Ecosystem Reference Materials and Notes

Moore, James F. (2006), Business Ecosystems and the View from the Firm, The Antitrust Bulletin, Vol 51, No. 1/Spring, 31-75.

For more than sixty years, markets and hierarchies have dominated our thinking about economic organization. This paper suggests that a third form, the ecosystem organizational form, has now become so important in practice that it should be accorded equal recognition in theory and in policy-making.

Business Ecosystem is a strategic planning concept originated by James F. Moore and widely adopted in the high tech community, starting in the early 1990s. The basic definition comes from Moore's book, The Death of Competition: Leadership and Strategy in the Age of Business Ecosystems (HarperBusiness, 1996).

The concept was introduced by Moore in the Harvard Business Review in May/June 1993, and won the McKinsey Award for article of the year. Moore wrote - An economic community supported by a foundation of interacting organizations and individuals–the organisms of the business world. This economic community produces goods and services of value to customers, who are themselves members of the ecosystem. The member organizations also include suppliers, lead producers, competitors, and other stakeholders. Over time, they co-evolve their capabilities and roles, and tend to align themselves with the directions set by one or more central companies. Those companies holding leadership roles may change over time, but the function of ecosystem leader is valued by the community because it enables members to move toward shared visions to align their investments and to find mutually supportive roles.

The ecosystem concept was widely used by Cisco Systems Inc throughout the world. The company leveraged partners for all business functions except for developing their core patented products and business strategy. Partners were used for sales, marketing, manufacturing, technical support and new installations. Cisco lived up to the motto 'do what you do best and leave the rest for others to do'. Until the 2002 technology bubble crash the company grew to be the largest valued and admired company in the world. This scalable business model allowed them to rapidly adapt and expand their operations using partners based on customer demand rather than slow risk based investments. The 'locally global' business model became the most respected business model in the communications industry of the 90s. While competitor crashed using old-world vertical models (e.g. Lucent, Nortel and 3-Com) Cisco stepped in and took their markets and customer

Roy Hanif was founder and innovator of their EMEA Services Ecosystem (in 1999). He created an exceptional management team and by using a 'think-tank' approach he attracted the largest 'traditionally competing' technology services companies throughout EMEA to deliver seamless, best practice, high quality services to Cisco's customers. The model was developed to be self-regulating in that respected partners were rated by customers for their performance (without Cisco interference). The rating was dynamically and automatically published in the web using a logical algorithm based database. The e-league tables were made visible to partners and customers and the hundreds of projects made the system come to life. Leagues were arranged by country, by skills and by complex solutions for each of the 30 countries in EMEA. Simply put, a service provider delivered a service, the customer would rate them using a standard c-sat rating on the web, the master database would be updated over night for all projects completing that day and the league was live in the morning - a customer satisfaction reality. Customers would go to the web league and not come to Cisco to find services, order their products on the web - power in the hands of the buyers and market. Of course those companies at the bottom of the leagues would eventually go out of business and those at the top flourished.

The model was regulated through Roy Hanif and his trusted senior management team. The partner services companies made-up a 'virtual management board' and an advisory board which met regularly to help improve and modify the living 'ecosystem.' The central team at Cisco set the governance, skill levels, roadmaps, market forecasts and approved new partners (once only!) as once accepted into the system, they were left alone to build or 'fall on their swords'. The central team could support them by not bending the rules or the system.

Roy named the business model the 'Darwinian League' and got the full support of the EMEA president Bill Nuti. This was one of the only truly fair e-commerce systems running entirely on the merits of its inhabitants. No vendor intervention meant that the system was able to emulate living ecosystems through natural selection. The highly successful business model attracted over 200 international service providers, trading was estimated at over 10 billion dollars in services and 2 billion pounds of Cisco product. The virtual organisation had over registered 3000 certified engineers that delivered rapid technical services in over 30 countries. Roy was awarded top global leader and contributor by the president, John Chambers, for his contributions to services business and for successfully managing the largest and most critical programme in Cisco's history; the billion dollar Thunderdial Programme. Roy lives in the UK and occasionally works in Europe as a senior advisor for central government on strategy, business reviews, large business change projects and portfolios.

The concept and associated methods became part of the standard practice of strategy making among companies including Hewlett-Packard, IBM,Intel, Microsoft, SAP, Softbank and many others.

The concept has since been applied more broadly to a variety of problems in network-centric strategy making, including foreign policy and national and regional economic development. It was one of the antecedents to the concept of Network-Centric Warfare in military strategy.

