapid decision-making and adaptability are required.

In conclusion, while the orchestrator role might seem the most appealing, it’s important to carefully evaluate your company’s capabilities and the potential rewards and risks before deciding which role to play in an ecosystem. The best choice will depend on your strategic goals, resources, and the specific ecosystem landscape you are navigating.

4. Building Your Own Business Ecosystem Strategy: A Strategic Blueprint

Creating an ecosystem is far more intricate than establishing a traditional business. If the latter is like building a single-family home, constructing an ecosystem is akin to developing a complex, mixed-use property with multiple interdependencies, interactions, and unpredictable outcomes. Success in this venture requires careful planning and execution. Our research highlights six critical factors that significantly increase your chances of developing a thriving ecosystem.

1. Securing Essential Partners

In an ecosystem, you cannot compel partners to join; you must attract them with a persuasive set of benefits and incentives. While a strong customer value proposition is crucial, it’s equally important to offer a compelling value proposition to potential contributors. A notable cautionary tale is that of Better Place, which aimed to revolutionise the electric vehicle market with an innovative battery rental and replacement ecosystem. Despite securing $900 million in funding, the company collapsed because it failed to convince key car manufacturers to participate. This underscores the importance of getting key players on board early.

2. Crafting the Right Governance Model

Governance is often the Achilles’ heel of business ecosystems. In our analysis of 110 failed ecosystems, inadequate governance was the most frequent cause of failure, responsible for more than a third of the cases. Effective governance strikes the right balance between openness and control. An overly open system might fail to protect vital interests, as seen in the case of Sony’s e-reader platform, which publishers avoided due to concerns over copyright protection. Conversely, too much control can stifle growth, as demonstrated by BlackBerry’s decline in the face of Apple’s more flexible iPhone ecosystem. The key is to find a governance model that encourages participation while maintaining quality and alignment.

3. Prioritising Scale Before Scope

Traditional innovation often follows a path of developing a product to its full scope, piloting it, and then scaling up. Ecosystems, however, require a different approach. Success lies in starting with a narrowly defined value proposition and focusing on scaling it before broadening the scope. LinkedIn is a prime example of this strategy. Initially, it focused solely on connecting professionals through basic profiles. Only after establishing a large user base did it expand into areas like online recruiting and content publishing. On the other hand, General Electric’s Predix platform struggled because it tried to cater to too many needs at once, leading to a lack of focus and ultimately hindering its success.

4. Solving the Chicken-or-Egg Dilemma

Launching an ecosystem often involves a classic chicken-or-egg problem: how to attract both customers and contributors in sufficient numbers. The solution lies in identifying and subsidising the side of the market that is more challenging to develop initially. For instance, early restaurant reservation platforms failed because they charged diners for using the service, while offering little incentive to restaurants. OpenTable, however, succeeded by reversing this model—attracting diners with no fees and charging restaurants instead, thereby creating a critical mass of both users and contributors.

5. Creating Three Key Flywheels

The engine behind many successful ecosystems lies in three interdependent flywheels: growth, data, and cost.

• Growth Flywheel: This leverages indirect network effects, where the value of the ecosystem increases for all participants as more users join.
• Data Flywheel: As the ecosystem grows, more data is generated, which can be used to enhance the value proposition, attracting even more users in a virtuous cycle.
• Cost Flywheel: This takes advantage of economies of scale, spreading fixed costs over a larger base, thereby lowering per-unit costs and fuelling further growth.

For example, many ride-hailing platforms effectively activated the growth and data flywheels but struggled with the cost flywheel, leading to financial losses despite user growth.

6. Ensuring Social Acceptance

A thriving ecosystem must also be socially accepted. Recent backlash against successful ecosystems from consumers, partners, competitors, and regulators highlights the importance of social legitimacy. Orchestrators need to establish a governance model that is both consistent and fair within their business ecosystem strategy. Consistency involves transparent, comprehensive, and stable governance mechanisms. Fairness ensures compliance with local laws and norms, avoids biases in data and access, and builds trust among participants. An ecosystem that fails to distribute value fairly among its participants is unlikely to succeed in the long term.

