What is a business ecosystem?
A business ecosystem is the network of organizations (including suppliers, distributors, customers, competitors, government agencies, etc.) involved in delivering a specific product or service through the competition and cooperation. The idea is that each entity in the ecosystem affects and is affected by the others, creating an ever-changing relationship in which each entity must be flexible and adaptable in order to survive as in a biological ecosystem.
Key points to remember
- A business ecosystem is the network of organizations (including suppliers, distributors, customers, competitors, government agencies, etc.) involved in delivering a specific product or service through the competition and cooperation.
- The idea is that each entity in the ecosystem affects and is affected by the others, creating an ever-changing relationship in which each entity must be flexible and adaptable to survive, similar to a biological ecosystem.
- Ecosystems create high barriers to entry for new competitors because the ecosystem is already made up of the actors that allow it to function.
- Business ecosystem theory was developed by business strategist James Moore in 1993.
Understand a business ecosystem
In the 1930s, the British botanist Arthur Tansley introduced the term ecosystem to describe a community of organisms interacting with each other and with their environment: air, water, earth, etc. To thrive, these organizations compete and collaborate with each other over available resources. , co-evolve and adapt together to external disturbances.
Business strategist James Moore embraced this organic concept in his 1993 report harvard business review article “Predators and Prey: A New Ecology of Competition”, in which he compares companies operating in the increasingly interconnected world of Trade to a community of organisms adapting and evolving to survive. Moore suggested that a company should not be viewed as a single company in an industry, but as a member of a business ecosystem with participants spanning multiple industries.
Like natural ecosystems, companies involved in business ecosystems compete for survival with adaptation and sometimes extinction.
Advances in technology and the increase globalization have changed ideas about the best ways to do business, and the idea of a business ecosystem is meant to help companies understand how to thrive in this rapidly changing environment. Moore defined the business ecosystem as follows:
A business community supported by a foundation of interacting organizations and individuals – the Business Bodies. The economic community produces valuable goods and services for customers, who are themselves members of the ecosystem. Member organizations also include suppliers, primary producers, competitors and other stakeholders. Over time, they co-evolve their abilities and roles and tend to align with directions set by one or more core societies. Companies in leadership roles may change over time, but the ecosystem leader function is valued by the community because it allows members to evolve toward shared visions to align their investments and find roles that mutually support each other.
Indeed, the business ecosystem consists of a network of interconnected businesses that dynamically interact with each other through competition and cooperation to increase sales and survive. An ecosystem includes Suppliers, distributors, consumers, government, process, products and competitors. When an ecosystem thrives, it means that participants have developed behavior patterns that streamline the flow of ideas, talent, and capital throughout the system.
Ecosystems and competition
Ecosystems create strong barriers to entry for new competition, as potential entrants must not only duplicate or improve upon the core product, but must also compete with the entire system of independent complementary businesses and vendors that form the network.
Being part of a business ecosystem provides mechanisms to leverage technology, achieve excellence in research and commercial competence, and compete effectively with other businesses. Other goals of a business ecosystem include:
- Stimulate new collaborations to address growing social and environmental challenges
- Harness creativity and innovation to reduce production costs or enable members to reach new customers
- Accelerate the learning process to effectively collaborate and share ideas, skills, expertise and knowledge
- Create new ways to meet basic human needs and desires
It is for these reasons that in today’s fast-paced business world, a company creates its own ecosystem or offers a way to join an existing ecosystem by providing an advantage that that ecosystem is currently lacking.