Blog - The misplaced use of the term ecosystem
Most innovations are created in collaboration (Berenschot Strategy Trends 2019), which allows firms to innovate faster, and spread the risks and costs associated with innovation. Firms strengthen their competitive position through collaboration with complementing partners in forms like co-creation, alliances, innovation hubs or innovation ecosystems. Ecosystems have rapidly gained attention for innovation collaboration. Deloitte dedicated an entire business trends report (2014) to this radical new trend. In a study conducted by Accenture (2019) 84% of business leaders stated that ecosystems were important in disrupting their industry and driving growth. The terminology related to ecosystems is becoming increasingly imprecise in everyday business vocabulary which is causing confusion. In this article we tighten the terminology on the most common types of ecosystems.
Why bother about terminology?
Best practices are shared in literature, websites and conversations. However, it is important to be sure which type of collaboration you are reading about, because there are great differences between ecosystem types. The goal of this post is to create awareness about the different types of collaboration that exist and how they are confused with ecosystems. This will contribute to the future understanding of how we can improve within these types of collaboration to increase our success in innovation.
Creating clarity: what is an ecosystem?
In the literature, an ecosystem is defined as a set of actors with varying degrees of multilateral, nongeneric complementarities that are not fully hierarchically controlled (Jacobides et al, 2018). An ecosystem is therefore characterised by three attributes:
- nongeneric complementarities: In case of generic complementarities there would be no need for firms to align and act in a group, as is done in ecosystems. For example: even though yoghurt may complement cereals and cereal bowls, these are generic complementarities in consumption and are not parts of an ecosystem by this definition.
- an interdependence exists between a set of actors: In an ecosystem relationships are not bilateral, but multilateral.
- an ecosystem is not unilaterally hierarchically controlled: In an ecosystem all its members retain a certain control and claim over their assets. As such, a firm cannot autonomously set terms for prices, quantities, standards and contracts for instance.
Figure 1: Supply chain versus Ecosystems
Based on these characteristics we describe some of the most common types of ecosystems below and the differences to supply chains.
Different types of ecosystems
Supply chains are often confused with ecosystems. However, a supply chain, defined as a series of companies in which the consecutive stages of production of an economic product take place, from primary producer to final customer (Van Weele, 2014), does not classify as an ecosystem. In contrast to ecosystems, supply chains are characterised by bilateral relationships and a buying firm which often has control over its suppliers by determining what is supplied and at what cost. The confusion arises as a supply chain may have a business ecosystem supporting it, but this does not make it an ecosystem on itself.
In Business ecosystems the focus lies on an individual firm or new venture and the environment that the firm must monitor and react to. Business ecosystems are viewed as a "community of organisations, institutions, and individuals that impact the enterprise and the enterprise's customers and supplies" (Teece, 2007). The individual firm must take all relevant actors into consideration which might affect the firm’s competence to build a sustainable competitive advantage. Airbus, the European multinational aerospace corporation, collaborates with wing- and motor suppliers. Since the production of a wing is highly dependent upon the shape and weight of the motor, these suppliers are part of the business ecosystem of Airbus, unlike the suppliers of other generic complementary parts such as screws.
Innovation Ecosystems are the 'collaborative arrangements through which firms combine their individual offerings into a coherent customer-facing solution' (Adner, 2016). A particular innovation is principal to the existence of the ecosystem. Strong coordination between interdependent actors to create and commercialise innovations that benefit the end customer are seen as the precondition to successful innovations. The innovation ecosystem of Building Integration Management (BIM) systems consists of LED, sensor, software suppliers and construction companies. This innovation ecosystem also includes investors who have funded a demonstration of their capabilities in ‘The Edge’ building in Amsterdam, currently the ‘smartest’ building of the world.
Platform ecosystems are built around a specific class of technology with a focal firm and its providers of complements that make the platform more valuable to consumers (Jacobides et al, 2018). Great examples of platforms are Airbnb, Facebook, Google Home, Philips HUE, Uber and Xbox. In the particular case of Facebook, the more users there are, the more appealing the platform becomes. This is the case not only for its users, but also for possible content writers and firms interested in publishing their advertisements. So Facebook’s platform ecosystem consists, among others, of users, content creators and advertisers.
Regional Ecosystems, such as Brainport, aim to stimulate economic development in a specific region. In a regional ecosystem, the organisations involved have their location in common. All types of organisations can collaborate, such as technology-driven companies, local government bodies, research institutes and universities.
Other types of ecosystem collaborations may exist but are not in scope in this article.
Do you need support in establishing, growing and managing your ecosystems? Feel free to contact us at Berenschot.
Berenschot supports firms and its partners in creating and managing innovation ecosystems through the application of its innovation ecosystem approach (Figure 2). In this way we contribute to the successful development of innovations such as photonics and smart systems in various industries.
Figure 2: Berenschot Innovation Ecosystem Approach
Stephanie Riffo Rodriguez