In summary, building a successful business ecosystem is a complex but potentially rewarding endeavour. By securing the right partners, crafting a balanced governance model, focusing on scaling before expanding, solving initial market challenges, creating reinforcing growth mechanisms, and ensuring social acceptance, you can significantly increase your chances of creating a sustainable and thriving ecosystem.

5. Outperforming Competing Ecosystems: Strategies for Success

Competing within a business ecosystem strategy involves distinct dynamics compared to traditional market competition. The nature of ecosystem competition introduces unique challenges and opportunities that require a nuanced approach. Here’s how to navigate these complexities and excel against competing ecosystems.

1. Navigating Blurred Boundaries

Unlike traditional markets, ecosystems often operate with less defined boundaries. As ecosystems evolve, they can blur the lines between different industries. For instance, automakers now find themselves in competition with technology companies for mobility solutions, while banks are up against e-commerce giants for payment services. As Stephen Elop, former CEO of Nokia, aptly put it, “Our competitors aren’t taking our market share with devices; they are taking our market share with an entire ecosystem.” This shifting landscape means that understanding competitors requires looking beyond conventional product lines and focusing on broader ecosystem dynamics.

2. Balancing Contributor and Customer Value

Ecosystems must attract both contributors and customers, each with their own value propositions. The success of an ecosystem hinges on striking a delicate balance between fostering collaboration to expand the ecosystem’s benefits and maintaining competitive edges to ensure fair distribution of value. Additionally, ecosystem strategies must be adaptable, acknowledging that they may evolve based on changing dynamics and emergent opportunities.

3. Embracing Winner-Takes-All Dynamics

Ecosystem competition often follows a winner-takes-all or winner-takes-most pattern, driven by network effects, learning curves, and economies of scale. This can create significant barriers for late entrants. The advantage typically lies with the first mover who offers a comprehensive solution rather than just being first to market. For example, Apple’s iPod wasn’t the first digital music player, but it succeeded by integrating the iPod with iTunes, providing a complete and seamless user experience.

4. Differentiating Your Ecosystem

To stand out in a crowded ecosystem, differentiation remains crucial. Ecosystem orchestrators can leverage several dimensions to create a competitive edge:

Scope of the Ecosystem

Decide on the market segments and geographical areas to target. Niche strategies can be effective where general solutions fail to meet specific needs. For instance, Uber and Lyft dominate the general ride-hailing market, while competitors like Wingz and HopSkipDrive cater to specialised needs such as airport transfers and non-emergency medical transport. Localised models can also thrive when network density and regional relevance outweigh the benefits of a global reach.

Customer Value Proposition

Ecosystems must balance the breadth of their offerings with the quality of customer experience. For example, Poshmark focuses on a wide range of sellers and high user engagement, while ThredUp emphasises a curated and high-quality customer experience. Investing heavily in customer experience can create a significant competitive barrier, as seen when Google Maps gained an advantage over TomTom by integrating with Android and offering a superior, free service.

Contributor Value Proposition

Define what your ecosystem offers to its contributors and what they gain in return. The governance model plays a critical role here. An open model facilitates easier entry and greater freedom for contributors, while a closed model ensures stricter alignment and reduced internal competition. Nintendo’s rigorous quality control for games and Microsoft’s more open approach with Xbox are prime examples of how different governance models can lead to success in the gaming industry.

5. Evolving Governance Models

Successful ecosystems often start with more controlled governance to establish quality and avoid early pitfalls, gradually becoming more open as they mature. New entrants, however, may need to adopt an open governance model initially to build scale quickly and compete with established players. This evolving approach allows ecosystems to adapt and grow while managing risks effectively.