The most comprehensive current treatment of the concept is from Harvard Business School faculty member Marco Iansiti and Roy Levien, in their book The Keystone Advantage: What the New Dynamics of Business Ecosystems Mean for Strategy, Innovation, and Sustainability (Harvard Business School Press, 2004)

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This article is licensed under the GNU Free Documentation License. It uses material from the Wikipedia article “Business ecosystem”.

For a start-up, one of the biggest challenge is gaining access to customers and being able to transact business with them as easily and quickly as possible. In the last 5 years, new business models have been emerging that help reduce that challenge, referred to as Ecosystem business models.

These new business models are providing knowledge workers (aka the ?Creative Class?) access to ready-made delivery platforms and selling channels to a well-defined market.

These emerging channels to market typically provide a means to connect suppliers with consumers, usually handling the transaction between the two as a trusted mediator (taking a percentage in return for the channel services, e.g. selling platform, marketing, customer management, fulfillment, transaction handling):

• Apple Apps Store - sells applications to Apple iPhone phone users, handles delivery and payment, payment is via iTunes account
• Google Android Market - sells applications to Android mobile phone users, handles delivery and payment using Paypal
• Amazon Webstore - sell your wares online, access Amazon shoppers and Amazon store tools, handles payment using Amazon account
• 99Designs - companies/individuals post requests for graphics designs and designated “prize money”, companies/individuals post responses, the winning design selected gets the “prize money”
• oDesk - teams or individuals post skills/availability, companies/individuals post jobs with desired fee for completion (fixed rate or hourly)
• Shutterstock - royalty-free photographs, individuals/companies provide photos and get paid based on sales
• Innovation Exchange - companies/individuals post challenges and cash, suppliers post responses
• Mechanical Turk - people post questions/tasks, suppliers post answers/accept task
• Cafepress - individuals/companies generate graphic content, Cafepress puts it on mugs, shirts, etc and handles all fulfillment for the supplier
• Amazon Kindle - sell eBooks via Amazon and their new eBook reader
• uTest - on-demand software testing
• Crowd Spring - similar to 99Designs
• Lulu - sells self-published books
• Beta Test - links beta-testers with software publishers (e.g. iPhone)
• Eclipse Foundation - links Eclipse IDE consumers with suppliers who build on top of the Eclipse open source IDE platform
• Just Parts - links consumers of auto parts with suppliers

One channel which can be very significant for Microbusinesses is Paypal -

• Paypal - “one-click” purchasing between suppliers and consumers. Many niche sellers, e.g. 3rd party add-on suppliers for Joomla! use Paypal as their transaction vehicle. Most eCommerce solutions provide a gateway to Paypal as the payment means. Paypal itself also can accept credit cards on behalf of a seller. Paypal by itself provides access to a group of consumers who are comfortable transacting business online. Paypal provides a trusted supplier relationship between the buyer and the supplier. I have to confess I never thought Paypal would amount to anything when I first heard about the business many years ago?

Keystone organizations in an Ecosystem need money to operate and sustain their functions. The nature of how the keystone organization makes money depends upon whether it is a not for profit (social economy business) or a for profit (commercial business).

A not for profit Keystone organization typically makes its money through some or all of the following means:

• Selling memberships
• Selling consulting services
• Selling documentation and books related to the Ecosystem platform product
• Accelerating feature developments on the Ecosystem platform product in return for cash
• Selling support for the Ecosystem platform product or service
• Selling advertising on Keystone-associated websites, printed publications
• Selling t-shirts/etc with the Keystone logos/tag-lines
• Soliciting donations from Ecosystem users/consumers, e.g. through Paypal
• Running conferences and symposiums
• Selling company/product listing services for Ecosystem suppliers
• Selling training services/courses related to the Ecosystem platform product
• Selling certifications for products which use the Ecosystem product platform
• Selling infrastructure services which the Ecosystem product uses, e.g. webservices
• Selling sponsorships to commercial organizations in return for access to Ecosystem members, e.g. through offering of meetings, special offers/discounts from commercial businesses to its members
• Government grants

A for profit Keystone organization may also make its money from any of the above, but may also include some or all of the following as key sources of revenue:

• Sales channel and associated contract/transactions between consumers and suppliers of the channel (e.g. Apple Apps Store, oDesk)
• Selling products that are complimentary to the base product platform and other Ecosystem members that the Ecosystem is based on (and not competing directly with the Ecosystem suppliers)

• Apple AppStore
• Amazon Webstore
• Google Android Marketplace
• Google APIs
• Get A Freelancer
• oDesk
• eBay
• uTest
• User Testing

• Webmetrics Offers a Tool to Monitor Business Ecosystems in an Internet Platform/API Context