How Healthy Is Your Business Ecosystem?
Paying attention to the right metrics and red flags will help leaders sidestep the most common pitfalls in the four phases of ecosystem development.
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Image courtesy of Harry Campbell/theispot.com
Companies that start or join successful business ecosystems — dynamic groups of largely independent economic players that work together to create and deliver coherent solutions to customers — can reap tremendous benefits. In the startup phase, ecosystems can provide fast access to external capabilities that may be too expensive or time-consuming to build within a single company. Once launched, ecosystems can scale quickly because their modular structure makes it easy to add partners. Moreover, ecosystems are very flexible and resilient — the model enables high variety, as well as a high capacity to evolve. There is, however, a hidden and inconvenient truth about business ecosystems: Our past research found that less than 15% are sustainable in the long run.1
The seeds of ecosystem failure are planted early. Our new analysis of more than 100 failed ecosystems found that strategic blunders in their design accounted for 6 out of 7 failures. But we also found that it can take years before these design failures become apparent — with all the cumulative investment losses in time, effort, and money that failure implies.2
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Witness Google, which made several unsuccessful attempts to establish social networks. It invested eight years in Google+ before shutting down the service in 2019. One reason for the Google+ failure was its asymmetric follow model, similar to Twitter’s, in which users can unilaterally follow others. This created strong initial growth but did not build relationships, which might have fostered greater engagement on the platform. The downfall of another Google social network, Orkut, was built into its unusually open design, which let users know when their profiles were accessed by others. It turned out that users were uncomfortable with this lack of privacy, and the network went offline in 2014, 10 years after its launch.
References (18)
1. M. Reeves, H. Lotan, J. Legrand, et al., “How Business Ecosystems Rise (and Often Fall),” MIT Sloan Management Review, July 30, 2019, https://sloanreview.mit.edu.
2. U. Pidun, M. Reeves, and M. Schüssler, “Why Do Most Business Ecosystems Fail?” Boston Consulting Group, June 22, 2020, www.bcg.com.
Comment (1)
Giovanni COLUCCI