Saku_Mäkinen_ tivit_business_ forum

Perspectives on interconnectedglobal business ecosystems

Mäkinen, Saku, PhD, professor

April 12th, 2011

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Tivit Business Forum

Brief agenda

• Ecosystem and its evolution• Properties of ecosystems• [R]Evolutionary mechanisms• Challenges arising from basic properties

• Roles in ecosystems• Keystone player• Dominator player• Niche player

• Value delivery to customer• The central theme for profitability and survival for any ecosystem and

party• Empirical example of value delivery deficiencies and delays

• Summary from structure-evolution-value considerations

Mäkinen, Saku, PhD,professor, industrial management

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Business ecosystem and its [r]evolution

3Mäkinen, Saku, PhD,professor, industrial management

Ecosystem; defined

• Ecosystem, in biology• An ecosystem is a biological environment consisting of all the

organisms in a given area, along with the nonliving factors with which they interact; a biological community and its physical environment linked together through nutrient cycle and energy flow.

• Business ecosystem• An economic community supported by a foundation of interacting

organizations and individuals; suppliers, producers, competitors, etc. The economic community produces goods and services of value to customers, who are themselves members of the ecosystem. Over time, they coevolve their capabilities and roles as well as structures of the ecosystem.


Case mobile ecosystem; firm level


Basole, 2009

Properties of systems

• Hierarchy• System has a hierarchically nested structure, whereby the system is

seen as a composition of smaller sub-systems that are themselves systems

• Goal orientation• System as a whole is goal-seeking

• Holism at system level performance delivery• Holistic system, its performance and its properties are synthesised

/synergised through the sub-systems properties


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Properties of systems

• Interdependence • Sub-systems are interdependent both within the same as well as

across different levels of the system hierarchy

• Modular structure• Sub-systems are specialised for particular functions

• Feedback mechanisms• System has multi-levelled feedback loops


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Case mobile ecosystem; industry level


•Hierarchy•Goal orientation•Holism at system levelperformance delivery

•Interdependence •Modular structure•Feedback mechanisms

Basole, 2009

Analyzing generic ecosystem; reducing complexity

Supplier 1

Supplier 2

Complementor 1

Complementor 2

Focal firm Customer

Components Complements


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Generic ecosystem; case semiconductor manufacturing

Lens manufacturer

Energy source manufacturer

Mask manufacturer

Resist manufacturer

Lithography tool manufacturer

Semiconductor manufacturers


•Hierarchy•Goal orientation•Holism at system levelperformance delivery

•Interdependence •Modular structure•Feedback mechanisms

10Adner, Kapoor, 2010

Evolution of ecosystem2 basic mechanisms


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Launch Development Maturity Time

Currenttechnology

Technologyoption 1

Technologyoption 2

All actors aim at improving towards holistic goal of performance deliveryBut make innovation decisions uniquely

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So, if lens producer develops technological performance?

Lens producer

Energy source producer

Mask producer

Resist producer

Lithography tool producer Semiconductor manufacturers

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Challenges arising from [r]evolution

• Goal orientation and holism in performance delivery• Customer value should be the central theme directing evolution• Managing the goal orientation is not trivial for all parties

• Hierarchy and interdependence • Sub-systems are tied together, coevolving• The delivery of performance is delayed due to interconnectedness

• Modular structure and feedback mechanisms• Synthesis of performance delivery of sub-system levels needs to be

coordinated, either by focal agent or self-organization• Feedback mechanisms may not be economically viable

• Coordination mechanisms• Focal firm, self-interest, profit-survival interest• Other focal agent, e.g. regulatory, other social interests• Self-organization, mutual self-interests, cliques, social interests etc.


Roles in ecosystems

One view on the role aspect…


Roles in ecosystem

• Depending on the level of (cf. Iansiti, Levien, 2004)• Complexity of relationships• Level of turbulence and innovation

• Keystone organizations• High complexity and high level of turbulence/innovation• Simplify complex connectivity btw participants• Reliable point of reference for technological innovations• Concentrating on its own core, and providing guidance on innovation in

technology development of other parties• Disproportionately valued in contrast to its revenue/employees in the

ecosystem as a whole

• Requirements for keystone player• Create value e.g. through platform (services, tools, technologies) to other

parties in ecosystem• Share value through platform to other to attract and retain parties in the

ecosystem development (diversity and robustness on shocks)


Roles in ecosystem


• Dominator player• High complexity and low turbulence/innovation• Integrate vertically or horizontally to own and manage large part of

the network directly (not ecosystem as such)• Controls value creation and value capture• Mediates market requirements to the network

• Requirements for dominator• Market understanding and value delivery• Stability and ability to resist environmental shocks• Responsibility to manage the network


Roles in ecosystem


• Niche player• Low complexity and high turbulence/innovation• Concentrates on specialized capabilities that differentiates it from others

in the ecosystem• Leverage from complementary offering facilitates specialization• In healthy ecosystem, form the bulk and create most of the value

• Requirements for niche player• Careful consideration for developments in ecosystem• Keystone-dominator balance, are there forces to replace specialty?• Innovation is crucial in niche value delivery• How critical is the niche occupied for the whole ecosystem, can it be

replaced?


Managing ecosystem? Example of keystone configuration…

Lens producer

Energy source producer

Mask producer

Resist producer

Lithography tool producerKEYSTONE PLAYER

Semiconductor manufacturers


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It is all aboutBENEFIT for customer


Importance of BENEFIT for customer

• The health of ecosystem depends on BENEFIT delivery• Environmental shocks need to be absorbed, diversity• Diversity to fulfill customer demand and moderate its changes

• Different roles have differing dangers• Keystone needs to understand market trends, if not, some other

player finds opportunities; fragile and vulnerable, albeit powerful• Niche player may be more survival oriented, may shift to new

ecosystem with its innovation focus and specialized capabilities• Dominator is solely responsible for value delivery

• BENEFIT for end-user ultimately determines fate• But what is this benefit then…


Value for customer and heterogeneity of customer needs


Woodall,, 2003

Needs of the

Segment A

Needs of the

Segment B

Value for customer heterogeneity and ecosystem structure

• Role of value heterogeneity• More heterogeneous needs,

more niches• More homogenous needs,

more controlled ecosystem• More niches, more fruitful

avenues for ecosystem• More central control sought

after, less needs satisfied competitively

• More heterogeneous needs, more value/risks on keystone


Het

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ty o

f mar

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eeds

Low

High

Economies from centralized control

Low High

Self-organizing network

Keystone platform

Dominator platformDominator

Summary from structure-evolution-benefit

• Innovation and competitive advantage• Leaderships no guarantee for competitive advantage nor profits• Innovation in ecosystems cascades unpredictably• Value for the customer (benefit) needs to be the focal point

• Platform for heterogeneous benefits• Heterogeneous value for customer, segment interconnectedness around core

value• Emphasize modularity and platform design, profit sharing• Viable niche mechanisms in modules, survival and profitability• Stable, governed, proprietary platform with wide access to ecosystem

participants

• Systemic goods for homogenous benefit• Homogeneous value for customer, value chain configuration, orchestrated

ecosystem• Emphasize partnership management, interfaces• Viability through joint technology development, sub-system competition• Oligopolistic competition at system level, market connections are stressed


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Thank you

[email protected]


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