In biology, an ecosystem is defined as “a system formed by a community of interdependent organisms with their physical environment”. In business we are more often seeing networks of organizations interacting with complex competing and co-operating relationships to further their own success and the success of the community itself. These types of networks can be classed as ecosystems as well. This is at its most basic, the definition of a business ecosystem.
In their 2004 book “The Keystone Advantage”, Iansiti and Levien expand on the definition further by explaining that similar to the organisms in a biological ecosystem, the members of a business ecosystem also share their fate with each other. If the ecosystem fails, so will all of the participants. If the ecosystem thrives its member organizations will reap the benefits. After reaching a level of sustainability, individual organizations in the ecosystem can be swapped in and out without dramatic effect on the ecosystem as a whole. This allows the ecosystem to self-govern its members in much the same way organisms govern their own ecosystems.
In order to be successful, an organization must be able to create and capture value. Members of an ecosystem have an advantage in this area since they have a network of organizations to engage in value co-creation with (I will do a post on value co-creation later), and they have a large pool of value to capture. Value management is also a facet of a successful ecosystem. Like an individual organization, in order to be successful an ecosystem must generate value. This means that member organizations must contribute more to the network than they take from it. When an ecosystem has a net negative amount of value creation it faces destruction (a perfect case is Bre-X or more recently the collapse of the American financial industry).
For an ecosystem to be successful, its members must not only look out for their own success, but also for the health of the network as a whole. There are three factors ecosystem members must have in order for the system to be healthy: productivity, robustness and niche creation. Productivity is important to young, growing ecosystems where it is imperative for the members to generate enough value to attract new members and to sustain themselves. Robustness is an ability to create a competitive advantage from multiple sources, and the ability to redefine offerings in response to market changes. Niche creation is an organization’s ability to create technological innovations.
Business ecosystems are networks of organizations who have linked their fate and are motivated to promote the health of the ecosystem not for altruistic reasons, but because the health or their own organization demands it. These member organizations gain a huge advantage over outside competitors due to value co-creation and the robustness the network provides them.
