What connection does the biological concept of ecosystem have with the business world?
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Biology and business: parallels between evolutionary paradigms
It’s not the first time that the business world draws from the field of biology to clarify its functioning and illustrate possible paths of development: in 2012, Greg Horowitt and Victor Hwang, in their book “The Rainforest: The Secret to Building the Next Silicon Valley”, used the eloquent metaphor of the rainforest to explain the success of the economic and entrepreneurial model of Silicon Valley. The metaphor of ecosystems directly and ideologically preceded this reasoning and proposed a functional model that is potentially applicable to a wide variety of business contexts and territorial economies.
In particular, the concept of a biological ecosystem was introduced in the 1930s by botanic Arthur Tansley, who described it as a community og organisms interact constantly with each other and with the entirety of their environment: to thrive, such organisms compete and simultaneously collaborate utilizing the available resources, thus evolving together and developing the skills to adapt to any changes and disturbances from the outside. To truly understand how business ecosystems work, it’s important to keep in mind something that may not be immediately obvious about natural ecosystems: the processes occurring within an ecosystem, in a completely simultaneous and synergistic manner, involve both collaboration and competition.
In the Nineties, and precisely in 1993, business strategist James Moore adapts the concept of ecosystems to business in “Predators and Prey: A New Ecology of Competition”, an article published in the Harvard Business Review and became famous; Moore drew a parallel between organisms in symbiosis in natural ecosystems and companies operating in the world of commerce, which demonstrated to be increasingly interconnected and interdependent with each other.
Moore suggested that each individual company was not only one of the members of a productive sector but an integral part of a business ecosystem. which, in reality, cuts across a variety of sectors and industries. The functioning of the ecosystem proposed by Moore himself, therefore, involved companies within it evolving together from a specific innovation and then competing but at the same time cooperating in creating new products and services, aimed at meeting customer needs and ultimately “incorporate successive waves of innovations”.. In this context, the blend of cooperation and competition is evident, highlighting the role of innovation as the true driver of ecosystem development and evolution, and thus of the companies within it.
Life in ecosystems: four phases
Moore stresses that, being dynamic communities of organisms, ecosystems are themselves alive, constantly active, never static. According to Moore, every ecosystem goes through four phases of life: birth, expansion, leadership, and finally renewal (which, if not achieved, leads to the crystallization and then dissolution of the ecosystem). When it comes to business, of course, these four phases do not have such clear temporal and conceptual boundaries and can overlap with each other in the natural unfolding of forces exerted by the entities within the ecosystem. But what remains unchanged and is always present in the life of ecosystems is what Moore calls co-evolution, a process of constant interaction between the competitive and collaborative strategies implemented by the members of the ecosystem.
To understand: in the initial phase, the cooperative focus is on customer acquisition and defining business values, built around the innovation that drove the birth of the ecosystem; Moore cites the 1970s and the rise of the personal computer, huge novelty on the market, which triggered the birth of an ecosystem of companies which orbitated around it. Continuing with the phases, expansion entails all companies working together to bring the cumulative offering of products and services to an increasingly broad market, collaborating with suppliers and partners to gain the momentum needed to gain ground in the market. Meanwhile, naturally, leaders emerge within the ecosystem, taking on the delicate task of providing a solid vision that inspires suppliers, customers, and partners to continue cooperating to constantly improve the offering. Finally, we come to the stage of internal renewal within the ecosystem, where we naturally and circularly return to the starting point: innovation. Therefore, there is close collaboration with innovative entities to bring new ideas into the ecosystem. All of this is accomplished by managing entry barriers into the ecosystem to protect oneself, one’s ideas, and the entire community from potential rival ecosystems, thereby avoiding the loss of top clients and suppliers.
The Life within Ecosystems: Internal Composition
Regarding the members of an ecosystem, it is worth noting that a business ecosystem is “an interconnected set of individual entrepreneurs, economic operators, and institutions that formally and informally interact to generate business activities”; therefore, understandably, its internal composition is quite varied. According to OECD/EUROSTAT guidelines, the model used to describe the ecosystem typically includes eight clusters of actors:
- Financial component: includes banks, financial institutions, and venture capital funds;
- Business Support: includes companies that offer services for business creation and opportunity accelerators, business assistance structures, as well as specialists and experts such as business consulting firms.
- Public Sector: specifically includes Chambers of Commerce, Regional, Metropolitan, and Municipal authorities, and associated institutions supporting business creation.
