Ecosystem strategies
Competing together VS Competing against each other
An ecosystem is a network of interconnected systems. We can explain business ecosystems with the same idea of an ecosystem regarding the environment and living things, just like we can call a biological community of living organisms interacting with each other and their environment an ecosystem, a business ecosystem is an interconnection of businesses and organizations including suppliers, distributors, competitors, customers, governments and more interacting together for the purpose of producing a specific service or product.
An ecosystem play or strategy is the process of building additional value offerings to customers by expanding the scope of services rendered in addition to your product and doing so in collaboration or partnerships with the players in the ecosystem.
Businesses pursue this strategy mainly to drive customer retention for the core product and/or to generate additional revenue for existing customers (it's cheaper to maintain an old customer than to get a new one).
The process of building an ecosystem can take various paths.
Apple built theirs by providing additional app services like Apple Music, iCloud, and, most recently, the development of ApplePay. All these helped ensure future sales for the iPhone (their core product). Also these value adds have become sizable drivers of revenue accounting for c.20% of revenue.
Companies like Google allowed for other services to be provided via their app and devices. For example, the use of Google nest by Mecerdes and LIFX to provide GPS driven home heating and safety alarm systems. The use of these third party apps mean people are more likely to stick to the Nest, increasing Google's customer retention.
However, to build a solid ecosystem, a good strategy is needed. Strategy for a business involves deciding where the playing field would be and, more importantly, how to win.
When it comes to business ecosystem strategies, a firm must thoroughly analyze how it build the system. It must be well thought out. If it seeks to create a walled garden like Apple, it must map out the risk of abandonment by customers if it stifles access to greater variety.
If it seeks out collaboration like Google, it should watch out for the development of rival products from collaborators.
To learn
The rise of technology has opened new areas for business innovation and value creation. However the rise of profound opportunity is tempered by the increased risk of disruption.
The development of an ecosystem approach is one of the most effective ways to address this, hence its increased popularity. Nevertheless, the system itself is not immune to risk and must be developed with careful analysis to ensure successful implementation.