Business Ecosystem Strategy: Evolving Over Time

The world is changing fast, and business ecosystem strategy now touches every major industry. From media and technology to energy and mining, these ecosystems reshape how companies operate and collaborate. A business ecosystem is a network of largely independent entities. They work together to deliver complex solutions that no single company could achieve alone. These ecosystems usually fall into two types: transaction ecosystems and solution ecosystems.

Types of Business Ecosystems

Transaction ecosystems revolve around a central platform. It connects different market participants, such as buyers and sellers, in a digital marketplace. Online retail giants show this model in action. They help users and suppliers trade. Solution ecosystems work differently. Here a core company coordinates the offerings of many partners to deliver a full service or product. A smart-home ecosystem is a prime example. Various manufacturers work together to create one connected home environment.

Both types of business ecosystem strategy can generate substantial value fast. Since 2015, over 300 ecosystem-based startups have reached unicorn status. They have achieved valuations of over $1 billion.

The Growing Importance of Ecosystem Strategies

These startups have done remarkably well. Big Tech companies that use ecosystem models also dominate. Together, they have pushed business ecosystems to the top of strategic planning for established companies. More than half of the S&P Global 100 firms now take part in at least one ecosystem. A recent BCG survey of 206 executives in multinational corporations found that 90% of them plan to expand their involvement in ecosystems.

Defining Your Ecosystem Strategy

The benefits are clear, yet many leaders of established companies still don't know how to build an effective ecosystem strategy. This article addresses that uncertainty. It offers a structured approach to developing a business ecosystem strategy. We draw on three years of research and wide experience with large enterprises across many industries and regions. From this, we have identified eight key questions to guide companies through the process.

These questions give you a step-by-step framework. They help you understand, define, and execute a successful ecosystem strategy that fits your business needs.

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

People often see startups and tech firms as the main winners of ecosystem-based models. But established companies can gain big rewards from these strategies too. Many incumbent firms have used 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 built thriving ecosystems. These delivered impressive shareholder returns. Both firms beat their regional competitors by more than double between 2015 and 2020. These cases show ecosystems aren’t just for tech companies. They can be a powerful tool for traditional industries too.

The Risks and Realities of Ecosystems

Still, entering an ecosystem is far from guaranteed success. Building and running an ecosystem can be costly and risky. Most ecosystems ultimately fail. Our research shows fewer than 15% of ecosystems last over the long term. We also studied value creation among over 50 of the largest banks from 2015 to 2020. We found no clear link between joining an ecosystem and overall shareholder returns.

The Importance of Clear Motivations

A successful ecosystem strategy starts with clear motivations for taking part. Before you dive in, know why you want to take this step. Be clear on the specific goals you hope to achieve. We have identified five valid reasons to create or join 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

Does one of these motivations match your company’s strategic priorities? Are you ready to invest for the long term, experiment, and learn from failure? Then exploring the ecosystem opportunity is a wise move. If several motivations apply, prioritise the one most critical to your business goals. It will guide your later strategic choices and actions.

2. How to Identify Viable Opportunities for Business Ecosystem Strategy

Every thriving business ecosystem has a compelling value proposition at its heart. It solves a clear, pressing business problem. So when you look for ecosystem opportunities, take an outside-in view. Focus on market needs. Don't take an inside-out approach driven by your company’s current assets and capabilities.

Finding Opportunities in Customer Frictions

The best way to spot viable ecosystem opportunities is to study the customer journey closely. Look for market frictions: the frustrations, unmet needs, and desires that are too complex for one company to solve alone. Focus on frictions that cause real challenges for customers or suppliers and also offer substantial opportunities. This helps 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 spot a promising market opportunity and a compelling value proposition, check whether an ecosystem is the best way to deliver the solution. Ecosystems work best with highly modular solutions. Here, components combine easily but need heavy coordination to manage interfaces, align innovation efforts, or find and match partners. When these conditions don't hold, other models may fit better. These include vertically integrated structures, hierarchical supply chains, or open-market models.

