Business ecosystem
Encyclopedia
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.
in May/June 1993, and won the McKinsey Award for article of the year. Moore wrote:
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.” 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 rather than the physical/biological environment 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”. 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”. 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”.
Mangrove Software, The Montague Institute, Kenneth L. Kraemer, director of the University of California, Irvine
’s Center for Research on Information Technology and Organizations and Stephen Abram, Vice President of Micromedia, Ltd., Tom Gruber, co-founder and CTO of Intraspect Software, Vinod K. Dar, Managing Director of Dar & Company, have all advocated this approach.
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”.
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”.
Books also use natural systems metaphors without discussing the interfaces between human business and biological ecosystems.
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’”.
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”.
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”. 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. 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”. 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 .
James F. Moore
James F. Moore studies co-evolution in social and economic systems. His recent work has focused on understanding the "economics of peace."Moore was a Senior Fellow at Harvard Law School's Berkman Center for Internet & Society from 2000 to 2004...
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.
Origins of the concept
The concept first appeared in Harvard Business ReviewHarvard Business Review
Harvard Business Review is a general management magazine published since 1922 by Harvard Business School Publishing, owned by the Harvard Business School. A monthly research-based magazine written for business practitioners, it claims a high ranking business readership among academics, executives,...
in May/June 1993, and won the McKinsey Award for article of the year. Moore wrote:
Definitions
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.”
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
Ecological niche
In ecology, a niche is a term describing the relational position of a species or population in its ecosystem to each other; e.g. a dolphin could potentially be in another ecological niche from one that travels in a different pod if the members of these pods utilize significantly different food...
a business occupies is challenged by newly arriving species.” 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 rather than the physical/biological environment is increasingly common, especially within the field of information technology
Information technology
Information technology is the acquisition, processing, storage and dissemination of vocal, pictorial, textual and numerical information by a microelectronics-based combination of computing and telecommunications...
(IT). For example, J. Bradford DeLong
J. Bradford DeLong
James Bradford DeLong commonly known as Brad DeLong, is a professor of Economics and chair of the Political Economy major at the University of California, Berkeley. He served as Deputy Assistant Secretary of the United States Department of the Treasury in the Clinton Administration under Lawrence...
, a professor of economics
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
at the University of California, Berkeley
University of California, Berkeley
The University of California, Berkeley , is a teaching and research university established in 1868 and located in Berkeley, California, USA...
, has written that "business ecosystems" describe “the pattern of launching new technologies that has emerged from Silicon Valley”. 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”. 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
Xerox PARC
PARC , formerly Xerox PARC, is a research and co-development company in Palo Alto, California, with a distinguished reputation for its contributions to information technology and hardware systems....
—a more productive set of processes for rapidly developing and commercializing new technologies”.
Mangrove Software, The Montague Institute, Kenneth L. Kraemer, director of the University of California, Irvine
University of California, Irvine
The University of California, Irvine , founded in 1965, is one of the ten campuses of the University of California, located in Irvine, California, USA...
’s Center for Research on Information Technology and Organizations and Stephen Abram, Vice President of Micromedia, Ltd., Tom Gruber, co-founder and CTO of Intraspect Software, Vinod K. Dar, Managing Director of Dar & Company, have all advocated this approach.
Industries
For example, Gruber explains, over a century ago, Ford MotorsFord Motor Company
Ford Motor Company is an American multinational automaker based in Dearborn, Michigan, a suburb of Detroit. The automaker was founded by Henry Ford and incorporated on June 16, 1903. In addition to the Ford and Lincoln brands, Ford also owns a small stake in Mazda in Japan and Aston Martin in the UK...
did well using methods of mass production, an assembly line, and insourcing
Insourcing
Insourcing is the opposite of outsourcing; that is insourcing is often defined as the delegation of operations or jobs from production within a business to an internal entity that specializes in that operation...
. 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”.
The application service provider
Application service provider
An application service provider is a business that provides computer-based services to customers over a network. Software offered using an ASP model is also sometimes called On-demand software or software as a service ....
