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Over the last two or three years, the concept of the business ecosystem has gained significant prominence, almost to the point that it is about to replace “digital transformation” as the buzzword du jour.
Books and articles related to the subject proliferate, and the world’s most prominent management conference – the Global Drucker Forum – chose it as the topic of its 2019 edition.
Leading and managing the complex networks that constitute a company’s business ecosystem has become a critical capability in the context of digital transformation dynamics, which are disrupting industries and redefining the way business works in the 21st century.
The buzz is not surprising. Leading and managing the complex networks that constitute a company’s business ecosystem has become a critical capability in the context of digital transformation dynamics, which are disrupting industries and redefining the way business works in the 21st century.
Effective business ecosystem engagement requires a different type of strategic and organizational acumen; one that is based on a dynamic system view that overcomes traditional linear thinking and transcends the egocentric perspectives most companies tend to harbour.
To gain insights into how large organizations deal with this leadership challenge, the Center for the Future of Organizations at the Drucker School of Management conducted a global survey among senior executives that focused on understanding the strategic and organizational capabilities it takes to act successfully within ecosystem networks.
In addition, the project aimed to identify existing capability gaps and learn what could be done and what is currently being done to close such gaps.
To get input for the design of the survey, and to avoid an ivory tower perspective, we compiled an executive advisory board with representatives from 10 corporations that included Airbus, Allianz Group, Cisco Systems, Coca Cola, Google, JP Morgan Chase, Kraft Heinz, Shell, Siemens, and UnternehmerTUM (a major European Innovation Cluster).
We also engaged in a series of in-depth conversations with academic thought leaders, business leaders, and consultants, and we conducted a cross-functional mini-think tank to discuss our findings and start to map an agenda for future work.
To Set the Stage – A Working Definition of Business Ecosystems
“How would you define an ecosystem?” was a question raised by each and every executive we interviewed.
As it often happens with fads, a term tends to get picked up and used in a variety of contexts, without a clear definition or shared understanding. The notion of ecosystems reaches from ecological metaphors (i.e., balanced systems of natural equilibriums) to a synonym for complex interdependent value-creation relationships, and from platform business models to collaborative architectures at large. “How would you define an ecosystem?” was a question raised by each and every executive we interviewed.
We decided to use a very simple definition, which is based on a dynamic, systemic understanding of what constitutes the “extended enterprise” of an organization, and which we used to frame the subject in the introduction to our survey questionnaire:
“We define a business ecosystem as an interdependent value-creation network of an organization, that reaches beyond its boundaries.
It includes customers, suppliers, distributors, technology partners, Joint Ventures, alliances, government agencies, industry associations, and others, who play a role in the overall creation and delivery of a company’s products and services. T
he degree to which a company can actively shape and leverage the dynamics of its business ecosystem is a critical element of competitive advantage. Digital Transformation has moved this challenge to the front of the strategic and organizational agenda.”
This definition implies:
- Interdependence and horizontal network structures are key features of ecosystems, which distinguishes them from traditional linear value chain models.
- Platform businesses are just one form of ecosystems. Ecosystems may include platform elements or not.
- Subsystems of an organization (such as functional areas, business units, projects, etc.) may act within ecosystems and/or create their own sub-ecosystems.
- Ecosystem analysis is complex and a matter of perspective; it reaches from understanding micro-relationships within and between ecosystem stakeholders to the recognition of global inter-industry dynamics. All levels of analysis are of strategic importance.
- Ecosystems are moving targets. They are fluid and dynamic. New entrants with new technologies may significantly change power equations.
We do not claim that this definition is better or more appropriate than others. However, as issues related to business ecosystem management continue to attract both scholarly research and practitioners’ attention, it is important to establish a shared understanding of the subject.
An Agenda for Business Ecosystem Leadership
Twelve key issues constitute the agenda for leaders who want to build the capabilities it takes to navigate the complexity of this new ball game
In an effort to structure the largely uncharted arena of business ecosystem leadership challenges, we identified twelve key issues executives need to be aware of. They represent, in no particular order, the essence of the numerous inputs we received from expert conversations, our mini think-tank, and the results of the survey. Together, they constitute key elements of a topical agenda for leaders who want to build the capabilities it takes to navigate the complexity of this challenging new ball game.
- Understanding Network Dynamics – an in-depth understanding of their interconnected position and the interdependencies within the ecosystem that informs a company’s activities in this space.
- Ecosystem Governance – exerting influence without formal power, and adapting internal governance processes to accommodate for ecosystem dynamics.
- Ecosystem Strategy – understanding the value contribution of each player and finding a unique spot in the system that cannot be made redundant.
- Ecosystem Design – selecting key partners and creating explicit policies and mechanisms to optimize the performance of the ecosystem.
- Ecosystem Quality – assuring the quality of participating partners, related to criteria such as brand equity, market presence, and strategic fit, technological capabilities, agility, and more.
- Dealing with Multiple Business Ecosystems – mastering the complexity of multiple ecosystems that belong to various business spaces and/or functional arenas.
- Boundary Management – assessing and managing the degree of openness that is appropriate in the various external relationship contexts; leveraging productive friction.
- Relationship Portfolio Management – dealing with the multiplicity of relationship and deal types that constitute an ecosystem (joint ventures, licensing agreements, technology partnerships, open innovation platforms, and many more).
- Orchestrating Multiple Operating Models – dealing with the idiosyncrasy of ecosystem participants that tend to differ substantially in size, business model, operating model, culture, etc.).
- Ecosystem Effectiveness – creating an ecosystem architecture that assures speed, transparency, and flexibility in cross-organizational collaboration.
- Ecosystem Talent Management – identifying, attracting, and capitalizing on mission-critical talent outside the boundaries and the control of an organization.
- Ecosystem Learning Architecture – including the relevant members/partners of the ecosystem in an ongoing journey of joint transformation via an inter-organizational learning architecture.
Over the next few weeks, I will discuss the implications of this agenda in more detail and also share highlights of our empirical findings in a series of LinkedIn posts. Please stay tuned.
This article is the first in a multi-part LinkedIn series about Organizing for Business Ecosystem Leadership. It is based on a recent research project conducted by the Center for the Future of Organization at the Drucker School of Management at Claremont Graduate University (CFFO).
If you would like to get immediate access to the entire study, you may download an electronic copy of the report here or get it as a physical booklet or Kindle version here.
To deepen our understanding of business ecosystem leadership, CFFO plans to launch a global dialogue and action platform on the subject. If you are interested to receive an invitation to the platform, contact [email protected]. Thank you!
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