Business Ecosystems becoming mainstream

It was nearly 30 years ago that James F. Moore published his book The Death of Competition: Leadership and Strategy in the Age of Business Ecosystems. He could not have realized back then what impact this thought piece would have in the decades ahead. James was not announcing the death of competitive forces at the time. Far from it, our world is characterised by hyper-competition, something he was keenly aware of. What he was pointing us to is the shift in whom we will compete - that is fundamentally changing. There are some contributing factors to this shift - the speed at which information can now be almost ubiquitously collected and exchanged, the reach of digital platforms across markets, and how porous industry borders have become, all are making competitive dynamics between direct industry rivals of old not as much a source of competitive advantage. Instead, competition between ecosystems, each comprising multiple organizations, is becoming more pervasive, than industry rivals of old. In this growing paradigm, collaboration among ecosystem members is key to the competitiveness of your organization and its ecosystem partners, and developing an ecosystem edge can unleash significant value, well beyond what our organization could attain on its own today. Think for a moment of Microsoft's efforts to position itself in a world where Gen AI is pervasively used. Offering conversational AI models to enable create natural language experiences for customers, employees, and business partners, for Microsoft customers, required of Microsoft to acquire Gen AI capabilities through M&A, and innovations in how Gen AI data is accessed, stored and reported on in a client industry context, to support decision-making. Micosoft’s own ecosystem is growing, as a result.

Back to James Moore for a moment, who saw the advent of business ecosystems and the impact it would have, he was heading next to China. In a talk hosted by the Business Ecosystems Alliance, James spoke about his impressions of his engagement with HAIER, a multibillion-dollar conglomerate that has grown through the practice of ecosystem building. James noted 'China was nothing like I expected. I saw [in the organization] a systematic approach to maximize human potential and the value it unlocks.'

As the adoption of business ecosystems grew from a small set of practitioners, mostly in the technology sector, to a mainstream practice by organizations across the world, some common myths that hold us back from recognizing its pervasive use and the value it could unleash, had to be challenged.

Here are three (3) of these common myths and how they were overcome:

