An ecosystem strategy is the set of choices an organisation makes about how it will create and capture value through a wider network of organisations, customers, partners and other actors.
The starting point is simple. A single firm is contrained by its capabilities and assets. This leads to a defined and limited set of offers within one or more markets. While the firm will depend on contributions from others, often with different capabilities, resources and interests, the main offers are firm focused.
In contrast an ecosystem strategy defines how the organisation can create further value through others. As an example, Tesla enables other firms to create charging points for Tesla cars who use the Tesla charging standards.
Tesla’s ecosystem strategy determines who participates, which relationships matter, what it should control, what it should rely on others to provide, and how those choices support its wider business objectives.
It therefore extends strategy beyond the boundaries of the firm.
Table of Contents
How is ecosystem strategy different from traditional business strategy?
Traditional business strategy tends to focus on the organisation itself. It asks where the firm should compete, how it should differentiate itself, which capabilities it needs and how it can outperform competitors.
Ecosystem strategy adds another layer.
It asks how the organisation depends on other actors to create the complete value proposition. Competitors still matter, but with an ecosystem strategy it needs to work with a wider set of participants including complementors, suppliers, partners, platforms, customers and other organisations whose actions determine if the strategy will succeed.
This changes the unit of analysis. The organisation is still important, but it is considered as part of a wider system of relationships and dependencies.
The distinction matters most when customer value depends on several organisations contributing different elements of the final solution.
When does an organisation need an ecosystem strategy?
An ecosystem strategy becomes useful when success depends bridging different customer jobs that span more than the single organisation offers. As an example, booking a holiday often involves taking out insurance, booking experiences, and potentially car hire. Integrating these steps (jobs) using a platform ecosystem strategy involves working with partners to create a seamless customer journey.
This can happen when a product relies on complementary services, when several organisations contribute to a customer outcome, when technology standards need to work together, or when innovation depends on external capabilities.
It is particularly relevant when no single organisation owns all the resources, knowledge, technologies or customer relationships required to deliver the intended value.
A business selling a relatively self contained product may have limited need for an explicit ecosystem strategy. In contrast, a business whose offer depends on software providers, logistics companies, developers, data partners and specialist suppliers has a much stronger reason to think about how to develop an ecosystem strategy.
What strategic choices does an ecosystem strategy involve?
An ecosystem strategy requires choices about the organisation’s place within the wider system.
These include deciding which parts of the value proposition the organisation should provide itself, where it should work with others, which relationships are strategically important, and where dependencies exist. In some cases this may involve contributing to other ecosystem orchestrators rather than attempt to create your own.
It may also involve deciding which activities should remain open to participation and which should be controlled to ensure quality and consistency. As an example, Apple controls the design and build of the iPhone, the App Store, and maintains the IOS system on which the iPhone runs. Developers though can build applications using the IOS SDK to create apps. However, the apps undergo quality inspection before they are listed on the app store.
The aim is not to maximise the number of partners. More relationships can just as easily create complexity and may not necessarily provide value. The purpose is to identify the relationships and contributions that are essential for the intended value proposition to work.
These choices then influence later decisions about ecosystem design, roles, governance and orchestration.
What is an example of ecosystem strategy in practice?
Apple provides a familiar example.
The iPhone depends on far more than Apple’s own capabilities. Semiconductor companies, app developers, mobile network operators, component manufacturers, payment providers and accessory companies all contribute to the value experienced by the customer.
Apple does not perform every activity itself. Instead, it makes deliberate choices about what it controls closely and where it allows other organisations to contribute.
The App Store illustrates this clearly. Apple provides the platform, sets participation requirements and controls access to customers, while independent developers (complementors) create much of the software that increases the usefulness of the device.
The strategy therefore extends beyond producing and selling the iPhone. It includes choices about what resources external developers need to help them contribute to the ecosystem.
Developing an ecosystem strategy initially involves mapping out current relationships, defining the strategic ambition and intent and then choosing whether to build an ecosystem, participate in others, or both.
Related concepts
- Ecosystem Design
- Ecosystem Roles
- Ecosystem Governance
- Ecosystem Orchestration
- Ecosystem Advantage
- Ecosystem Value Creation