The term “business ecosystem” has firmly established itself in the dictionary of management buzzwords. For example, research by the BCG Henderson Institute found that in annual reports the term “ecosystem” occurs 13 times more frequently now than it did a decade ago. All of a sudden, new business ecosystems pop up all-around us. For example, Walgreens Boots Alliance CEO Stefano Pessina recently declared that his company’s partnership with Microsoft will help create an “ecosystem” connecting its drugstores to patients, their insurers and local medical care providers in communities; SoftBank founder Masayoshi Son announced his ambition to create an “ecosystem” of companies for a second Vision Fund that can collaborate to accelerate growth; and the government of Canada announced support for a new aerospace innovation “ecosystem”.
Many managers fear to miss out on this trend and feel urged to come up with their own business ecosystems — or at least to become part of some large emerging ecosystems. However, they struggle because the topic suffers from the broad scope of the concept, unclear definitions and lack of practical advice.
We suggest that a useful approach is to think of a business ecosystem as a solution to a business problem, as a way to organize in order to realize a specific value proposition. To this end, a business ecosystem is a governance model that competes with other ways of organizing the creation of a product or service, such as a vertically integrated organization, a hierarchical supply chain, or an open-market model.Fuller J, Jacobides MG, Reeves M (2019) The Myths and Realities of Business Ecosystems. MIT Sloan Management Review online (25 February)
To help managers find their way through the confusing jungle of ecosystem thinking, in this article, we aim to address the following questions:
- What is a business ecosystem and how is it different from other governance models?
- Which basic types of business ecosystems can be distinguished?
- Under which conditions is an ecosystem an advantaged governance model?
- What are the benefits and drawbacks of organizing in a business ecosystem?
This article is the first in a series. Subsequent articles will address how to design a business ecosystem, how to measure its success over time and how to manage it.