What is a business ecosystem and why you must build yours
A strong business ecosystem lies at the heart of any growing business.
Alliances, partners or ecosystems have become a prevalent topic of conversation among business leaders in the last few years, and it is now clear that you can’t grow without fostering a rich partner network. But to many it is still unclear what exactly constitutes an ecosystem, how it works and why they have become so crucial in any business strategy.
And while it is indeed a critical component of a company’s success, does that mean that anyone can build his/her own ecosystem? Are they appropriate for any company? At any stage of development?
When your company is ready to embrace the ecosystem economy, the question becomes, which type should you choose, and what is the main differentiator that should be leveraged to extract the most value out of it?
We will try to answer these questions in this article to fully understand the what, why and how.
“Ecosystems means competitive advantage.”
JF.Moore - Harvard - The prey and the predator
Why do companies need to have an ecosystem?
People evolve within multiple ecosystems at any given time, in which they manage different types of relationships. For instance, we are all born into a family, and experience our first “ecosystem” from day one. Parents, grandparents and extended family constitute the first one we encounter, before we become members of other groups such as friends, colleagues and partners. Each of these groups is a living entity that grows, evolves and requires actual management. People can be members of tens or hundreds of such ecosystems.
Similarly, companies are like people: they grow, expand, manage relationships, and add value. Thus, they too have ecosystems of their own.
An ecosystem is defined as a group of independent players that create products or services that together construct an offering. But beyond this definition, what is at stake in a business ecosystem is the potential to offer the best possible experience and final product to the client. It is this potential that has enabled ecosystems to become the heart of any business as the main agent to grow and unlock value.
Leading brands that are ecosystem oriented
In 2015, 12 out of top 31 global brands were ecosystem-oriented companies
Did you know that four of the top five brands according to a 2017’s study – Google (1), Apple (2), Microsoft (3), Amazon (4) are ecosystem brands?
Ecosystem has become a competitive advantage
Most business executives are already convinced that a partner ecosystem brings organizations together in the digital economy. The paradox here is that despite this strong belief, many executives are not prepared to make this change. Or their ecosystem is not delivering the expected results.
Source: Accenture / Corner Stone of Future Growth / Michael Lyman, Ron Ref, Oliver Wright
Companies benefit from joining ecosystems in three primary ways:
Access to a broad range of capabilities
Accelerated scale and increase of customer value
Agility and resilience
Being part of an ecosystem, or even better being its center of gravity can be especially beneficial when companies are in their startup phase, as it provides them with fast access to external capabilities that may be too expensive or time-consuming to build internally.
Questions you need to answer for a successful ecosystem journey:
What is my target market play
What role will I play in the ecosystem
Who are the other members of my network that will deliver the market play
How will we orchestrate the ecosystem to deliver the value
At which stage should companies build their first ecosystem?
Here are some criteria you should look at when assessing whether or not the time is right to build yours:
First, ask the obvious: is your product ready? Are you out of the MVP stage with real clients and actual revenue?
If the answer is “Yes, of course!”, then you need to assess if you can deliver the ideal value proposition to the final client yourself or if other partners are required as well.
Do you have the right resources to support your partners? As we’ll see later on, building an ecosystem is a lot about nurturing it, and things like training sessions, certifications, counselling and marketing activities will be critical to your success.
Furthermore, if your product can expand to other markets, it is highly recommended to repeat this process in each geo, but aiming to join another ecosystem this time.
What kind of partners do you need when you build your ecosystem?
Earlier we discussed how family is the first ecosystem we join. Even in this ecosystem, there are functions and roles, just like in a company. You might ask yourself who contributes to this business ecosystem? Who is going to help you promote your product? Who is going to collaborate with you on selling it? And what is the overall value which is created by the constitution of that ecosystem?
First and foremost, you need to ask yourself, how will you communicate the value of your products to your clients?
Different partner types mean different approaches and messages, thus, it is essential to define the value proposition that applies to each channel type.
Next, it is important to refine your targets, based on geographic constraints, lack of resources, time constraints or product scalability.
Below are the main type of players you can partner with in the tech ecosystem:
Value Added Resellers: a VAR will sell your products along with others in order to build a stronger offer - VARs mainly sell hardware. They key is that they provide value beyond product fulfillment.
System Integrators: They mostly offer software oriented and customizable solutions tailored to clients’ needs.
Consulting Companies: they will help the end client at a more strategic level, to understand his/her position in the digital transformation era through market analysis, existing tools and the compatibility of these tools, and finally, propose solutions relevant to the client’s needs
Managed Service Providers: this type of partner offers subscription based services, focusing on maintenance, support and keeping workflows running smoothly.
White Labelers / OEM Partners: this type of partnership is frequent when you allow another vendor to include your product within his proprietary solution, either by mentioning your brand or under his own branding.
As you can see, many types of players are out there, but they each play a different role in the value creation. Ecosystems are a complex puzzle to put together, with the goal of creating a differentiated value and constituting a defensive barrier to entrance. The key success driver is often centered around the complementarity of these actors delivering value within an industry or a market.
Ecosystems are key to success only if you go about it the right way
Your ecosystem journey consists of several steps:
Ecosystem strategy - Define the vision and the value
Ecosystem Design - Design your program, architecture and operating model
Incubate & Launch - From initial test to mobilizing the full scale of your ecosystem
Scale - Execute ecosystem services and program
Where to start
At TYDEX, we are following a specific, structured and results driven approach. The most important step is the initial understanding of the necessity of an ecosystem within your organization. Since you read until this point, you probably have already made this first step.
After the required understanding comes a mandatory incubation process, that will lay the foundation of your ecosystem. In this phase, you need to establish what your revenue and business goals are, identify your target audience, craft your value proposition and develop a business and marketing plan.
Next comes perhaps the most challenging phase: the execution. Execution requires a hands-on approach where you must put a process together, from partners’ acquisition to relationship building through onboarding, and iterate until you get it right.
Last but not least is the nurturing of your ecosystem. As with any relationship, you must put in work in order to receive value. You need to mobilize a dedicated team to efficiently manage your partners, maintain the relationship alive and constantly educate them on your products so that they know how to sell them best.
At Tydex we have over 20 years of experience in helping companies build their business ecosystem in order to grow their revenue, acquire new customers, expand to new markets and innovate their products/services.
Contact us if you would like to learn how we can help you.