Notice: this post series draws on the Digital Transformation course prepared by EIT Digital and IEEE FDC. If you are interested in getting an in depth view and/or if you want to understand how to apply these concept to your business contact EIT Digital if based in the 28 European States or contact IEEE FDC if based in other parts of the world.
Before going into Digital Ecosystem let’s take a look at the usual, natural ecosystems, those identified and studied by Darwin who first saw the world as a snapshot that was continuously evolving and through differentiation moved from a more elemental stage into today’s variety and complexity. The similarities we can draw between Darwinian and Digital Ecosystem are surprising and we can actually learn a bit from Nature.
One of the key characteristics of an ecosystem is that it evolves over time. An ecosystem is defined by the players it contains and the interplay among this players. The interplay is creating a pressure that steers the evolution over time. Notice that the evolution does not require a “master plan” although some players, without being aware of it -in the Darwinian ecosystems- or with some awareness – in the current human stage of evolution and in Digital Ecosystem, can have a more significant role/impact in its evolution.
On the Darwinian side the evolution occurs through random variations (of a species DNA/RNA) and the pressure of Selection, that is the variations leading to a better use of available resources take the lead. In the Digital Ecosystems (I am now referring specifically to these, but the reasoning applies to all technology based ecosystems) the evolution happens because of creativity (we used to take into consideration researchers creativity, inventors’ but now we have to start considering artificial intelligence creativity) and the selection is provided by the market, i.e. it is the market that dictates who is the winner.
In a Darwinian ecosystem biologists tend to rank the success of a species in terms of environment share (that is how widespread that species is, meaning that the more widespread the more the species is able to thrive in different environment) and in terms of variations. This latter is very important because it increases the chance of further evolution. Now from the point of view of environment share we, human species, are very well positioned, we are one of the very few species that has managed to live in almost all of the planet environment. In terms of variations we are in a very low position and the intermingling is reducing even further the variations across the human species (notice that although each person is “different” from any other, except for mono-zygote siblings, there is very little group variations, it was much greater in the past but now it is disappearing). So if we want to be objective the beetles are much much more successful than humans (yes I know it is a little disturbing and humbling…).
In Digital Ecosystems we measure the success of a player in terms of market share and number of releases, that is the evolution of that service, product over time, since this shows the adaptability of that product to changing market conditions. In case of players that are companies we look at their total market share and the number of products plus their evolution over time. The Herfindhal-Hirschman index, that I discussed in a previous post, is part of this metrics showing the consolidation of the market around specific players.
3. Internal Competition
Darwinian ecosystems are semi-stable in the sense that they achieve a dynamic equilibrium but any little perturbation will shift the equilibrium to a different point. Perturbation may be shortage/abundance of resources, the arrival of new players, like the migration of a species from one place to another (we are seeing quite a bit of this induced by our transportation vectors, insects boarding a plane and disembarking in a new area, plants seeds brought by people travelling from one place to another, the mutation of a virus … does it ring a bell?). As the equilibrium shifts some species will thrive and other will suffer further changing the the equilibrium.
In a Digital Ecosystem the market forces tend to create a semi-stable equilibrium. However, competition as well as changes in the overall environment (new players, tech evolution, cultural changes, regulation adjustments, …) lead to a constantly changing equilibrium, hence also here we can talk about dynamic equilibrium. Actually, the rate of change is different in different market sectors but overall it is accelerating because the DX decreases friction in the market and changes are frequent and sometimes even disruptive.
4. External Competition
Darwinian ecosystems are born out of physical barriers, be it climate, mountain ranges, oceans that create boundaries within which the ecosystems evolves. Because of this they tend to be stable, we don’t see marsupials in Europe nor Americas, only in Australia. The isolation of that continent made the evolution of marsupials possible and contained it in that specific ecosystem. Over long period of time ecosystems can get in touch with others and the interactions leads to a change in configuration. Take Australia, since I just mentioned it. The ecosystem remained closed without any interaction with others, then Europeans came and brought in rabbits from Scotland. Some rabbits escaped from the farms and started multiplying in the wild. With no foes around they multiplied to the point of becoming a threat to the local grass and shrubs, in turns affecting local animals that where dependent on those. Colons realised the problem and though of importing foxes from Scotland to curb the number of rabbits. It didn’t go as planned. Foxes hunted the wild rabbits but discovered that wallabies tasted as good as rabbits and not being aware of the danger posed by foxes were an easy prey. The result was that rabbits kept multiplying whilst wallabies population begun to shrink. Because of externalities the local ecosystem assumed a new configuration.
In Digital Ecosystems the exposure to external competition affect the value chains leading to the creation of new ones. Take the cars ecosystem. The advent of electric cars is going to disrupt it. New companies that were not part of the existing ecosystem, like Tesla, start developing electric cars and the part of the market shifts to these new cars. They represent a different ecosystem, less corrective maintenance, more proactive one and steered by data generated by each single car and analysed as a whole. There is a much more direct relation between the end user and the manufacturer (in line with the INdustry 4.0 paradigm). This changes the existing value chains.