Business Ecosystems: A useful concept, or just another buzzword?
Are ecosystems a useful concept in the world of business, or should they be consigned to the dustbin of history like so many forgotten buzzwords of bygone eras?
‘We need to think outside the box in terms of becoming more agile and creating synergy so our ecosystem can move the needle when it comes to disruption’.
Sound familiar? While this might seem like a meaningless jumble of popular business words, there can be no doubt that the language we use in business has evolved over the decades.
But with this evolution comes the increasing trend towards ‘buzzwords’, something that is in vogue at the time, but may not carry the same meaning to every recipient.
The language of business, like any other language, is constantly changing and evolving. Words which once were considered buzzwords have become codified and standardized in their meaning.
Whether it be something to which standards are now applied (agile or lean), or words which have simple definitions but sound better than the alternatives (synergy vs cooperation), words have entered and left the realm of buzzwords since business itself began.
And then there are words like ‘ecosystem’; a word taken from another field and now applied broadly in the field of business by professionals and companies who want to seem forward-thinking and innovative.
But are ecosystems a useful concept in the world of business, or should they be consigned to the dustbin of history like so many forgotten buzzwords of bygone eras?
Similar to the research I have recently been working on, the staying power of ‘ecosystems’ can be guessed by looking at how the term is used, both in academia and in business.
The term ‘ecosystem’ itself was originally introduced in the 1930s by biologist Arthur Tansley who proposed it as we know it today: an environment and the animals, land, water, and air that combine to make it up.
As a term in business however, ‘ecosystem’ was first introduced in the early 1990s by a Harvard professor named James Moore. He described them as systems that evolve through certain stages, adapting to each one before renewing itself and emerging as a different and better system, or being pushed into extinction by a better ecosystem.
This biological analogy introduces an issue into ecosystems research: should we assume that, like a biological ecosystem, business ecosystems are cyclical? Or, as Moore suggested, are they linear?
This disconnect with the original term is typical of many buzzwords; they sound good but have an unclear meaning. While the exact nature of business ecosystems remains up for debate, my own definition of a business ecosystem is ‘an interdependent groups of firms and other actors who create value through complementarity and combining their resources through informal interactions’.
Contrast this definition to how 'ecosystem' is used today with the preeminent example: Apple. While Apple does not itself describe its business as an ecosystem, the term has grown around the company and come to mean every product and service Apple offers, working in harmony to create a unified user experience.
This can be contrasted to a company like Uber, which considers itself an ecosystem of a central hub and drivers who work together to bring value to customers, contractors, and the company itself.
This is where the problem with ecosystems lies: anyone can describe their business or business model as an ecosystem. There is no standardization organization for ecosystems, thus there is no consistency in the use of the term. While ‘ecosystem’ is a term that is popular right now, it seems likely that without consolidation, ecosystems are doomed to obscurity in the long term.
However – I would argue that this is not the case (and not just because my principal research topic is ecosystems).
I believe that ecosystems, in a narrower conception meaning a group of interested actors coming together to work in an informal way, and in doing so creating more value than anyone could individually, can be a valuable idea for anyone working in the world of business.
I believe that ecosystems can be a valuable idea for anyone working in the world of business, with one caveat. The concept needs to be narrowed in scope to mean simply a group of interested actors working together informally, and in doing so, creating more value than any one of them could individually.
The key selling point of ecosystems lies in their distinctness from other forms of organization. Do you want to work with partners but not be beholden to strict contract rules? Form an ecosystem. Do you want to work with companies that can be interchangeably switched as your business needs demand? Form an ecosystem. Do you have an idea for a product that relies on a huge amount of cooperation, both from companies and from individuals? Form an ecosystem.
Ecosystems, in my mind, are a kind of meeting point between different kinds of organizational forms. They are looser than a joint partnership or alliance as they lack contractual agreements. But at the same time, they are closer-knit than a group of companies who merely buy from and sell to each other.
Ecosystems, like the Apple App Store or Valve Corporation’s Steam platform, also afford companies the ability to work with a vast and varied network of loyal consumers/contributors as well as different companies who bring value to the system in their own way.
There are, of course, areas where the concept can be improved; more clarity, clearer sub-types, perhaps even standardization or accreditation, but I believe that ecosystems as a concept are not only here to stay, but that they are scalable ways to reach out and engage stakeholders to break the paradigm, create real synergy, and ideate holistic growth.
In other words: they are a valuable way to think about the informal relationships often found between different firms and their customers which allow for significant value creation.