- Enterprises: they represent “the fabric of existing companies, business networks, consortia and industrial parks, value chains, and productive districts”, often with a focus on startups.
- Infrastructure: in this cluster, you find telecommunications, data centers, commercial real estate, and testing facilities.
- Research & Development: technology parks and research centers, also reference points for startups, deal with the transfer of skills, technological knowledge, and know-how.
- Human Capital: encompasses the education sector (schools, universities, training institutions).
- Community: the social component found in ecosystems, which plays the important role of a catalyst for creatives, entrepreneurs, and innovators of all kinds and consists of co-working spaces and various types of associations.
Survival, prosperity, evolution: the benefits of competition and cooperation
Business ecosystems demonstrably impact three economic outcomes: the birth of new enterprises, job creation, and the increase of resources and consequently collective wealth. These benefits stem directly from the synergy of competition and cooperation, which forms the basis of how ecosystems operate: this means sharing part of one’s expertise, know-how, in an ecosystem does not represent the risk of losing market share, but rather allows them to acquire competencies to respond to developments and changes themselves.
The Latins would probably frame it as a specific form of “do ut des” (I give you so that you may give me), but the reasoning is even more subtle than that. An example can help understand the strategic significance of this modus operandi: Salesforce, to cite one, is a company that produces a software based on cloud, designed to help businesses find more leads, close more deals, and satisfy customers with their services; this is a case of an ecosystem because Salesforce “has created a model that involves triangulations with its own partners and with universities”“to bring about new resources and competencies and to address companies looking for professional figures they often can’t find”. Another clear example of ecosystem logic is the partnership between “sworn” competitors Apple and Samsung, who collaborated to allow customers to access Apple’s iTunes service directly from Samsung’s smart TVs.
Google and Netflix are two other companies that have built their success on the ecosystem logic and ultimately contributed to revolutionizing the classic competitive logic that previously dominated the business world entirely. “The market has indeed increasingly rewarded those companies that […] created value through relationships and networks”.. Conquering the market, and a leading position within it, is no longer the ultimate goal of such companies, which instead aim to create and stimulate more and more the customer flows, products, and services.. What matters to continuously innovate is the network and its effects, which ensure that the ecosystem increases in value with each new entry of companies and players of all kinds.
Innovation at the center
The innovation discussed within an ecosystem is better defined as “open innovation“, which is the ability to learn to innovate and then do so openly, collaborating, as seen, with those outside the organization, even with competitors. In this context, we talk about coopetition, which is a blend and synergistic mix of competition and cooperation, meaning “a strategic approach that combines competitive and cooperative instances”. Coopetition offers a strategy for entering markets that, without it, would remain hermetically closed for many companies, especially startups and small-sized ones.
Therefore open innovation and coopetition have direct social impacts and result in the so-called social innovation; at the same time social innovation and open innovation converge into what Solimene and Tufani have called “coalescence innovation“, which synthesizes social and open innovation “in an approach to innovation that enhances contamination and collaboration”, creates common opportunities and positively impacts various social contexts, thus creating effective and prosperous ecosystems.
The awareness that, in a context where changes are increasingly rapid, fewer and fewer companies can effectively operate alone: to momentarily step out of the naturalistic metaphor, the business world must be imagined as a symphony, which requires the dynamic and well-oiled mechanism of an orchestra to be brilliantly executed. A single musician can adapt and arrange a symphony and perform it solo, but the result will never be as grand as that offered by orchestral performance.
Promoting the power of ecosystems: Stella meets Ca’ Foscari
Stella embraces the business ecosystem theory, promoting it through a curated focus on network effect and knowledge sharing, elements sought after in the creation of physical spaces. Consistent with these principles, Stella created an eventin partnership with Università Ca’ Foscari in its new venice location, Palazzo Isola Nova, a building thought as a hub for work, networking e knowledge sharing.
“In a time where the significant changes of our era require an innovative approach that integrates the economic, social, and environmental dimensions for a more sustainable Venice, Stella and Ca’ Foscari share the idea that this goal can be achieved” “by systematizing businesses, researchers, students, and the local community”.. If we refer to the eight clusters mentioned above, Palazzo Isola Nova, as well as other Stella-branded locations, will play its role in the Community cluster, as a physical space for the creation and proliferation of these communities and the network of relationships that support them.
The event, scheduled for November 23rd, will be an opportunity to present the approaches and initiatives adopted by the University to achieve this goal, as well as to reflect on the potential inherent in ecosystem logic for business.