1. Ecosystem building is simply too much effort - It's a rather common response. When faced with a challenge that requires more than a repeat of yesterday’s business plan, the tendency of many management teams is to do it ourselves. It's a pervasive response. After all, sticking to our own organizational efforts, building ourselves, relying on old and trusted partners, makes use feel as though we can retain control of the situation we find ourselves in, however uncomfortable we know it to be. It's a common human response. Yet, it is one of the riskiest we can take. If we take an objective and hard look at what winning in a new market space or re-capturing customers' hearts and minds would take, and where the most critical capabilities are found, many leadership teams (and boards) now recognise that such critical capabilities are often outside our reach [unless you have Microsoft’s war-chest at your disposal]. Even if such capabilities were close by, they are likely to challenge how we think and act. An example of an organization that has overcome this common myth is Globe Telecoms. Globe began its way as a MNO, a cellular telecoms provider, in the Philippines. In the early years, it competed with rival MNOs, in a well-defined geographical market, setting-up its own towers, investing in networks in wireless networks and switches, providing hand-held devices and connectivity offerings in its local market. It runs the country's largest mobile network and is one of its largest fixed-line and broadband network providers. Fueled by rapid digitisation, and its response to the pandemic, saw it expand its portfolio, within a mere few years, to include building a Neobank, digital health solutions, EdTech, ecommerce, entertainment offerings and more, with a network of international collaborations to support its expanding digital ecosystem. In 2023, its Group CEO, Ernest Cu, highlighted how adopting a holistic, ecosystem-based thinking, was essential to the company’s business strategy. But not only in the pursuit of new opportunities in its digital ecosystem. Its approach incorporates ecosystem risk management and changes to its corporate governance. In a telecoms market that is maturing, and with over 54 million customers and mobile data comprising 81% of Globe’s total mobile revenues in 2023, discovering new opportunities in its digital ecosystem, before other MNOs do, is simply not enough. Effective collaborations have given it an ecosystem edge across areas of its growing portfolio.
2. It would take too much time - Another common myth is that of the time it would take to build and commercialise an ecosystem. How much would it take to map the ecosystem, to find suitable partners, to negotiate, to learn how to work together and craft new and differentiated offerings that rely on more than what we currently offer? There would be slippages along the way, no doubt, and that may push us further from our goals and stated timelines...How would we explain such possible delays, rather than going it alone? When it comes to speed of execution, in the digital age, few organizations can match the go-to-market efforts of Netflix. Its growth from about 50 countries in 2017, to over 200 countries in a mere two years, is a testament to its ability to go-to-market at speed and leverage its digital capabilities in the process. Yet, a closer look reveals how Netflix saves time using its ecosystem collaborations. An example is its latest drive to strategically position itself in Latin America by investing in local content. By this, it aims not merely to discover themes to base new shows on, but deep local collaborations that bring to life the richness of history and cultures of the region, in countries such as Columbia, Brazil and Argentina. In Why Netflix Is Betting Big on Latin America, Bloomberg anchor Emily Chang explored Netflix productions such as 100 years of Solitude, where production complexities are tackled with the help of a myriad of local experts, and a regional talent network. TV productions, we all know, runs on a tight timeline. Are these learnings applicable to industries where timelines are not as extreme? We think so...
3. What if it goes spectacularly badly, expose us to extreme risks, dent our reputation? It is a question many executives have shared with us. We must acknowledge that there is a lot we simply cannot predict, even with the best intentions and the most meticulous planning, and things can and do go wrong, in the midst of execution. How do some of the world's most capable ecosystem builders tackle such risks? Let's look to one organization that is expanding across emerging markets - DP World. In the world of maritime logistics, from shipping to port and inland operations, industry borders are changing and becoming more porous to new forms of competition. In fact, I dedicated an entire chapter to this in my book - Challengers: How a New Breed of Leaders Collaborates and Wins in a Hyper Competitive World. What we see are organizations extending beyond their industry borders to solve significant and, at times, existential challengers - from the imperative to decarbonize operations, to meeting growing supply chains, from Southeast Asia to Africa. Just a month ago, DP World announced that it would be doubling its freight forwarding offices across Sub-Saharan African, an ap. 20% growth in its global freight forwarding office network - a significant move. In a region where fragmented markets and infrastructure constraints are common, how DP World intends to grow its market presence is key. It already operates several port terminals on the continent and has significant strategy and growth ambitions in the region. This is where its assets - in ports, terminals, warehouses, trucks, rail and shipping services can help consolidate a fragmented industry and contribute to its ecosystem partners, while building resilience. In late 2023, it signed a 30-year concession agreement with the Tanzania Ports Authority, to modernize the multi-purpose Dar es Salaam Port. I would not be surprised to hear of similar moves closer to the continent's most industrialized hub, South Africa. All these present DP World with new strategic options and extending its ecosystem well beyond its core terminal operations. Defending the core is important. Leveraging the core, with the help of a collaborative ecosystem, can get DP World even further.

Ecosystems have now come of age. Since James Moore's seminal thought piece in 1996, business ecosystems have expanded well beyond the technology sector. They are now being built across infrastructure-rich sectors such as mining, energy and transportation, as much as they are leveraged in telecoms, media and ICT. Most importantly, we now have the tools and methods to, as noted by Ernest Cu, Group CEO of Globe, use holistic, ecosystem-based thinking, to make our business strategy execution more successful and our organizations more resilient than ever. We can avoid the myths that have hindered such efforts, in the past.

Which opportunity or challenge are you thinking of? Do any of the questions we posed above resonate with your thinking, and if so, are you convinced the challenges you might face in ecosystem building are facts or perhaps some myths? It's a conversation worth having.

Have a good week ahead.