What Is a Business Ecosystem and How Does It Work?
An increasing number of people are working and living in the business ecosystem. You might have heard about the e-commerce, entrepreneurial, and mobility ecosystem. But most people are unaware of an ecosystem’s characteristics that make it innovative.
Understanding the business ecosystem’s meaning can be helpful for incumbent businesses and startup entrepreneurs to compete as well as to collaborate more effectively. This article seeks to clarify the concept of the business ecosystem. It will also elaborate on the various types of business ecosystems and their importance.
Business Ecosystem Meaning
A business ecosystem can be defined as a network of organizations that usually includes distributors, suppliers, competitors, customers, and government agencies. These participating organizations are involved in developing and delivering a particular service or product through cooperation and competition.
The business ecosystem definition can be better understood concerning biological ecosystems. Like a natural ecosystem, a business ecosystem also operates on the idea that each entity within a particular ecosystem affects and is, in turn, affected by the other entities. This creates a continuously evolving relationship where each entity must be flexible and adaptable to survive.
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Types Of Business Ecosystems
Business ecosystem models are of different types. The types of the business ecosystem can be categorized based on purpose, structure, value creation mechanisms, success factors, etc. Moreover, the business environment can be either local or global.
A business ecosystem can be considered from a macro view (industry level or country level) or a micro view (company level). Mentioned below are the different types of business ecosystems.
This ecosystem is made up of a community of organizations having similar interests. This ecosystem shows up either through initiatives like industry standards(e.g., Bluetooth) or through lobbying to animate a change of regulations. The overall goal of these organizations is specific, and they collectively focus on assisting an exciting sector common to all of them.
Micro-business ecosystem focuses on helping a particular organization to achieve its goals. The micro-business ecosystem is further subdivided into two types of business ecosystems, which are as follows –
Captive Business Ecosystem
Under this ecosystem, a single entity controls the entire network of organizations and the people involved. Also, under this ecosystem, each of the big decisions regarding the ecosystem is centralized.
For instance, Apple leads an extensive ecosystem that comprises suppliers, hardware add-on companies, app developers, users, and retailers. Most of what happens within this ecosystem are guided by frameworks Apple has designed.
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Decentralized Business Ecosystem
This type of ecosystem is self-regulated. These ecosystems are generally organized around a particular open-source technology. This type of organization can be seen in the case of various Blockchain ecosystems or the BitTorrent ecosystem. For instance, Ethereum is run on consensus-based, decentralized governance.
This ecosystem generates and distributes an output, like a service or a product.
It is a digital platform that unites interested parties in a two-sided market to establish an ecosystem.
This ecosystem combines the features of transaction and solution ecosystems.
Digital Business Ecosystem
This ecosystem consists of hundreds and thousands of developers who connect and interact digitally in ways that benefit all. These developers build themes and plugins to enable users to build websites. The digital ecosystem has made it easier for novice business owners to boost their online presence.
Shopivana website builder is an excellent example of a digital business ecosystem.
Importance Of Business Ecosystem
The reasons listed below will satisfactorily explain the importance of the business ecosystem in today’s rapidly shifting business world.
- The business ecosystem encourages growth as well as innovation. Being a component of a business ecosystem enables you to achieve excellence in business competence and research, to effectively compete against other companies, and also provides you with mechanisms to leverage technology.
- It enables you to drive innovative and new collaborations to address the rising environmental and social challenges.
- A business ecosystem enables you to harness innovation and creativity, which can, in turn, allow members to reach out to new customers and also to lower production costs.
- It accelerates learning so organizations can effectively collaborate and share skills, insights, knowledge, and expertise.
- It enables you to hire the right talent.
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How Does The Business Ecosystem Work?
The concept of a business ecosystem has its roots within the biological ecosystem. Both comprise a countable number of loose but interconnected participants who depend on each other for their survival and effectiveness. The overall health of the ecosystem will impact each of its members.
The four elements of a business ecosystem model are leaders, contributors, users, and the environment. Let’s understand each of them one by one.
Leaders stand at the center of a business ecosystem model and are called “central contributors.” They act as a hub and are indispensable for the survival of other ecosystem members. These leaders set the vision for all members of the ecosystem to follow, and they also provide platforms. These platforms are regarded as critical building blocks of the business ecosystem.
Next comes the contributors. Outside the boundary of where the leaders are placed exists the contributors. It consists of several independent organizations and individuals who contribute to the evolution of the ecosystem. Each contributor performs tasks related to designs, productions, operations, distributions, product delivery, service, solutions, etc. And in this process, they depend on each other to survive. While working on the platform provided by the ecosystem leader, they try to improve their performance and increase the platform’s capabilities.
The third and most crucial component of a business ecosystem is the users. The users can be either individuals or businesses that ultimately purchase the services and products of the business ecosystem. The feedback the users give heavily impacts the working of a business ecosystem.
Lastly comes the business environment. This environment which surrounds the leaders, users, and contributors, determines the framework necessary for the functioning of the business ecosystem. Various scholars and authors have extensively studied the impact of the business environment on a particular business ecosystem. In the context of the business ecosystem, the environment can be categorized into economic, technical, social, cultural, law and policy, and credit environments.
All of these elements are interdependent and interact with each other to create and share collective value for a standard set of customers.
Nowadays, it’s a widespread belief among business analysts that the future of business is in the hands of companies willing to build ecosystem business models into the structure of their value-creation strategy. Hence, companies must either create their ecosystems or invent a process to join an already existing business ecosystem by trying to provide the ecosystem with an advantage that might be currently non-existent. Now that the business ecosystem definition is clear don’t stop exploiting its potential.