6. Combining Differentiation Strategies

Positioning within an ecosystem isn’t a matter of choosing one dimension over another; it involves strategically combining and balancing these dimensions. For example, HopSkipDrive targets a specific customer segment—small children—by emphasising safety, transparency, and trust in its services. This focus is reinforced by a stringent governance model that includes thorough background checks for drivers.

In summary, winning against competing ecosystems requires a sophisticated approach that goes beyond traditional competition tactics. By understanding and adapting to the blurred boundaries of ecosystem competition, balancing the value propositions for both contributors and customers, leveraging first-mover advantages, and strategically differentiating across multiple dimensions, you can position your ecosystem for success in a dynamic and competitive environment.

6. Capturing Value in Your Ecosystem: Balancing Growth and Profit

In the ecosystem business model, the focus on value creation often comes before value capture. However, once your ecosystem is up and running, stakeholders will inevitably want to know how value is captured and distributed. Here’s how to approach value capture effectively while managing the unique economic dynamics of ecosystems.

1. Understand the Economics of Ecosystems

Ecosystems often operate under a different set of economic principles compared to traditional businesses. While traditional businesses experience diminishing returns—where each additional customer contributes less incremental value—ecosystems typically benefit from increasing returns. As more participants join, the value per customer can rise, thanks to network effects and learning curves. This can lead to exponential growth and winner-takes-most dynamics, but it also means that reaching critical mass can take time and investment.

For orchestrators, this means managing significant risk, as they may not see profits until the ecosystem reaches a tipping point. Contributors generally face lower risks but also have more limited upside potential.

2. Monetising the Ecosystem

To effectively capture value, orchestrators need to consider various monetisation strategies while balancing multiple objectives:

• Maximise the Pie: The primary goal is to grow the overall value of the ecosystem. A larger ecosystem benefits all participants, including the orchestrator.
• Incentivise Participation: Ensure that essential contributors are earning enough to stay engaged. Their participation is crucial to maintaining and growing the ecosystem.
• Capture Fair Share: Determine how to capture a fair portion of the ecosystem’s value for yourself. This involves choosing the right pricing and monetisation strategies that align with your value proposition.

Monetisation Options:

• Charging Structures: Decide whether to charge all participants, or just one side of the market while subsidising the other. Examples include access fees, transaction fees, licensing fees, or revenue shares.
• Revenue Streams: Consider different sources of revenue, such as transaction fees, supplementary products or services, or advertising.
• Balancing Act: Ensure that monetisation does not hinder ecosystem growth. For example, charging for transactions rather than access can be less disruptive and encourage higher engagement.

3. Value Distribution

How value is distributed among ecosystem participants in a business ecosystem strategy can significantly impact its overall health and sustainability. Governance models play a crucial role in regulating access to customers, data, intellectual property, and financial rewards.

Strategies for Effective Value Distribution:

• Gatekeeping: Use your position as the orchestrator to control access to critical resources, such as customer data or essential services, to ensure a fair distribution of value.
• Value Sharing: Create mechanisms for distributing value that align with the contributions of different participants. This can involve direct payments, data sharing, or access to customer insights.

4. Enhancing Your Share of Value

Orchestrators can employ several strategies to increase their share of the ecosystem’s value:

• Coring: Integrate successful applications or services developed by contributors into your own offering. For example, Apple has introduced features similar to popular third-party apps to retain more value within its ecosystem.
• Competitive Pricing: Use your insights into market trends and successful offerings to introduce competitive products, potentially crowding out contributors.
• Commoditisation: Implement rules or standards that standardise offerings, reducing differentiation and increasing competition among contributors.

5. Managing Risks and Relationships

While capturing value, orchestrators must avoid overreaching or exploiting their position, which can lead to several risks:

• Multihoming: Contributors may engage with multiple ecosystems, diluting their commitment.
• Disintermediation: Participants might bypass the ecosystem to connect directly with customers or other contributors.
• Forking: Contributors might use the ecosystem’s resources to create competing platforms.

