Not every organization can be an Uber, AWS or Microsoft but that does not mean that you cannot build a highly successful and profitable business by playing a non-dominant role within an ecosystem.
The term “digital” may imply that technology is the key enabler for organizations to transform, but this is most often not the case. The technological revolution over the past ten years has been remarkable, the success of organizations such as Airbnb, Uber, Amazon and Alibaba dependent on the business models and ecosystems that they have established, as well as the underlying technology required to develop and scale their businesses. Each of these incredibly successful organizations has built a business model that is fed by a business ecosystem consisting of a wide variety of organizations playing different but complementary roles, each contributing to the overall value delivered to the end customer.
What is a business ecosystem?
The term ‘business ecosystem’ originates from James F. Moore, who in the early 1990s introduced the strategic planning concept of a business ecosystem. More recently Gartner has defined it as “a dynamic network of entities, interacting with each other to create and exchange value for all participants.”
You cannot go it alone
Digital business is complex and to succeed organizations cannot solely focus on internal or vertical integration. Participation in a business ecosystem is essential, but so is the realization that most ecosystems succeed because they are a collection of cooperative or even competing organizations working together to deliver value.
Not every organization can be an Uber, AWS or Microsoft but that does not mean that you cannot build a highly successful and profitable business by playing a non-dominant role within an ecosystem. Intel and PayPal are good examples of non-dominant ecosystem player success stories. Indeed, they are not the dominant player but bring a huge additional value to the ecosystems they participate in.
The above diagram depicts a telco-focused business ecosystem. Twilio is a ‘communications platform as a service’ provider and SMS aggregator selling services to more than 26,000 companies and partnering with most of communications service providers. Source: Jean-Luc Tymen
One of the key challenges for businesses is figuring out how to take advantage of digital disruption and the opportunities it brings. Effective participation in a business ecosystem is the keystone to success in today’s digital environment. Companies that believe that they can go it alone are destined for failure.
Participation in a business ecosystem does not in itself guarantee success. The success of a business ecosystem can be measured by the level of value generated across the entire ecosystem; this is achieved through the various interactions between the different ecosystem participants. There are multiple roles that participants (or stakeholders) can play in an ecosystem.
Organizations can participate in multiple business ecosystems, playing very different roles in each. For example, Samsung manages its own ecosystem, participates in the Apple ecosystem and is in competition with Apple in the smartphone market.
Business ecosystem interactions
It is also important to detail the different types of interactions that need to take place within a business ecosystem; these include financial, products and services, operational, contractual and data interactions.
It is essential for organizations that are planning, in the process of creating, or participating in business ecosystems to fully understand their role and as equally important the role of other stakeholders within the ecosystem. This requires the organization to model the ecosystem to enable them to define the business drivers, business model and the value proposition that they and other key ecosystem stakeholders provide. This process is typically carried out iteratively as there are clear cause and effect relationships between the ecosystem, business drivers, model and value proposition.
Some organizations who are providing technical expertise, services or products to the ecosystem start this process by looking for the target market or problems that their technology will resolve. In other words, they are looking for a problem that their solution will solve. Many people look at 5G, Blockchain or AI as a being able to provide great technical capabilities to organizations and users, which of course is true. It is no good stating that 5G will provide low latency, high download speeds, etc… what is more important is to understand the value proposition and problems for the end users that this will resolve.
This is not an easy task and will require the organisation to collaborate and communicate effectively with a range of internal business and technical teams, but ideally, they will also engage with external stakeholders. This process is referred to as Business Ecosystem Modelling and it is a lot more than just creating a series of static PowerPoint slides or a detailed Word document that no one reads after page three.
Business ecosystem modelling tools
Unfortunately, most organizations attempt to carry out business modelling activities by using the traditional tools and methods available to them. This often becomes a complex and confusing exercise which can result in poor communications, lack of collaboration and multiple versions of the truth. However, there are tools, best practices and guidelines that can assist greatly with this strategic journey and can provide capabilities to test different hypothesis and models, and to modify them in real time. A review of the Gartner Market guide for business ecosystem modeling and analysis software is good starting point.
In the past three years over 50 of the collaborative TM Forum Catalyst projects have used the business ecosystem modelling tool CurateFx to define their business ecosystems. This platform has been integrated with TM Forum Frameworx, Open APIs and a variety of B2B2X best practices such as the Online Partnering Guide and the B2B2X Business Scenario template.
Digital transformation is happening and organizations must deal with it. They must understand that to be successful it will be more important to focus on the business elements of transformation first and then the technology. Business ecosystem modelling is a key activity that will help organizations along their digital transformation journey.
