In high tech circles, the term “ecosystem” is used to maddening effect. Leaders toss the term around as though it is the answer to every business problem: Can’t build the solution your clients need? Just tell them you’ll deliver the extra capabilities through your ecosystem. Can’t reach all markets? Just tell your investors that you’ll get there through your ecosystem. Need to expand your sales force? Just add “the channel” to your ecosystem.
But what is an ecosystem, how do you know when you have one, and how do you ensure its ongoing success? The term ecosystem is borrowed from the biological sciences, where it refers to a collection of living and nonliving organisms that are “linked together through nutrient cycles and energy flows.” There are three important features of this definition when we transfer it to the high tech business: assessing living and nonliving organisms, understanding the difference between nutrient cycles and energy flows, and appreciating the whole ecosystem as separate from the sum of its parts.
These features are especially insightful when we apply the ecosystem to the industry disruption created by Cloud Computing. We’ll look at each feature separately, starting with living and nonliving organisms.
A Collection of Living and Nonliving Organisms
First, the ecosystem is a collection of living and nonliving organisms. In biology, the ecosystem includes both plants and rocks, or water and sand, for example. In high tech, the corollary is people and assets. When building ecosystems, it’s often easy to focus on either people or assets in a vacuum, an approach that will rarely succeed.
For example, several years ago, we were building an offering for the small business market. This was a new venture for IBM, since at the time we didn’t have offerings that reached below the midmarket and cloud computing wasn’t commercially viable. We had an appliance for small business, and we needed applications to ride on top of that platform. A very large ERP vendor had an application that they were building for the small business market and they were looking for a viable platform on which to deliver it.
The match seemed ideal. Both companies flew enthusiastic architects between locations to meet and build presentations that displayed the elegance of the combined solution. Marketing teams built plans on how to roll out the new offering. Executives agreed over dinner that the partnership would be fruitful for both sides.
Everyone was focused on the nonliving organisms—the platform and the application. But the project never got out the door because once we started looking at the living organisms—the sales teams—we realized that neither side had a channel that could reach our new target audience. We lacked the people who were most crucial in turning the asset into mutual profit.
At least as frequently, partnerships are formed when two companies realize great synergies between their teams. The companies might share a common mission or have similar organizational cultures. Often they have a competitor in common. Highly optimistic conversations about the boundless possibilities of a strong alliance reverberate up and down the organizational chains of both companies.
But without assets, these partnerships are what one pundit called “Barney Relationships.” Barney, the friendly purple dinosaur from a long running children’s show, sings, “I love you, you love me….” While this is charming for kids, in business it’s all just talk. Partnerships, and ultimately ecosystems, need assets that drive revenue for all the parties involved.
An ecosystem starts with very basic building blocks: people and assets. In Part 2, we’ll look at how variations of those building blocks feed on and interact with each other.