Strategy as EcologyStrategy as Ecology

Marco Iansiti & Roy Levien

By Shereen El Sammaa

OutlineOutline

Business ecosystem-Briefly Assessing health of your company’s

ecosystem-How healthy are you? Determining your place in it-Keystone,

Dominator, Niche Player Developing a strategy to match your

role in it-Match your strategy to your environment

How useful an Analogy? Implications of Ecosystem perspective

What is a Business What is a Business Ecosystem?Ecosystem?

Typical business ecosystem includes:

Traditional suppliers & distributorsCompanies to which you outsource business functionsInstitutions that provide you w/ financingFirms providing technology needed to carry out your businessMakers of complementary productsCompetitors & Customers→ when their actions & feedback affect your processes & products

Assessing Your Assessing Your Ecosystem’s HealthEcosystem’s Health

So what is a healthy ecosystem? What are the indications that it will

continue to create opportunities for each of its domains & for those who depend on it?

Three Critical Measures of Health:Productivity

Robustness

Niche Creation

So… So…

How can you promote the How can you promote the health & stability of your health & stability of your own ecosystem, thereby own ecosystem, thereby helping to ensure your helping to ensure your company’s well being?company’s well being?

It depends on your role-current & potential-within the network

Keystones, Dominators, Keystones, Dominators, and Niche playersand Niche players

The three main roles

Match your Strategy to Match your Strategy to Your EnvironmentYour Environment

Company’s choice of ecosystem strategy governed primarily by the kind of company it is or aims to be

Choice also be affected by business context in which it operates:

General level of turbulenceComplexity of its relationships w/ others in the ecosystem

If your business…If your business…

faces rapid & constant change, & by leveraging the assets of other firms, can focus on a narrowly & clearly defined business segment → Niche strategy

is at the center of a complex network of asset-sharing relationships & operates in a turbulent environment → Keystone Strategy

If your business…If your business…

relies on a complex network of external assets but operates in a mature industry → Physical Dominator Strategy

chooses to extract maximum value from a network of assets that you don’t control → Value Dominator Strategy

is a commodity business that operates in a stable and mature environment& operates relatively independently of other organizations → Ecosystem Strategy is irrelevant (although that may change soon)

How useful an Analogy?How useful an Analogy?

Strong parallels between Business Networks & Biological Ecosystems-large number of loosely interconnected participants that depend on one another for their effectiveness & survival

Ecosystem healthy → individual participants will thrive and vice versa

Crucial hubs that assume the keystone function of regulating ecosystem health

Keystone-Sea Otter, Dominator- sea urchins, Niche Players-variety of invertebrates and plants

How useful an Analogy? How useful an Analogy? (cont’d)(cont’d)

Analogy isn’t perfect-sunlight & nutrients vs. technology

But to be perfect, an analogy has to be so simplistic that it would offer little real insight

Use of term “ecosystem” rather than “community” → clearly signals that we are discussing a complex system & working w/ a biological analogy

Vivid terminology helps managers focus on features of modern business networks, often ignored by conventional theories

Underlie many drivers of success & failure

Implications of Implications of Ecosystem PerspectiveEcosystem Perspective

Central importance of interdependency in business

Importance of integration Broad scattering of innovation

across a healthy ecosystem Taking action w/o understanding

impact on its many neighboring business domains, or on ecosystem as a whole

More Than StrategyMore Than Strategy

Implications ripple throughout whole organization, not only strategies

No longer possible to design or conceive of a product in isolation e.g. music players, cameras, computers, etc… all merging functions

Creates opportunities for innovation & product development

In a healthy ecosystem → New products can leverage the capabilities provided by existing products

The fact is that…The fact is that…

Users no longer care much about identity or features of their products, only about

how they fit in with & enhance the systems of which

they are a part

Thank YouThank You