2.4 Ecosystem Development

Business is all about ecosystems. Customers are ecosystem networks rather than individual actors or separate segments. Ecosystems can be complex and extremely powerful as they can multiply or shrink a company’s business abruptly and exponentially.

For example, in the past, cities used coin and card machines to collect parking fees. Nowadays, payments are made digitally by using apps provided by third parties. This was facilitated by cities establishing ecosystems to share data and transactions, rather than sourcing a digital app solution and providing the service themselves.

The result today is a better service to citizens and faster transformation to digital services, which results in moneysaving for the city. In other words, the experiment has been beneficial to all parties in the ecosystem.

Figure 2.4.1 Digital parking ecosystem

 

Developing the ecosystems

Every organisation works with several ecosystems. Business technology ecosystems are technology related and have some common characteristics like:

  • Use of technology is protected with licence terms and intellectual property rights (IPR)
  • The use of technology often generates a large amount of data (Big Data) that is a very valuable asset and a solid foundation for additional business
  • The custom software has a high development cost and low scaling cost proving commercial alternatives for risk and benefit sharing
  • Use of data is restricted with regulations, like the General Data Protection Regulation (GDPR)
  • Services are connected globally and are vulnerable to security issues that may have a massive business impact (cyber security).

Technology providers make extensive investments in ecosystem development and acquire new developers and customers with a low entry cost, trusting that they will break-even by gaining critical mass. Technology providers that succeed in building ecosystems make significant profit, which enables them to invest even more in technology and ecosystem development and thus, become even stronger in the market. For that reason, there are only a few players dominating the ecosystem market.

From a sourcing perspective, the organisation should be:

  • Smart in selecting new ecosystems, as they will benefit from the early adopter pricing and publicity
  • Rational in selecting the dominant ecosystems with high costs, as they might lose business and progress with declining ecosystems
  • Careful in selecting the niche ecosystems that may turn out to be good enough (positive scenario) or that cause them to fall badly behind and require replacement (negative scenario).

The most attractive scenario is the opportunity to build an ecosystem and become a dominant player in the market. As building and developing an ecosystem can be very costly, organisations should be certain to have the required competences, commitment and passionate people to make it happen.

When building or joining an ecosystem, an organisation should:

  • Have a clear and bold vision to be communicated
  • “Walk the talk” as the vision must be discussed several times to make an impact
  • Introduce a compelling commercial model with risks, costs and benefits in balance
  • Acquire the best companies for the ecosystems, ensuring creativeness and interest
  • Ensure clarity with clear commercial and intellectual property rights rules
  • Celebrate the initial steps as well as the big achievements regularly to create a community.