What are Business Ecosystems?

Business Ecosystem Model developed by Dr. James F. Moore

I recently wrote about business ecosystems, adaptability, and change leadership. This post takes us back to the basics: what are business ecosystems?

Business ecosystems are dynamic webs of interdependent organizations that rely on each other for success.

Traditional thinking envisions companies as rivals, battling each other for dominance and profit. Today’s organizations operate in a more complex world. They integrate competition and cooperation in innovative and unexpected ways and they need each other in order to survive.

James F. Moore, who coined the term, explains that business ecosystems include those we’ve always considered to be part of a corporation: those inside the organization’s walls plus distribution channels and direct suppliers. They also include the extended enterprise: direct customers, standards bodies, suppliers of complementary products, and so on. Finally, they include those who can have a significant effect on the core business but who are often considered afterthoughts or pesky outsiders: trade associations, regulatory bodies, unions, investors, and so on.

Why are Business Ecosystems Important? Well, When An Ecosystem Crashes…

In 2006, the Boston Globe Magazine covered a dramatic story of ecosystem failure. The tale focused on a Rhode Island bookkeeper who embezzled 9 million dollars over the course of six years. Before she was discovered, a host of businesses popped up to support her extravagant spending. A horse trainer, thrilled by her new client’s appetite for all things equestrian, committed herself full-time to the embezzler’s projects. A horticulturist turned away new customers for three months in order to create the floral design for a lavish wedding planned by the embezzler. These business owners, and others, delighted to find an enthusiastic, big spending customer, devoted themselves to a new market: the one created by the bookkeeper.

In time, the embezzler was discovered. She lost her job and landed in jail. However, the ripple effect from her crime spread across the ecosystem and hurt almost all who touched her. The horse trainer was forced to close her business due to lack of clients. The horticulturist was sued for the embezzled money paid to him. The company from which the bookkeeper had embezzled was forced to lay off staff and close locations due to the loss of operating funds. The impact was fatal for many and their companies went out of business.

Luckily, most organizations don’t experience situations so extreme. However, all companies are part of complex ecosystems that have the capacity to thrive or crash. Understanding your ecosystem—and curing your ecosystem blindness—will help you and your organization thrive.

Who’s part of your business ecosystems?

Is your strategy stuck in the 20th century?

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