Ecosystems

Potentials and challenges of a new strategy

Ecosystems have become much more important in recent years. According to a study by the Fraunhofer Institute, around 70% of the companies surveyed are already involved with digital ecosystems. Whether consciously or unconsciously, we have all already come into contact with a wide variety of ecosystems or are even part of them as users. In the healthcare sector, various hospitals and clinics are already dealing with overall solutions for the digitization of their processes and ultimately the formation of a healthcare ecosystem. Various forms and types of ecosystems are possible. Ecosystems that place the customer at the center are just as conceivable and legitimate as ecosystems that are formed around the treatment of a specific disease. Accordingly, we are convinced that there is great potential for ecosystems in the healthcare sector in the future. As this is a broad and complex topic, we would like to explain both the fundamentals and the specifics of ecosystems in a series of articles to create understanding and highlight a possible new strategy for the digital age. The focus of this first part of the series of articles is on differentiating ecosystems from other forms of cooperation and defining important terminology.

Ecosystems can be defined as a group of independent companies whose interplay of complimentary services fulfills a common value proposition. This definition can now be broken down into individual building blocks and prerequisites for an ecosystem:

Business ecosystems are based on a joint value proposition. This addresses a specific customer need that is to be satisfied by the interaction of the activities of the individual companies.
The companies participating in the ecosystem act independently of one another, join the ecosystem of their own free will and often come from different industries.
The individual services of the companies have strictly or supermodular complementary properties and thus exceed in their totality their added individual value. Strict complements exhibit interdependencies in the sense that element A does not function without element B, or the value of A is maximized by the use of B. A simple example is a key to a lock. Supermodularity is when more of element A makes element B more valuable.

Building an ecosystem is just one of several strategic options open to companies to deliver on a given value proposition. Ecosystems are an intermediate form between vertically integrated companies or static supply chains on the one hand and open, competitive markets on the other (see figure 1). In vertical integration, the value chain is internalized so that, in the ideal-typical case, a company has all the necessary resources and capabilities and fulfills the value proposition completely itself. The static supply chain goes beyond the boundaries of the company and outsources certain value-adding activities to actors at upstream (supplier) stages of the value chain. In the open market model, customers can choose between independent, uncoordinated and competing suppliers and combine different products according to their changing needs.

Figure 1 – Organizational structures of a value chain system (Own illustration based on Fuller, Jacobides & Reeves, 2019, p. 3).

Other organizational structures that are often incorrectly referred to as ecosystems are networks and strategic alliances. These basically represent a variation of the supply chain model mentioned above. Typically, relationships in strategic alliances are structured and formalized through contracts in conjunction with formal cooperation mechanisms. Ecosystems, on the other hand, set standards and define the rules of the game for cooperating actors. For example, the cooperation between app developers and Apple is not based on any formal basis, but only on the standards defined by Apple.

We hope that this article has given you an initial insight into the world of business ecosystems and shown you the differences between the various organizational structures. In the next part of the series, we will look at different types of ecosystems and the roles within an ecosystem.

Mauro Osta

Further reading