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“Playing the ecosystem game” – new article published in Academy of Management Journal

How do firms successfully design ecosystems? This is a question that is pervasive to many industries – think about mobile phones, e-mobility and many other technological innovations, in which one firm alone will struggle to develop and continuously improve all components and services that customers may demand. Accordingly, firms in many sectors have tried to find ways in which they can design ecosystems around technology platforms they develop, and to which other firms can contribute – such as app providers or even handset manufacturers in the iPhone and Android mobile ecosystems.

In a new article published in the Academy of Management Journal, a key problem that Prof. Oliver Alexy, Professor of Strategic Entrepreneurship at the TUM School of Management, identifies with his colleagues Prof. Brice Dattée (EMLyon) and Prof. Erkko Autio (Imperial College London) is that it is really, really hard to plan such ecosystems. Indeed, ecosystems make most sense when firms can provide a broad technology platform based on a general purpose technology—a technological breakthrough which has the potential to revolutionize not just one, but many industries. However, when a broad platform offers myriad of potential applications, which application should the ecosystem provider focus on? For example, the general purpose technology Graphene may feature in microchips as well as fighter planes; similarly, “big data” or the “internet of things” have as many definitions as companies offering products referring to these terms. The issue is that customers will only commit to an ecosystem that has a clear application, and partners which the firm will need to develop such an application will only commit to a stable technology platform that has customers. And at the same time, platform providers cannot commit prematurely either to a specific application or a specific customer group when they need to fear that they may still be outcompeted by a rival ecosystem or a competitor identifying a more effective or efficient application for the same baseline technology.

Drawing on a series of real-life cases, the authors describe the processes by which leading firm have tackled this problem. In particular, these firms involve a set of best-of-breed partners to develop the ecosystem in an iterative fashion. Rather than drawing up a structured plan for the ecosystem in advance and demanding that partners plan certain roles to help develop a specific application, ecosystem-designing firms need to learn how they can influence and steer a dynamic and often stochastic process during which the “killer app” is not defined upfront, but emerges in the process. To this end, the authors identify a series of strategies that may help firms in discovering promising ecosystem applications and ensuring that these applications will eventually materialize on the platform in a way that is beneficial for the ecosystem designers.

 

More details can be found in the published article.

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