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Ecosystems 2.0 – I

Of the seven top companies for market capitalisation 6 are thriving on ecosystems they created. Image credit: McKinsey

The Digital Transformation, by killing transaction costs and making possible to interoperate through data in the cyberspace, foster the creation of ecosystems and more and more companies leverage on them.

At the Digital Reality Initiative we have made in depth studies on Digital Ecosystems identifying three categories of players:

  • seeders
  • flankers
  • competitors

Seeders are those companies that directly (by purpose) or indirectly are attracting other companies to play in their marketplace. An example can be Microsoft that by selling FlightSimulator has stimulated other companies that have no contractual agreement with them to develop applications that enrich the value of their FlightSimulator.

These companies are eager to develop (and invest their own money) applications because FlightSinulator is de-facto creating a marketplace for them a business opportunity. Developing an application like FlightSimulator would require a huge amount of resources that a small company does not have (both money and skill) but creating “adds-on” is within the capability of a small company. These are the “flankers”.

Within an ecosystem you see, as in any market, competition among companies (among the flankers – seeders compete at ecosystem level, i.e. by creating alternative ecosystems, like X-Plane and FlightSimulator to stick to the example).

Another example is the one of Adobe that by creating Photoshop has provided a seed around which an ecosystem was born, with many companies (flankers) developing plug-ins enriching the features of Photoshop and sometimes competing with one another. Skylum is doing the same thing with their Luminar software. They are competing with Adobe at ecosystem level and flankers in the Skylum ecosystem are competing with one another.

Notice that the two key features of success for an ecosystem are:

  1. For the seeders the possibility of attract investment from a multiplicity of companies that increase the value of their product
  2. For the flankers the possibility to piggy-back on a product at zero cost and leverage its market space to deliver their value to customers, usually at a low price point. This is interesting since the customer will perceive a good value to cost ratio (with just a little more money he can increase the value of a product he already has -sunk cost) making the selling proposition easier and they do not have to incur in cost for developing all software that would be needed if they had to start from scratch nor to create a market “need”.

McKinsey has looked into business ecosystems and noticed an evolution of business models that makes them predicting that we are seeing an evolution of ecosystems, calling it ecosystems 2.0. The article is interesting to look at, and it may get even more interesting if one takes a global view of ecosystems, that is what I am proposing to do in this series of post.

Stay tuned.

About Roberto Saracco

Roberto Saracco fell in love with technology and its implications long time ago. His background is in math and computer science. Until April 2017 he led the EIT Digital Italian Node and then was head of the Industrial Doctoral School of EIT Digital up to September 2018. Previously, up to December 2011 he was the Director of the Telecom Italia Future Centre in Venice, looking at the interplay of technology evolution, economics and society. At the turn of the century he led a World Bank-Infodev project to stimulate entrepreneurship in Latin America. He is a senior member of IEEE where he leads the Industry Advisory Board within the Future Directions Committee and co-chairs the Digital Reality Initiative. He teaches a Master course on Technology Forecasting and Market impact at the University of Trento. He has published over 100 papers in journals and magazines and 14 books.