Assessing Your Company’s Role in the Ecosystem

Is the opportunity both attractive and suited to an ecosystem model? Then check whether your company has the assets and capabilities to lead. Ask yourself these 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.

Don't let your current capabilities fully dictate your strategy. If the opportunity is compelling enough, you can build or buy the capabilities you need. You can also partner with others to fill the gaps. As scholars Hannah and Eisenhardt noted, in complex strategic environments like ecosystems, the right strategy can matter more than initial capabilities.

3. Determining Your Role in the Ecosystem

When large, established companies spot a promising ecosystem opportunity, they often assume they should be the orchestrator. This assumption can mislead them. It can hide two important truths. First, other roles within an ecosystem can be just as profitable, or more so. Second, a company doesn’t need one fixed role across all ecosystems. It can change its position to suit 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

Are there already well-established ecosystems in the area you want? Then joining as a contributor may be smarter than building a new ecosystem from scratch. Either way, weigh the trade-offs of each role with care.

  • 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 the orchestrator role, make sure your company is well-positioned and has the capabilities it needs. A successful ecosystem orchestrator has four key qualifications:

  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

Does your analysis suggest your company isn't fully qualified to be the sole orchestrator? Then consider these 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.

The orchestrator role might seem the most appealing. Even so, weigh your company’s capabilities and the rewards and risks before you pick a role in an ecosystem. The best choice depends on your strategic goals, your resources, and the specific ecosystem space you are navigating.

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

Creating an ecosystem is far more intricate than starting a traditional business. A traditional business is like building a single-family home. An ecosystem is like developing a complex, mixed-use property. It has many interdependencies, interactions, and unpredictable outcomes. Success takes careful planning and execution. Our research highlights six critical factors that greatly raise your chances of building a thriving ecosystem.

1. Securing Essential Partners

In an ecosystem, you can't force partners to join. You must attract them with a persuasive set of benefits and incentives. A strong customer value proposition is crucial. It's just as important to offer a compelling value proposition to potential contributors. Better Place is a cautionary tale. It aimed to transform the electric vehicle market with an innovative battery rental and replacement ecosystem. It secured $900 million in funding. Even so, the company collapsed because it failed to win over key car manufacturers. This shows why you must get key players on board early.

2. Crafting the Right Governance Model

Governance is often the Achilles’ heel of business ecosystems. We analysed 110 failed ecosystems. Weak governance was the most common cause of failure. It drove more than a third of the cases. Good governance balances openness and control. An overly open system can fail to protect vital interests. Sony’s e-reader platform shows this. Publishers avoided it over copyright protection concerns. Too much control can also stifle growth. BlackBerry declined against Apple’s more flexible iPhone ecosystem. The key is a governance model that encourages participation while it keeps quality and alignment.

3. Prioritising Scale Before Scope

Traditional innovation often follows one path. You develop a product to its full scope, pilot it, then scale up. Ecosystems need a different approach. Start with a narrow value proposition and scale it before you broaden the scope. LinkedIn is a prime example of this strategy. At first, it only connected professionals through basic profiles. It expanded into online recruiting and content publishing only after it built a large user base. General Electric’s Predix platform struggled instead. It tried to serve too many needs at once. This lack of focus held back its success.

4. Solving the Chicken-or-Egg Dilemma

Launching an ecosystem often brings a classic chicken-or-egg problem. How do you attract enough customers and contributors at once? The solution is to find and subsidise the side that is harder to develop first. Early restaurant reservation platforms failed for this reason. They charged diners to use the service but gave restaurants little incentive. OpenTable succeeded by reversing this model. It attracted diners with no fees and charged restaurants instead. This created 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 uses 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 activated the growth and data flywheels well. But they struggled with the cost flywheel. This led to financial losses despite user growth.