(ASP) industry is moving toward relationship networks and focusing on core competencies. “According to the gospel of Cisco Systems
Cisco Systems
Cisco Systems, Inc. is an American multinational corporation headquartered in San Jose, California, United States, that designs and sells consumer electronics, networking, voice, and communications technology and services. Cisco has more than 70,000 employees and annual revenue of US$...
, companies inclined to exist together within an “ecosystem” facilitate the imminence of Internet-based application delivery”.
Books also use natural systems metaphors without discussing the interfaces between human business and biological ecosystems.
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’”.
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”.
Biological ecosystems
Environmentalists sometimes use "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.The Cooperative Bank, established in the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
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”. 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. 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
Sustainable business
Sustainable business, or green business, is enterprise that has no negative impact on the global or local environment, community, society, or economy—a business that strives to meet the triple bottom line. Often, sustainable businesses have progressive environmental and human rights policies...
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”. The company cites pollution, climate change, the need for corporate transparency
Corporate transparency
Corporate transparency is set of information, privacy, and business policies to improve corporate decisionmaking and operations openness to employees, stakeholders, shareholders and the general public. Standard & Poor's has included a definition of corporate transparency in its aimed at analysis...
, 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
Zero waste
Zero waste is a philosophy that encourages the redesign of resource life cycles so that all products are reused. Any trash sent to landfills and incinerators is minimal. The process recommended is one similar to the way that resources are reused in nature...
, attending to product life cycles, and using the triple bottom line
Triple bottom line
The triple bottom line captures an expanded spectrum of values and criteria for measuring organizational success: economic, ecological, and social...
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 .
See also
- Complexity science
- Economic networkEconomic networkEconomic network or refereed network of independent individuals has the primary purpose of making a strong community in order to gain strength and perform as a significant player in relation to current market situation...
- enterpriseEntrepreneurshipEntrepreneurship is the act of being an entrepreneur, which can be defined as "one who undertakes innovations, finance and business acumen in an effort to transform innovations into economic goods". This may result in new organizations or may be part of revitalizing mature organizations in response...
- Entrepreneurship ecosystemEntrepreneurship EcosystemThe Entrepreneurship Ecosystem refers to the elements – individuals, organizations or institutions – outside the individual entrepreneur that are conducive to, or inhibitive of, the choice of a person to become an entrepreneur, or the probabilities of his or her success following launch...
- ExchangeTradeTrade is the transfer of ownership of goods and services from one person or entity to another. Trade is sometimes loosely called commerce or financial transaction or barter. A network that allows trade is called a market. The original form of trade was barter, the direct exchange of goods and...
- Institutional
- InterdependenceInterdependenceInterdependence is a relation between its members such that each is mutually dependent on the others. This concept differs from a simple dependence relation, which implies that one member of the relationship can function or survive apart from the other....
- KnowledgeKnowledgeKnowledge is a familiarity with someone or something unknown, which can include information, facts, descriptions, or skills acquired through experience or education. It can refer to the theoretical or practical understanding of a subject...
- OrganizationOrganizationAn organization is a social group which distributes tasks for a collective goal. The word itself is derived from the Greek word organon, itself derived from the better-known word ergon - as we know `organ` - and it means a compartment for a particular job.There are a variety of legal types of...
- Social good
- Social networks
- Value (economics)Value (economics)An economic value is the worth of a good or service as determined by the market.The economic value of a good or service has puzzled economists since the beginning of the discipline. First, economists tried to estimate the value of a good to an individual alone, and extend that definition to goods...
- Value chainValue chainThe value chain, is a concept from business management that was first described and popularized by Michael Porter in his 1985 best-seller, Competitive Advantage: Creating and Sustaining Superior Performance.-Firm Level:...
- Value conversionValue conversionValue conversion is the act of converting one type of value or financial instrument into another type of negotiable value. In the securities profession the definition of conversion value is very narrowly defined as the positive difference between the market price of a convertible security and the...
- Value networkValue networkA value network is a business analysis perspective that describes social and technical resources within and between businesses. The nodes in a value network represent people . The nodes are connected by interactions that represent tangible and intangible deliverables. These deliverables take the...
- Value network analysisValue network analysisValue network analysis is a methodology for understanding, using, visualizing, optimizing internal and external value networks and complex economic ecosystems. The methods include visualizing sets of relationships from a dynamic whole systems perspective...