Fig. 1 Teaser and background for part 2 of this writeup – Building a Business Ecosystem
The best study of how to build anything has always come as an inspiration studying our world and of course nature. From flying crafts to mimicking human intelligence, nature has consistently given us the keys to unlock how to realize artificial versions. Ecosystems are no different. And am quite glad that at Huawei Connect 2016, pre Mr. Guo Ping excellent speech on day 2, there was an analogy by way of natural ecosystems presented to reverberate the beauty of “ecosystems” and how they enable the “harmony of growth in value”. Ecosystems emerge from platforms that enable dynamic exchange of value through active and interdependent relationships. This makes them sustainable and also evolutionary. These relationship can correlate to direct value exchanges, and sometimes can be indirect, such as consequential. For businesses, the focus on ecosystems is to protect turf and grow span of transactions for commercial and profitable benefits. It means facilitating both direct and indirect benefits between the different parties that transact on its platform. Thus the focus on “what’s in it for me” becomes a key part of business ecosystems, something ingrained in by way of code of existence in natural ecosystems.
Fig. 2 A snapshot of a type of natural ecosystem and “energy flow” relationships (Source: w3.marietta.edu)
The best “Ecosystem” reference case
Going back to teen age days studying the topic of ecology & ecosystems in Biology, the depiction above drives home the clarity needed in the relationships existing in ecosystems and how the cycle of relationships bring value to make such ecosystems sustainable. In this view, you will notice that almost all the other participants in this ecosystem have an energy flow relationship to other entities, a fact that must exist by virtue of the value (energy) exchange taking place. This exchange is somewhat referred to in the artificial ecosystems as “value loops”. This loop exist to make each entity in the ecosystem “valuable to others” and to ensure means by which such value becomes rewarded one way or the other through the sum total of all relationships. Because the depth of “resolution” for a natural ecology is vast and deep, it would be a long write up trying to completely map the relationships in a natural ecosystem and therefore to provide a very high resolution of relationships. It is clear though, that by considering the “uncontrolled factors” between and within entities, relationships can change with new ones being formed with new external entities that once fell outside the originally view defined in the picture. E.g. a line drawn between the Hawk and a mouse could emerge when circumstances chance.
Key concepts of an Ecosystem – Reference both Fig 1 and Fig 2
Using the chart above, I will attempt to outline the key “players” in an ecosystem as a way to build up to how to build an artificial ecosystem. In that case a sustainable Business ecosystem.
- Peers & Transactions – You will notice that some of the entities in this energy-flow ecosystem are sources for many others, and some are simple very limited. It’s normal to have such scenarios as they represent either a core relationship or a central piece of the energy flow. The relationships existing between any “two” represents a transaction that is happening between the entities. Each of the participants in this ecosystem will thus fall under one or both of two categories – a producing peer and a consuming peer. In nature’s ecosystem, everyone is a producer and also a consumer.
- Platform – Of course to increase the resolution of analysis so as to capture how to manage the risks and opportunities underpinning any ecosystem, we won’t forget the sun, rain and of course waste from all stakeholders that eventually flow back to the soil and enable vegetative processes to continue. The one player in this system that our resolution doesn’t capture by way of its roles is Earth. Earth is the platform on which all producers, consumers and even unknown stakeholders act on in order to enable this ecosystem exist. Thus Earth is a platform and platforms can be open or closed based on their nature, maturity and indeed characteristics that surround them. Ecosystems on the other hand are neither open nor close as they only outline a sum of “limited” relationships that exist in a context.
- Partners & Exchanges – Partners are key to enable transactions on the platform. The Sky which produces rain or water in this regard is also key partner to this ecosystem. Without rain or some form of water, vegetation’s won’t grow and that could limit or alter the energy flow balance. Platforms can become inputs into other ecosystems or as well other platforms. The “Sky system” in this regard is a platform of different actors that participate in the “engineering” of conditions relevant to the ecosystems survivability. The “sky system” is therefore a partner to the ecosystem and offers services to the platform in order that the different consumers and producers can continue to relate. The role of the partner is to provide or enable services in the ecosystem.
- Exchanges are transactions that happen between partners and the platform to enable “professional value” to be shared. Thus the professional value of the “sky system” can be said to provide “water services” when the platform need it to assure continued production and consumption. Exchanges will include evaporation from the soil and return by way of condensation and rainfall.
- Stakeholder – Then there is another key category – the important players who exist either to enable, compete or indeed see this ecosystem fail. Such players provide some means to regulate or control the platform directly or indirectly. Their role sometimes ensures the business of the ecosystem is sustained in harmony and thus appear as shareholders or sponsors of the ecosystem. The sun, moon and stars, including man will be stakeholders in this regard.
- Channels & Context – How entities in the ecosystem we’re relating to get to transact or relate is through forms of “channels and contexts”. Context is unique and applies to each “relationship pair”- so are channels. In the case of the garter snakeand grasshopper, the context of the garter snake eating the grasshopper will be because they are hungry or as part of breeding or perhaps as a preparation for hibernation. The channels to eating would be through hunting, scouting, burrowing or climbing. Identifying the two are important to ensure we can define clear scenarios and build “case models” to help enrich value loops and relationships on the platform.
- Value Loop – The value loop is a cycle of energy (in the case of nature’s ecosystems) or value flow between participating entities. It serves as a measure of motivation for relating with an entity or the platform. A value loop can also be considered in this ecosystem as an “energy loop”. While in man-made ecosystems value loops are based usually on “batter” schemes between two entities (with some value directions being indirect), for nature’s model, value loops can span a number of entities with engrained indirect value flows.
In Part 2 of this blog, I’d hope to help provide a sequence of steps to building an ecosystem by identifying a platform, key participants, orchestrating relationships and mapping motivations on them.