The word “ecosystem” is currently being used in a lot of different situations. Many colleagues, entrepreneurs, and startup stakeholders I meet are confused by its meaning, even calling it a “buzzword,” which gives it a negative connotation.
Here’s the reality: I like to compare the word “ecosystem” to a “ball”. If I mention to you, “give me a ball”, how do you interpret this? You will probably ask: “Which ball? Basketball? Football? Tennis ball?” The same goes for “ecosystem.” The word can encompass a variety of topics, and this is why the next time you have a conversation with someone, make sure to clarify: which ecosystem are you talking about?
Here is a short blog post that highlights three types of ecosystems I am personally involved with on a regular basis. I must admit, I made the mistake in the past of not clearly explaining to my counterparts what I actually meant by it. Let’s dive in, and please comment on this blog post if you have more questions.
1. Startup / Innovation Ecosystem
The word “ecosystem” as far as I know; is mostly used to describe a startup ecosystem.
A startup ecosystem refers to a network of various entities, including entrepreneurs, investors, mentors, and support organizations, that collaborate and interact to foster the growth and success of startups. It typically encompasses the availability of funding, access to talent, supportive infrastructure, and a culture of innovation and entrepreneurship within a specific geographic location or industry.
In the work we did with and Diana Joseph and Susan Windham Bannister, who led innovation ecosystem development in the life sciences for the greater Boston area and played key roles in advising the New York and Los Angeles life sciences ecosystems as well, I learned that an Innovation Ecosystem is only an ecosystem when all entities are actively engaged with each other.
As we cite it in the paper: “What Corporates Can Do to Help an Innovation Ecosystem Thrive – and Why They Should Do It”:
“In a biological ecosystem, organisms function independently in that their behavior is designed to promote their own survival. At the same time, they are deeply interdependent – their individual survival depends on their mutual interactions and exchanges. Similarly, stakeholders in an innovation ecosystem function independently with their own interests at heart… but, at the same time, they can be more successful if they share and cross-leverage resources and expertise, develop formal relationships and collaborative efforts, and engage with other stakeholders in cross-promotion of the ecosystem.”
Now here is the thing, anyone involving in activities to activate an ecosystem cannot have an ROI such as sales, revenue and anything like that. Budget is allocated to create the culture; that unleashes innovation and create what Susan called: “innovation capacity: the ability to translate promising new technologies into the market on a sustained basis” In other words, to ensure that all the conditions are present in a specific region to ensure the idea can go from bench (if the innovation is life science) to patient’s lives in a short amount of time, as less risky as possible.
Investments are used to strengthen the platform that supports the full life cycle of innovation.
However, despite the fact that governments can push some iniatives, most startup ecosystems will emerge with the following stepping stones; highlighted by Brad Feld.
- Grassroots – it has to be from entrepreneurs
- It’s a long term thing, at least 20 years
- It has to be inclusive
- Events & happenings
Corporates have an important role here; because by participating, they would – after years of engagement – start to benefit from it: collaboration with startups; early access to the most prosing deals, licensing technologies etc.
2. Ecosystem, Alliances & Partnerships
The second type of activities I am reffering to while talking about leveraging the power of ecosystems is the entire industry of strategic alliances.
While it was effective to build everything internally in the 60’s; today’s world is moving way to fast to build anything alone. That’s why – due to disruptive technologies – more strategic partnerships and alliances are formed; and we’re only seeing the very early beginning of this.
I have no doubt this industry will be growing 10x in the next 10 years, and this is why companies like BCGs, and EY are now offering such services to companies; by helping establishing a process; to do this effectively with startups, big corporates or even research institutions / hospital.
1. ALLIANCE STRATEGY
2. PARTNER SCREENING
3. PARTNER DUE DILIGENCE
4. NEGOTIATION
5. ALLIANCE DESIGN AND SETUP
6. ALLIANCE OFFICE CREATION
What it means basically is that you would innovation, by leveraging the ressources of an innovation ecosystem, and maybe you’re not at the center of it’; and that’s ok; by you would utilize an ecosystem; and you embrace ecosystem principles as an alliance is mostly about building relationships and effectively communicating.
I learned that during a course I took at Kellogg, called Creating and Managing Strategic Alliances, 40-70% of alliances are failing due to the lack of firm capability to manage them but also soft skills such as communication (e.g communicating a vision), and lack of healthy relationships between the different stakeholders of the alliance.
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3. Ecosystem As A Business Model
EY showed it, in the case of the healthcare system: “To build a smarter healthcare system, MedTech must embrace an ecosystem model guided by successful platform principles.” ; in this regard, we’re talking about a business ecosystem.
As mentioned in the book “The Ecosystem Economy: How to Lead in the New Age of Sectors Without Borders” authored by McKinsey consultants, today’s biggest businesses are coming from platforms, e.g Amazon, Microsoft, Apple, Tesla etc and it is for a reason. Today’s digital technologies, the avaibility and data, analytical capabilities, computing power and customer’s expectations towards personalization, the rise of such business ecosystem business model is invevitable and will need to cover’s customer’s needs across the value chain. McKinsey predicts that, by 2030, the integrated network economy could account for 25 percent of the total economy—up from 1 to 2 percent today—with global revenues of $70 trillion
Conclusion:
Wrapping up, the power of the ‘ecosystem’ lies in its adaptability across various sectors, including startups, strategic alliances, and emerging business models. Just as we differentiate between sports balls, let’s strive for specificity when referring to ‘ecosystems’. I am excited about our collective exploration of these diverse landscapes and look forward to hearing your thoughts and experiences. Feel free to join the conversation in the comments section.
Sources:
- https://www.amazon.de/-/en/Brad-Feld/dp/1119613604
- https://oresundstartups.com/build-startup-community-brad-feld/
- https://www.researchgate.net/publication/350163423_What_Corporates_Can_Do_to_Help_an_Innovation_Ecosystem_Thrive_–_and_Why_They_Should_Do_It
- https://www.bcg.com/capabilities/mergers-acquisitions-transactions-pmi/strategic-alliances
- https://www.bcg.com/publications/2022/innovation-power-of-alliances
- https://www.petersimoons.com/the-alliance-spectrum/
- https://www.ey.com/en_ch/health/how-medtech-companies-can-drive-a-smarter-healthcare-system
- https://www.amazon.de/-/en/Venkat-Atluri/dp/1119984785
- https://www.mckinsey.com/capabilities/mckinsey-digital/our-insights/ecosystem-2-point-0-climbing-to-the-next-level
- https://www.mckinsey.com/capabilities/mckinsey-design/our-insights/a-design-led-approach-to-embracing-an-ecosystem-strategy
- https://www.kellogg.northwestern.edu/executive-education/individual-programs/executive-programs/cmsa.aspx