One of the themes that keeps emerging in the work of the Cambridge Service Alliance is the importance of the ecosystem. We define an ecosystem as the
wider network of firms and organisations that can
or could influence the way the focal firm creates and captures value through
the provision of its products and services. Members of this wider network might include, but
are not limited to: collaborators, regulators, clients, customers and consumers, their stakeholders,
suppliers and competitors.
Why
does an ecosystem perspective matter? The first reason is that thinking
about ecosystems encourages executives to take a broader view on the
opportunities they face. This argument was first made by Moore in his
Harvard Business Review article - "Predators and Prey: A New Ecology of
Competition". As the boundaries between traditional industrial sectors
break down organisations change the way the create value for their
customers. Take a simple example - airlines. Are they in the travel
business? After all their primary function is to transport people from A
to B? Are they in the entertainment and catering business - they feed
and entertain people while on their planes. Are they in the holiday
business? Witness the emergence of BA and Virgin holidays. Are they in
the telecoms business - think about in flight telecoms and wireless
services. Even more extreme examples are seen in electronics and
telecommunications. Phone companies now double as internet service
providers. They offer on demand TV and video services. They are debating
what else they can do given the cables they have running into your
house. Utilities companies in general are blurring - water companies
will provide gas and electricity. Gas companies will reduce the price
you pay if you buy electricity from them as well. An even more radical
example is provided by electric vehicles - some are exploring how they
might be used as energy storage devices when not being driven.
Boundaries between sectors are blurring and disappearing. As they do new
opportunities emerge. Being constrained by a logic which says "we are
an automotive firm" or "we are a pharmaceutical firm" simply limits
innovation and creativity.
This
theme of innovation and creativity is a second reason why ecosystems
thinking is so important. Firms define often themselves in terms of
their markets, customers and competitors. Yet one thing we have seen in
our work is the increasingly complex nature of inter-organisational
relationships. It is common to see firms competing for some contracts,
while collaborating on others. IBM, for example, competes with software
vendors such as Oracle and SAP, yet also installs Oracle and SAP systems
when their customers want them to. BAE Systems partners with Babcock to
deliver services at Portsmouth Naval Base, yet competes with Babcock
for other MoD contracts. This complex and nested set of relationships
raises some interesting questions. If you define another organisation
solely as your competitor there's a danger you miss opportunities for
innovation and collaboration. The car industry provides an excellent
example. Many car manufacturers have close relationships with (or in
some cases own) Dealer networks. They see the Dealer as the primary
route to market and the obvious choice for all after-sales service and
support. Yet there are loads of small, independent garages that offer
vehicle service and support. Often customers prefer these independent
garages - they are cheaper, operate with lower overheads and only use
genuine original equipment spares when needed. Traditionally the
automotive manufacturers have seen these independent garages as the
enemy. They take work from the Dealer network, build direct
relationships with the end customer and generally disrupt the industry.
But
if you draw a broader circle and include these "annoying independent
garages" in your ecosystem, you could - as an original equipment
manufacturer - start to ask how might we collaborate with these
independent garages? Should we offer to manage their spare parts
inventories through consignment stocks? Should we provide them
specialist tooling and equipment, creating a larger market for
proprietary technologies? As the use of telematics and remote monitoring
increases, should we - the original equipment manufacturer - sell the
engine diagnostic data to independent garages to help them provide
better service to their customers? Perhaps the original equipment
manufacturer can create a more seamless, integrated and lower cost
service for their customers by collaborating with their traditional
competitors.
Its
only when you start to challenges the assumptions that you hold about
how your industry operates and where the boundaries lie that you start
to think creatively about the opportunities that are open to you. Taking
an ecosystem perspective and broadening your horizon is a great way of
thinking about how you might innovate your business model.