Mitigation Strategies:

• Monitor Ecosystem Health: Regularly assess engagement levels, participant feedback, and social media sentiment to catch issues early.
• Maintain Fairness: Ensure that value capture and distribution practices are transparent and perceived as fair to avoid dissatisfaction and potential conflicts.
• Adapt Governance: Be prepared to adjust governance models and policies in response to evolving ecosystem dynamics and feedback.

In conclusion, capturing value in a business ecosystem strategy requires a careful balance between growing the ecosystem, incentivising participation, and ensuring fair value distribution. By understanding the unique economics of ecosystems, employing effective monetisation strategies, and managing risks, orchestrators can successfully capture their share of the value while fostering a healthy and sustainable ecosystem.

7. Benefiting as an Ecosystem Contributor: Maximising Your Impact

While orchestrating an ecosystem can be a major endeavour, being an ecosystem contributor offers significant opportunities and can be a strategic advantage. Here’s how to navigate this role effectively and capitalise on the benefits it provides.

1. Join the Right Ecosystem

Align with Strategic Priorities: Choose ecosystems that align with your company’s strategic goals and market position. This ensures that your participation will complement your broader business objectives.

Assess Competitive Position: Evaluate potential ecosystems for their long-term viability and growth potential. Look for ecosystems with a strong competitive position and a promising outlook.

Examine Governance Models: Scrutinise the governance structures of potential ecosystems. Key considerations include:

• Transparency: Ensure that the rules and decision-making processes are clear and fair.
• Access and Freedom: Check for any restrictions on customer access or operational freedom.
• Commitments and Investments: Understand the required investments and commitments, and assess how they might impact your flexibility and future opportunities.
• Data and Value Sharing: Review how data and value are shared and whether the arrangements are favourable to you.

2. Define the Right Level of Engagement

Single vs. Multiple Ecosystems: Decide whether to focus on a single business ecosystem strategy or participate in multiple ones (multihoming). A single ecosystem approach can allow deeper integration and focus, whereas multihoming can spread risk and increase opportunities but might also add complexity.

Breadth of Offering: Determine whether to contribute your entire portfolio or just specific products and services. Offering a full range can deepen your integration and maximise exposure, but it may also increase dependency. Limiting your offerings can reduce complexity and maintain strategic flexibility.

3. Stand Out from Other Contributors

Control Points: Identify and occupy key control points within the ecosystem—such as critical components, customer touch points, or bottlenecks. This can enhance your bargaining power and visibility.

Enhance Your Value: Differentiate yourself by:

• Becoming a Category Leader: Dominate a specific area or niche within the ecosystem.
• Creating New Categories: Innovate to establish new categories or services.
• Collaborating: Form strategic partnerships with other contributors to create additional value.
• Exploiting Ecosystem Mechanics: Use the ecosystem’s dynamics to your advantage, such as leveraging network effects or data insights.

4. Avoid Commoditisation

Stay Innovative: Continuously innovate to offer unique value that is hard for the orchestrator or other contributors to replicate.

Secure Direct Access: When possible, maintain direct relationships with customers and secure access to their data. This can reduce your dependency on the orchestrator.

Defensive Measures: Be prepared to act if the orchestrator’s actions threaten to commoditise your offerings:

• Lobbying and Public Support: Mobilise stakeholders and public opinion to counteract unfavourable changes.
• Legal Action: If necessary, use legal channels to protect your interests and address any unfair practices.

5. Know When to Exit

Regular Reviews: Periodically reassess your participation in the ecosystem. Factors to consider include:

• Brand Damage: Rising risks to your brand’s reputation.
• Competitive Discrimination: Unequal treatment compared to other contributors.
• Erosion of Trust: Declining trust in the ecosystem or its governance.
• Ecosystem Decline: Signs of deterioration in the ecosystem’s health.
• Better Alternatives: Emergence of more advantageous ecosystems or opportunities.

Exit Strategy: Exiting should be a strategic decision rather than a reactionary one. Ensure that you have a clear plan and transition strategy to minimise disruption to your business.