6. Ensuring Social Acceptance

A thriving ecosystem must also win social acceptance. Recent backlash against successful ecosystems from consumers, partners, competitors, and regulators shows why social legitimacy matters. Orchestrators need a governance model that is both consistent and fair within their business ecosystem strategy. Consistency means transparent, full, and stable governance mechanisms. Fairness means following local laws and norms, avoiding bias in data and access, and building trust among participants. An ecosystem that fails to share value fairly is unlikely to last over the long term.

Building a successful business ecosystem is complex but can be rewarding. Secure the right partners and craft a balanced governance model. Scale before you expand, and solve early market challenges. Create reinforcing growth mechanisms and win social acceptance. Do these things and you greatly raise your chances of a sustainable, thriving ecosystem.

5. Outperforming Competing Ecosystems: Strategies for Success

Competing within a business ecosystem strategy works differently from traditional market competition. Ecosystem competition brings unique challenges and opportunities. They call for a careful approach. Here’s how to handle these complexities and excel against competing ecosystems.

1. Navigating Blurred Boundaries

Unlike traditional markets, ecosystems often have less defined boundaries. As they evolve, they blur the lines between industries. Automakers now compete with technology companies for mobility solutions. Banks compete with e-commerce giants for payment services. Stephen Elop, former CEO of Nokia, put it well: “Our competitors aren’t taking our market share with devices; they are taking our market share with an entire ecosystem.” In this shifting space, you must look beyond conventional product lines. Focus on broader ecosystem dynamics instead.

2. Balancing Contributor and Customer Value

Ecosystems must attract both contributors and customers. Each group needs its own value proposition. Success hinges on a delicate balance. You foster collaboration to grow the ecosystem's benefits. You also keep competitive edges to share value fairly. Ecosystem strategies must stay adaptable too. They may evolve as dynamics change and new opportunities appear.

3. Embracing Winner-Takes-All Dynamics

Ecosystem competition often follows a winner-takes-all or winner-takes-most pattern. Network effects, learning curves, and economies of scale drive it. This creates big barriers for late entrants. The advantage usually goes to the first mover with a full solution, not just the first to market. Apple's iPod wasn't the first digital music player. It succeeded by pairing the iPod with iTunes. This gave users a complete, smooth experience.

4. Differentiating Your Ecosystem

To stand out in a crowded ecosystem, differentiation is crucial. Ecosystem orchestrators can build a competitive edge along several dimensions:

Scope of the Ecosystem

Decide which market segments and geographical areas to target. Niche strategies work well where general solutions miss specific needs. Uber and Lyft dominate the general ride-hailing market. Competitors like Wingz and HopSkipDrive serve specialised needs such as airport transfers and non-emergency medical transport. Localised models can also thrive. This happens when network density and regional relevance outweigh the benefits of global reach.

Customer Value Proposition

Ecosystems must balance the breadth of their offerings with the quality of the customer experience. Poshmark focuses on a wide range of sellers and high user engagement. ThredUp emphasises a curated, high-quality customer experience. Heavy investment in customer experience can build a strong competitive barrier. Google Maps gained an edge over TomTom this way. It integrated with Android and offered a superior, free service.

Contributor Value Proposition

Define what your ecosystem offers contributors and what they gain in return. The governance model plays a critical role here. An open model makes entry easier and gives contributors more freedom. A closed model brings tighter alignment and less internal competition. Nintendo uses rigorous quality control for games. Microsoft takes a more open approach with Xbox. Both show how different governance models can lead to success in the gaming industry.

5. Evolving Governance Models

Successful ecosystems often start with tighter governance. This sets quality and avoids early pitfalls. They open up gradually as they mature. New entrants may need an open governance model from the start. It helps them build scale fast and compete with established players. This evolving approach lets ecosystems adapt and grow while they manage risks well.

6. Combining Differentiation Strategies

Positioning within an ecosystem isn’t about choosing one dimension over another. It means combining and balancing these dimensions strategically. HopSkipDrive targets a specific customer segment: small children. It emphasises safety, transparency, and trust in its services. A strict governance model backs this focus. It includes thorough background checks for drivers.

