Business ecosystem

Starting in the early 1990s, James F. Moore originated the strategic planning concept of a business ecosystem, now widely adopted in the high tech community. The basic definition comes from Moore's book, The Death of Competition: Leadership and Strategy in the Age of Business Ecosystems.[1]

The origins of the concept

The concept first appeared in Moore's May/June 1993 Harvard Business Review article, titled "Predators and Prey: A New Ecology of Competition", and won the McKinsey Award for article of the year.[2]

Moore defined "business ecosystem" as:

“An economic community supported by a foundation of interacting organizations and individuals—the organisms of the business world. The economic community produces goods and services of value to customers, who are themselves members of the ecosystem. The member organisms also include suppliers, lead producers, competitors, and other stakeholders. Over time, they coevolve 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.”[3]

Moore used several ecological metaphors, suggesting that the firm is embedded in a (business) environment, that it needs to coevolve with other companies, and that “the particular niche a business occupies is challenged by newly arriving species.”[4] This meant that companies need to become proactive in developing mutually beneficial ("symbiotic") relationships with customers, suppliers, and even competitors.

Using ecological metaphors to describe business structure and operations is increasingly common especially within the field of information technology (IT). For example, J. Bradford DeLong, a professor of economics at the University of California, Berkeley, has written that "business ecosystems" describe “the pattern of launching new technologies that has emerged from Silicon Valley”.[5][6] He defines business ecology as “a more productive set of processes for developing and commercializing new technologies” that is characterized by the “rapid prototyping, short product-development cycles, early test marketing, options-based compensation, venture funding, early corporate independence”.[7] DeLong also has expressed that the new way is likely to endure “because it's a better business ecology than the legendarily lugubrious model refined at Xerox Parc—a more productive set of processes for rapidly developing and commercializing new technologies”.[8]

Mangrove Software,[9] The Montague Institute,[10] Kenneth L. Kraemer, director of the University of California, Irvine’s Center for Research on Information Technology and Organizations[11] and Stephen Abram, Vice President of Micromedia, Ltd.,[12] Tom Gruber, co-founder and CTO of Intraspect Software,[13] Vinod K. Dar, Managing Director of Dar & Company,[14] have all advocated this approach.

Industries

Gruber explains that over a century ago, Ford Motors did well using methods of mass production, an assembly line, and insourcing. However, Ford began to outsource its production “[w]hen the ecology evolved.” Gruber (n.d.) has stated that such evolution in the ecology of the business world is “punctuated now and then by radical changes in the environment” and that “globalization and the Internet are the equivalents of large-scale climate change. Globalization is eliminating the traditional advantages of the large corporation: access to capital, access to markets, and economies of scale”.[13]

The application service provider (ASP) industry is moving toward relationship networks and focusing on core competencies. “According to the gospel of Cisco Systems, companies inclined to exist together within an “ecosystem” facilitate the imminence of Internet-based application delivery”.[15]

Books also use natural systems metaphors without discussing the interfaces between human business and biological ecosystems.[16]

Another work defines business ecology as “a new field for sustainable organizational management and design,” one “that is based on the principle that organizations, as living organisms, are most successful when their development and behavior are aligned with their core purpose and values – what we call “social DNA’”.[17]

The need for companies to attend to ecological health is indicated by the following: “Business ecology is based on the elegant structure and principles of natural systems. It recognizes that to develop healthy business ecosystems, leaders and their organizations must see themselves, and their environments, through an “ecological lens”.[18]

Biological ecosystems

Some environmentalists have used "business ecosystems" as a way to talk about environmental issues as they relate to business rather than as a metaphor to describe the increasing complexity of relationships among companies. According to Townsend, business ecology is the study of the reciprocal relationship between business and organisms and their environments. The goal of this "business ecology" is sustainability through the complete ecological synchronization and integration of a business with the sites that it inhabits, uses, and affects.[19]

Other environmentalists believe that the ecosystem metaphor is just a way for business to appear 'Green'. For example, in the book 'The Unity of Nature', published in 2002 by Imperial College Press, Alan Marshall shows that the metaphor is used to make out that somehow business operates using natural principles which should be left to run without interference (by governments).

The Cooperative Bank, established in the United Kingdom in 1872, launched its National Centre for Business Ecology in 1995. This Centre promotes itself as “a low cost, high quality environmental advisory service to small and medium sized UK businesses”.[20] The bank reports that in keeping with its Ecological Mission Statement, it will not invest in businesses that focus on fossil fuel extraction, the manufacture of harmful chemicals, or the non-sustainable use of natural resources.[20] Yet, exactly what business ecology means to the bank and how it differs from current approaches to greening business are unclear.

Kinetix advertises that it provides sustainable business solutions to companies by working with them on strategy, design, and project management. Located beneath its name on the company’s web site are the words “business ecology,” which the company defines as “the effective use of material, social and financial resources – the key to sustainability”.[21] The company cites pollution, climate change, the need for corporate transparency, and the 2001 economic downturn as creating a market opportunity that is being met by firms involved in renewable energy, working toward creating zero waste, attending to product life cycles, and using the triple bottom line in their accounting practices. In its online brochure, the company has explained that it offers resource audits, workshops for organizational change, environmental management systems, and other services .[21]

See also

Notes

  1. ↑ Moore 1996
  2. ↑ McKinsey Award Winners for Best HBR Articles. 2001. p. 2.
  3. ↑ Moore 1996, p. 26
  4. ↑ Moore 1996, p. 3
  5. ↑ DeLong 2000, para. 1
  6. ↑ Cohen, DeLong & Zysman 2000
  7. ↑ DeLong 2000, para. 6 & 4, respectively
  8. ↑ DeLong 2000, para. 6
  9. ↑ Mangrove 2001, para. 1: “(t)he interaction and correlation of economic conditions, technology, customers, employees, corporate partners, shareholders, and competitors forming the environment under which a business operates”.
  10. ↑ Montague 1993, para. 1: “interacting systems consisting of companies, their customers and suppliers, and other players in the business environment”
  11. ↑ Kraemer 1999, para. 11: “It is the applications that firms buy or create themselves that bring value-added to the firm and to its business ecology of customers, suppliers and business partners”.
  12. ↑ Abram 2000, para. 4: has asserted that the Web is “maturing as a business ecology”
  13. ↑ 13.0 13.1 Gruber, para. 4: “Imagine that companies are like organisms in an evolutionary landscape”
  14. ↑ Dar 1999, para. 1: “Evolution on the Internet is no different from physical evolution but with vastly compressed life cycles and faster genetic mutation”.
  15. ↑ Kaminsky 2000, para. 1
  16. ↑ Baskin 1998
  17. ↑ Abe, Dempsey & Bassett 1998, pp. xii-xiv
  18. ↑ Abe, Dempsey & Bassett 1998, p. 19
  19. ↑ Townsend 2006
  20. ↑ 20.0 20.1 The Cooperative Bank 2001, section 1995, para. 1
  21. ↑ 21.0 21.1 Kinetix 2002, para. 2

References