The ecosystem business framework
The success of large businesses such as Microsoft, Amazon and Google as well as digital disrupters like Airbnb and Uber is attributed to their adoption of platform-enabled ecosystem business frameworks. Microsoft, Amazon and Google know how to make ecosystems work. It is their ecosystem approach that helped them to scale quickly, innovate and unlock value in opportunity areas where businesses that are vertically integrated, or have a linear value chain, would have struggled. Internet-enabled digital opportunity areas tend to be unsuited to the traditional business frameworks. These depend on having the time and the ability to anticipate needs, plan and execute accordingly.
As businesses in the telecommunications sector and beyond try to emulate the success of these companies and their ecosystem approach, it is necessary to clarify what is meant by the term “ecosystem” and how it can provide a framework for organising business.
The word “ecosystem” is borrowed from biology. It refers to a community of organisms – of any number of species – living within a defined physical environment.
A biological ecosystem
Source: STL Partners
A business ecosystem can therefore be thought of as a community of stakeholders (of different types) that exist within a defined business environment. The environment of a business ecosystem can be small or large. This is also true in biology, where both a tree and a rainforest can equally be considered ecosystem environments.
The number of organisms within a biological community is dynamic. They coexist with others and are interdependent within the community and the environment. Environmental resources (i.e. energy and matter) flow through the system efficiently. This is how the ecosystem works.
Companies that adopt an ecosystem business framework identify a community of stakeholders to help them address an opportunity area, or drive business in that space. They then create a business environment (e.g. platforms, rules) to organise economic activity among those communities. The environment integrates community activities in a complementary way. This model is consistent with STL Partners’ vision for a Coordination Age, where desired outcomes are delivered to customers by multiple parties acting together.
Characteristics of business ecosystems that work
In the case of Google, it adopted an ecosystem approach to tackle the search opportunity. Its search engine platform provides the environment for an external stakeholder community of businesses to reach consumers as they navigate the internet, based on what consumers are looking for.
- Google does not directly participate in the business-consumer transaction, but its platform reduces friction for participants (providing a good customer experience) and captures information on the exchange.
While Google leverages a technical platform, this is not a requirement for an ecosystem framework. Nespresso built an ecosystem around its patented coffee pod. It needed to establish a user-base for the pods, so it developed a business environment that included licensing arrangements for coffee machine manufacturers. In addition, it provided support for high-end homeware retailers to supply these machines to end-users. It also created the online Nespresso Club for coffee aficionados to maintain demand for its product (a previous vertically integrated strategy to address this premium coffee-drinking niche had failed).
Ecosystem relevance for telcos
Telcos are exploring new opportunities for revenue. In many of these opportunities, the needs of the customer are evolving or changeable, budgets are tight, and time-to-market is critical. Planning and executing traditional business frameworks can be difficult under these circumstances, so ecosystem business frameworks are understandably of interest.
Traditional business frameworks require companies to match their internal strengths and capabilities to those required to address an opportunity. An ecosystem framework requires companies to consider where those strengths and capabilities are (i.e. external stakeholder communities). An ecosystem orchestrator then creates an environment in which the stakeholders contribute their respective value to meet that end. Additional end-user value may also be derived by supporting stakeholder communities whose products and services use, or are used with, the end-product or service of the ecosystem (e.g. the availability of third party App Store apps add value for end customers and drives demand for high end Apple iPhones). It requires “outside-in” strategic thinking that goes beyond the bounds of the company – or even the industry (i.e. who has the assets and capabilities, who/what will support demand from end-users).
Many companies have rushed to implement ecosystem business frameworks, but have not attained the success of Microsoft, Amazon or Google, or in the telco arena, M-Pesa. Telcos require an understanding of the rationale behind ecosystem business frameworks, what makes them work and how this has played out in other telco ecosystem implementations. As a result, they should be better able to determine whether to leverage this approach more widely.
Table of Contents
- Executive Summary
- The ecosystem business framework
- Why ecosystem business frameworks?
- Benefits of ecosystem business frameworks
- Identifying ecosystem business frameworks
- Telco experience with ecosystem frameworks
- AT&T Community
- Deutsche Telekom Qivicon
- Telecom Infra Project (TIP)
- GSMA Mobile Connect
- Lessons from telco experience
- Criteria for successful ecosystem businesses
- “Destination” status
- Strong assets and capabilities to share
- Dynamic strategy
- Deep end-user knowledge
- Participant stakeholder experience excellence
- Continuous innovation
- Next steps