In summary, being an ecosystem contributor can be highly beneficial if managed well. By choosing the right ecosystem, defining your engagement strategy, standing out through innovation and strategic positioning, and knowing when to exit, you can maximise your impact and gain substantial value from your participation.

8. Evolving Your Business Ecosystem Strategy: Adapting to Change and Seising Opportunities

The evolution of ecosystems is inherently dynamic and influenced by various factors including market competition, regulatory changes, customer needs, and available resources. As ecosystems mature, their strategies must evolve to remain competitive and capitalise on emerging opportunities. Here’s a framework for how orchestrators can adapt and grow their ecosystems over time, incorporating both growth and expansion vectors.

Vectors for Growing an Existing Ecosystem

1. Geographic Expansion

• Global Growth: Extend your ecosystem’s reach to new regions and countries. For instance, Airbnb successfully expanded from a local platform to a global leader by entering over 220 countries and regions.
• Local Adaptation: Transfer successful local models to new areas. Uber, starting in San Francisco, rapidly scaled to 100 new cities within a few years.

2. Market Consolidation

• Acquisitions: Acquire smaller competitors or complementary businesses to consolidate market share. This strategy, seen in the online food delivery industry, helps build a more dominant position.

3. Scope Expansion

• Product and Service Addition: Broaden your ecosystem’s offerings by introducing new products or services. LinkedIn’s addition of publishing and recruiting services illustrates this approach.
• Hybrid Models: Evolve from a single-function ecosystem to a hybrid or super-app model. Airbnb expanded from a lodging platform to include supplementary services like tours and experiences.
• Super-Apps: Transform into a comprehensive platform that integrates various services. WeChat’s evolution from a messaging app to a multi-functional platform is a prime example.

4. Business Model Change

• Model Shifts: Transition to different business models as your ecosystem matures. Smart-home ecosystems might evolve towards open-market models with standards like Matter, and ride-hailing companies could shift towards owning fleets with self-driving technology.

Vectors for Moving Beyond an Existing Business Ecosystem Strategy

1. Ecosystem Carryover

• Leverage Existing Success: Use the success and resources from one ecosystem to build another. Apple transitioned from its iPod ecosystem to dominate the smartphone market with the iPhone. Similarly, Uber extended its driver and passenger base to create the Uber Eats delivery service.

2. Portfolio Diversification

• Experimentation and Diversification: Adopt a portfolio approach that emphasises experimentation and diversification. Allianz Group’s digital investment unit, Allianz X, showcases this strategy by investing in a broad range of ecosystems.

3. Contributor Play

• Extend Offerings to Other Ecosystems: Contribute your products or services to other ecosystems. Alipay, initially a part of Alibaba’s ecosystem, has become a major player in mobile and online payments across various ecosystems.

4. Infrastructure Play

• Offer Infrastructure as a Service: Provide your technology and infrastructure to other businesses. AWS, originally developed for Amazon’s e-commerce platform, now serves numerous other major ecosystems, becoming a significant revenue driver for Amazon.

Key Considerations for Ecosystem Evolution

• Adaptability: Embrace the inherent adaptability of ecosystems. Successful ecosystems often pivot and adjust their strategies based on changing circumstances and new opportunities.
• Strategic Planning: When designing and evolving an ecosystem, consider potential future developments and how they can influence your strategic choices. Planning for flexibility and future scenarios can guide effective decision-making.
• Monitor and Respond: Continuously assess the health and performance of your ecosystem. Stay attuned to market shifts, competitive actions, and technological advancements to adjust your strategy accordingly.
• Technology and Innovation: Leverage advancements in digital technologies to enhance and evolve your ecosystem. As technology becomes more accessible and platforms more commoditised, incumbents must quickly adapt to harness new opportunities.

In conclusion, mastering business ecosystem strategy evolution involves a combination of strategic growth within existing ecosystems and exploring new opportunities beyond them. By understanding and applying these vectors, companies can adapt to changes, expand their reach, and capture value in a rapidly evolving landscape.