Winning against competing ecosystems takes more than traditional competition tactics. Understand and adapt to the blurred boundaries of ecosystem competition. Balance the value propositions for both contributors and customers. Use first-mover advantages, and differentiate across several dimensions. Do this and you position your ecosystem for success in a dynamic, competitive environment.

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

In the ecosystem business model, value creation often comes before value capture. Once your ecosystem is up and running, stakeholders will want to know how you capture and share value. Here’s how to approach value capture well while you manage the unique economics of ecosystems.

1. Understand the Economics of Ecosystems

Ecosystems often run on different economic principles from traditional businesses. Traditional businesses see diminishing returns. Each extra customer adds less value. Ecosystems usually benefit from increasing returns. As more participants join, the value per customer can rise. Network effects and learning curves drive this. It can lead to exponential growth and winner-takes-most dynamics. But reaching critical mass can take time and investment.

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

2. Monetising the Ecosystem

To capture value well, orchestrators need to weigh several monetisation strategies. They must balance 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

In a business ecosystem strategy, how you share value among participants shapes its health and sustainability. Governance models play a crucial role here. They regulate 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 use 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

When capturing value, orchestrators must not overreach or exploit their position. That 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.

Capturing value in a business ecosystem strategy takes a careful balance. You must grow the ecosystem, incentivise participation, and share value fairly. Understand the unique economics of ecosystems, use effective monetisation strategies, and manage risks. Then orchestrators can capture their share of the value while they keep a healthy, sustainable ecosystem.

7. Benefiting as an Ecosystem Contributor: Maximising Your Impact

Orchestrating an ecosystem is a major endeavour. Being a contributor offers strong opportunities and can be a strategic advantage. Here’s how to handle this role well and make the most of its benefits.

1. Join the Right Ecosystem

Align with Strategic Priorities: Choose ecosystems that fit your company’s strategic goals and market position. This way, your participation supports your broader business objectives.

Assess Competitive Position: Judge each potential ecosystem on its long-term viability and growth potential. Look for ones with a strong competitive position and a promising outlook.

Examine Governance Models: Scrutinise the governance structures of potential ecosystems. Key things to consider 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 join several (multihoming). A single ecosystem allows deeper integration and focus. Multihoming spreads risk and adds opportunities, but it can also add complexity.

Breadth of Offering: Decide whether to contribute your whole portfolio or just specific products and services. A full range deepens your integration and maximises exposure, but it can increase dependency. A narrower range reduces complexity and keeps strategic flexibility.

3. Stand Out from Other Contributors

Control Points: Find and hold key control points within the ecosystem. These include critical components, customer touch points, or bottlenecks. They boost your bargaining power and visibility.

Enhance Your Value: Set yourself apart 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 using network effects or data insights.

4. Avoid Commoditisation

Stay Innovative: Keep innovating to offer unique value. Make it hard for the orchestrator or other contributors to copy.

Secure Direct Access: Where you can, keep direct relationships with customers and secure access to their data. This reduces your dependency on the orchestrator.

Defensive Measures: Be ready to act if the orchestrator’s moves 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: Reassess your participation in the ecosystem from time to time. 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: Make exiting a strategic decision, not a reaction. Have a clear plan and transition strategy to keep disruption to your business low.

Being an ecosystem contributor can pay off well if you manage it right. Choose the right ecosystem and define your engagement strategy. Stand out through innovation and strategic positioning, and know when to exit. Do this and you maximise your impact and gain substantial value from your participation.

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

Ecosystems evolve in dynamic ways. Many factors shape them: market competition, regulatory changes, customer needs, and available resources. As ecosystems mature, their strategies must evolve to stay competitive and seize new opportunities. Here’s a framework for how orchestrators can adapt and grow their ecosystems over time. It covers 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.
  1. 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.
  1. 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.
  1. 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
  • use 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.
  1. 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.
  1. 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.
  1. 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: use 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 changing market.