Business ecosystem

Business Ecosystem is a strategic planning concept originated by James F. Moore and widely adopted in the high tech community, starting in the early 1990s. The basic definition comes from Moore's book, "The Death of Competition: Leadership and Strategy in the Age of Business Ecosystems" (HarperBusiness, 1996).

Business Ecosystem

The concept was introduced by Moore in the Harvard Business Review in May/June 1993, and won the McKinsey Award for article of the year.Moore wrote - "An economic community supported by a foundation of interacting organizations and individuals--the organisms of the business world. This economic community produces goods and services of value to customers, who are themselves members of the ecosystem. The member organizations also include suppliers, lead producers, competitors, and other stakeholders. Over time, they co-evolve 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."

The ecosystem concept was widely used by Cisco Systems Inc throughout the world. The company leveraged partners for all business functions except for developing their core patented products and business strategy. Partners were used for sales, marketing, manufacturing, technical support and new installations. Cisco lived up to the motto 'do what you do best and leave the rest for others to do'. Until the 2002 technology bubble crash the company grew to be the largest valued and admired company in the world. This scalable business model allowed them to rapidly adapt and expand their operations using partners based on customer demand rather than slow risk based investments. The 'locally global' business model became the most respected business model in the communications industry of the 90s. While competitor crashed using old-world vertical models (e.g. Lucent, Nortel and 3-Com) Cisco stepped in and took their markets and customer

Roy Hanif was founder and innovator of their EMEA Services Ecosystem (in 1999). He created an exceptional management team and by using a 'think-tank' approach he attracted the largest 'traditionally competing' technology services companies throughout EMEA to deliver seamless, best practice, high quality services to Cisco's customers. The model was developed to be self-regulating in that respected partners were rated by customers for their performance (without Cisco interference). The rating was dynamically and automatically published in the web using a logical algorithm based database. The e-league tables were made visible to partners and customers and the hundreds of projects made the system come to life. Leagues were arranged by country, by skills and by complex solutions for each of the 30 countries in EMEA. Simply put, a service provider delivered a service, the customer would rate them using a standard c-sat rating on the web, the master database would be updated over night for all projects completing that day and the league was live in the morning - a customer satisfaction reality. Customers would go to the web league and not come to Cisco to find services, order their products on the web - power in the hands of the buyers and market. Of course those companies at the bottom of the leagues would eventually go out of business and those at the top flourished.

The model was regulated through Roy Hanif and his trusted senior management team. The partner services companies made-up a 'virtual management board' and an advisory board which met regularly to help improve and modify the living 'ecosystem.' The central team at Cisco set the governance, skill levels, roadmaps, market forecasts and approved new partners (once only!) as once accepted into the system, they were left alone to build or 'fall on their swords'. The central team could support them by not bending the rules or the system.

Roy named the business model the 'Darwinian League' and got the full support of the EMEA president Bill Nuti. This was one of the only truly fair e-commerce systems running entirely on the merits of its inhabitants. No vendor intervention meant that the system was able to emulate living ecosystems through natural selection. The highly successful business model attracted over 200 international service providers, trading was estimated at over 10 billion dollars in services and 2 billion pounds of Cisco product. The virtual organisation had over registered 3000 certified engineers that delivered rapid technical services in over 30 countries. Roy was awarded top global leader and contributor by the president, John Chambers, for his contributions to services business and for successfully managing the largest and most critical programme in Cisco's history; the billion dollar Thunderdial Programme. Roy lives in the UK and occasionally works in Europe as a senior advisor for central government on strategy, business reviews, large business change projects and portfolios.

The concept and associated methods became part of the standard practice of strategy making among companies including Hewlett-Packard, IBM,Intel, Microsoft, SAP, Softbank and many others.

The concept has since been applied more broadly to a variety of problems in network-centric strategy making, including foreign policy and national and regional economic development. It was one of the antecedents to the concept of Network-Centric Warfare [http://www.usni.org/Proceedings/Articles98/PROcebrowski.htm] in military strategy.

The most comprehensive current treatment of the concept is from Harvard Business School faculty member Marco Iansiti and Roy Levien, in their book "The Keystone Advantage: What the New Dynamics of Business Ecosystems Mean for Strategy, Innovation, and Sustainability" (Harvard Business School Press, 2004) [http://www.keystone-advantage.com/] . Their work is also available in an article in the Harvard Business Review [http://harvardbusinessonline.hbsp.harvard.edu/b02/en/common/item_detail.jhtml?id=R0403E] and Harvard Business School Press online [http://hbswk.hbs.edu/item.jhtml?id=3967&t=strategy] .

References

* [http://www.amazon.com/exec/obidos/tg/detail/-/B00005RZ44 Harvard Business Review in May/June of 1993]
* The Death of Competition (ISBN 0-88730-850-3)

ee also

* Economic network
* enterprise
* exchange
* interdependence
* knowledge
* Value (economics)
* Value chain
* Value conversion
* Value network
* Value network analysis

External links

* [http://www.openvna.com Open content site for value networks]