The Rise of Ecosystems


When I first launched my Blog in 2010, it was titled Blurring the Boundaries. It was growing ever clearer that the lines between physical and digital, industries, business and IT, you name it, the lines were blurring. It was evident that our growing digital world would drive significant structural change. These new era structures would fundamentally alter our belief in long standing institutions like management, policy, process, procedure, legal frameworks, accounting principles, organization structure, business and operating models, governance, regulations, institutions, and the core characteristics of new era organizations. In essence, The Collapse of Traditional Structures will lead to a Third Tipping Point in Human History.

One of the most profound changes will be the dissolving of industry boundaries and the emergence of ecosystems. Our industry construct – born during revolutions that set the standard of living in the western world – will give way to a finite set of horizontal ecosystems. This visual depicts a perspective on an ultimate finite set of nine ecosystems.

From Industry to Ecosystem

In this recent Podcast from Mckinsey, they explore the emergence of new ecosystems by 2025. They foresee a scenario where current constructs would collapse into just twelve large ecosystems. These would be multi-trillion-dollar ecosystems with a few large orchestrators, and a huge shift of wealth and value creation. In their analysis of 2025 numbers, they see over $60 trillion in total revenue associated with them – or roughly one-third of the $190 trillion total revenue pools that are projected to be in the global economy.

As this evolves over the next seven years, Ecosystem Thinking must replace entrenched models of value creation and capture. Operating in a world of dissolving borders becomes a necessity for leaders. The way we serve our customers and citizens will transform, as will the way we fulfill human needs and enable life experiences. The participants in the above podcast define ecosystems as a complex network of interconnected businesses that depend on and feed on each other to deliver value for their customers, to the end users, and their key stakeholders. I would refine that definition ever so slightly:

An ecosystem is a complex network of connected stakeholders that depend on and feed on each other to create and capture value for all ecosystem participants.

In this recent Post focused on competing in this new world, the authors state that companies will define their business models not by effectiveness against traditional industry peers, but how effective they are in competing within rapidly emerging ecosystems of businesses from different sectors. The rise of ecosystems involves multiple firms coming together in symbiotic relationships to achieve greater value for themselves than they could capture alone. This recent post describes how this could play out in the Insurance industry. As the authors point out, the future of insurance stands to be greatly influenced by platforms and ecosystems. Several interesting scenarios are described; from providing risk-mitigation service for each of the ecosystems described by Mckinsey, to working with OEMs higher up the Mobility value chain, developing products that address the added risks auto manufacturers might bear as the market embraces autonomous vehicles.

The rapid evolution to this world is fueled by platform business models. The early days of this transition will focus on Uber-like platforms that extend traditional market mechanisms, where value accrues primarily to platform owners. Fragmentation is likely to follow, as redundant platforms that enable life experiences emerge in every segment of the economy. The consolidation that ensues is likely to establish the eventual and finite set of ecosystems.

Platform Business Models

The future clearly isn’t what it used to be. While running for president in 1932 during the depths of the Great Depression, Franklin Roosevelt remarked, “The country needs and, unless I mistake its temper, the country demands, bold, persistent experimentation.” Globally, I’d say we are in that same place; an emerging era of experimentation driven by the fact that there are no clear answers to the challenges looming before us. Some of these challenges are described in this piece on The global forces inspiring a new narrative of progress.

The authors focus on growth and a lack of consensus as to why it has been stuck for years. They reference the work of Northwestern University economist Robert Gordon, who argued in his 2016 book, The Rise and Fall of American Growth, that the productivity slowdown that started in 1970 is likely to continue and hamper growth. However, the authors of the above article argue that automation enabled by artificial intelligence, robotics, and other advances will likely raise productivity (I agree with their assessment). This would indeed lead to increased growth, provided as the authors point out, that those productivity gains are accompanied by jobs and demand for goods and services, as they have in the past.

The ecosystem phenomenon is now getting considerable attention. Given its likely impact in the coming decade, that’s a good thing.

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