What are business ecosystems?



Interesting - I wrote this five years ago but it seems more relevant now. It uses the Google SEO ecosystem and the monetization of search as an example of how ecosystems emerge. I have updated it but here's a link to the original. Recently Fin and I have been writing on value-based agility and ecosystems are key to that.


If you want to be agile you need to be good at developing and interacting with ecosystems. Here are some of my thoughts about that from 5 years ago.


"Innovation ecosystems have now emerged as an important topic of discussion in business circles. I want to place them in context. For sure, #innovation managers and #transformation experts need to know more about ecosystems. In my last post about social media, I made the point that social media skills are a necessity if companies are to attract people to their innovation efforts.


Attracting people to your innovation efforts is an important way to prime markets, but it is not quite the formation of an ecosystem.


I prefer to define an ecosystem as co-productive communities. It’s where you get people working on your behalf (as well as their own). The classic ecosystem today is the Apple app developer ecosystem. The most overlooked aspect of it, and other business ecosystems, is the information layer. Independent websites such as Macrumors and TUAW, as well as analyst papers on the state of smartphones and app markets, all form part f the ecosystem. This complex information layer is part of what attracts people to Apple and convinces them to buy and none of it is owned by Apple.


The academic debate about ecosystems has tended to focus on how they emerge. At the last time of writing here on HYPE, I referenced authors Llewellyn D. W. Thomas and Erkko Autio, who had been cited even earlier by Oana-Maria Pop.


The authors talk about Initiation, Momentum, and Optimization in ecosystems. Wouldn’t it be great if you knew exactly how to initiate and grow an ecosystem around your products and services? I don’t think you will learn that from Thomas and Autio’s work – it is early days in this area of study. But I want to offer you an example that might be adaptable in other circumstances.


If you go back nearly twenty-five years to the introduction of the Google search engine you can see the emergence of a new ecosystem around search.


Prior to Google, there were several US-based search engines such as Alta Vista, Northern Light and Yahoo. There was also a European one – Alltheweb.com. In the background lurked the issue of monetization. How could companies make money out of search?


In the foreground, there was a different issue – relevance. How could we test, trust, or otherwise grasp the relevance of search returns when the Internet and web were so vast, vaster than anything we had known before.


Enter gamification. It’s a little-known feature of how Google succeeded. They made the web one giant game.


The game went something like this. Google introduced a concept called Page Rank to denote the relevance of a webpage. By relevance, Google meant a page that was highly linked by pages of a similar type. In effect relevance was an intricate vote by other websites, the vote being a hyperlink.


Once Google introduced Page Rank, the web began to change its nature. Suddenly we were no longer just people searching for information. We were suddenly involved in trying to achieve Page Rank in order to prove our relevance (and of course to get traffic).


Many of us could see a way to influence Page Rank, so we began a process called search engine optimization or SEO. The rules of SEO, initially, were crafted by people who were good at achieving Page Rank through link building. There had been a nascent SEO community but now it expanded rapidly, even to the point where ad agencies needed their own SEO experts.


SEO experts began building businesses by providing organic link-building services.


Over time it became clear also that certain types of content structure would score highly in Google – for example consistency between a URL, a headline, and the text of an opening paragraph. These features gave rise to another type of business – people who could create content that Google would rank highly. That type of business has since morphed again and again and is now called Content Marketing.


All this time, I contended then and do now, Alltheweb.com had the better search engine. But they had no game and therefore no way to build an ecosystem, and no way to build involvement. Eventually, they faded from view, as did Alta Vista and Northern Light. They were bought by Microsoft and became the foundation of its enterprise search products. Thereafter web search became a monopoly.


The significant innovation of Google’s opening gambit could hardly have been planned. Page Rank looked like a reasonable way to address the problem of relevance. Nobody could have second-guessed the impact it would have in spawning vast ecosystems of search and link experts and ultimately of content experts and content marketing.


That doesn’t mean, though, that we should ignore the lessons. Google stimulated new businesses around the globe and that is the nature of an ecosystem. It's about creating opportunities for third parties. This opportunity is often mediated by content, in this case, voluminous content about what Google's algorithm needs; content about link building; content about link baiting, legitimate SEO, and poor SEO. Google of course came to control the style of writing online. All of us who were earning money with the written word had to play its game. And if we did so we would be rewarded with more clients or readers.


What can be learned by companies wishing to develop innovation ecosystems?


I think one lesson is we should not get too focused on the concept of an innovation ecosystem.


There are many types of ecosystems. But the most successful ones give participants a real leg up in the toughest part of modern life – business start-ups and business growth.


Clearly, too, companies should not fear to stoop into gamification if that’s what it takes to build involvement. The companies that tried to game Google created its information layer, through a proliferation of articles and posts about how Google’s algorithm worked and how it could be tamed.


We still game Google like crazy and that keeps the community very vibrant. In my experience though companies build trivial gamification concepts – when what people want is opportunity. The overriding factor in an ecosystem is who else can you create business for?


Link: https://www.linkedin.com/pulse/what-business-ecosystems-haydn-shaughnessy/

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