How to organize your ecosystem for the transformation of your business?

For any company that aims to transform its business, one of the most viable strategies is to become (totally or in part) a platform-based business. And for that it is necessary that there is an ecosystem that can be orchestrated and evolved.

The first step in this transformation process is to organize this ecosystem. Often, its composition may seem confusing because we may have entities (people or companies) playing more than one role and entities that impact or suffer from the externalities generated by the platform, which can lead to relevant conflicts. In addition, concepts like “competitor” and “partners” become increasingly blurry. This lack of clarity and apparent confusion can lead to mistaken decisions about who your platform wants to orchestrate, the role each entity will play and the interactions you want to develop. This will impact its governance and, especially, the defined strategy and the model to be built.

To help in this organization, we usually work with 5 categories of entities that help us to have a clearer configuration of the ecosystem: Consumers, Producers, Partners, External Stakeholders and the platform owner.

1-) Consumers: They are all entities, companies or people, who consume or potentially can consume the unit of value that will be “exchanged” in the ecosystem. For example, Airbnb guests and buyers in delivery apps

2-) Producers: They are all entities (companies or people) that produce or potentially can produce the unit of value that will be “exchanged” in the ecosystem. They are Uber drivers, developers in an app store or merchants in a shopping mall.

3-) Partners: These are the entities that add value or facilitate interactions between consumers and producers and who will benefit from the development and evolution of the ecosystem. Example: couriers in delivery apps and Airbnb photographers.

4-) External Stakeholders: These are entities that can be impacted by the externalities of the platform or directly or indirectly influence its performance. This category usually includes regulatory bodies, government entities, classes of workers, unions, etc.

5-) Platform owner: Finally, the owner of the platform is the entity that proposes to orchestrate this ecosystem through the management of a platform

THE KEY INTERACTIONS OF YOUR ECOSYSTEM MUST REFLECT THE STRATEGY OF THE MODEL TO BE BUILT

This ecosystem organization provides clarity to identify which are the key interactions that must be designed and prioritized. And they must reflect your model’s strategy. Just to illustrate, consider below the example of a traditional media company, like a newspaper, looking for its transformation. Each layer represented on the canvas is one of the categories presented above. Consumers are located in the outermost part of the ecosystem because they are those who, in theory, can leave it more easily. The platform owner, on the other hand, is the innermost layer because it naturally has the highest degree of commitment to the ecosystem. A possible configuration of this context and its key interactions could be this:

With this initial frame, the key interactions to be prioritized become clearer. Ideally, it should be the combination of your strategy with that which generates the greatest value for the ecosystem. In this example, if the company is looking for the “Subscription / Digital First” model, the relationship between writers and subscribers and readers should be prioritized, as opposed to prioritizing an interaction between readers and advertisers. Obviously, the potential interactions between all entities must be developed for the ecosystem to strengthen and evolve, however, the important thing is to focus the initial effort on those fundamental ones.

The next step would then be to define the “value unit” exchanged in each relationship (content, audience, etc.) and the design of these interactions: creation and consumption of content, curation, customization, channels and contexts that must happen so that they can be scalable .

In this other example, how could a diaper manufacturer “frame” its ecosystem? As I mentioned at the beginning of the text, transformation can be making part of the business a platform. This means capturing opportunities adjacent to your core business. Looking at the ecosystem in an organized way helps to identify these opportunities. Nike has not become a platform for buying and selling sneakers, just as Mars Petcare has not created one for selling pet food. Nestle is also not betting on platform models where its products are directly marketed. But everyone is capturing opportunities to generate more value for the mapped ecosystem, “platforming” a part of their business.

ORGANIZING THE ECOSYSTEM HELPS MAPPING CONFLICT GENERATORS

A second benefit of this frame of the ecosystem is to help predict or mitigate potential conflict generators that can substantially impact the performance of the platform. There are 2 main conflicts that originate in the way the ecosystem is defined:

Conflict 1- Producers and consumers X External stakeholders

Often when choosing not to orchestrate any entity that could potentially be a producer or consumer on its platform, it automatically becomes an external stakeholder that is impacted by the externalities generated. This can lead to conflicts. The clearest example is Uber when it chooses not to include taxi drivers in its ecosystem. We all witness the consequences and reactions to that decision.

The decision to include or not include any entity in your ecosystem is not a basic one. It involves a “trade-off” between management and coordination complexity versus potential impacts and reactions when leaving the entity “out”.

In this video Amane Ddannouni from BCG explains very clearly the impacts of the externalities of a platform.

Conflict 2 - Platform owner x Producers

Another potential conflict occurs when the platform owner also decides to act as a producer. When producers have their main sales channel on the platform and at the same time the owner of the platform competes within it, there must be a very transparent and reliable governance model for conflicts not to arise. And this is quite difficult. A minimal imbalance in this relationship and they arise. The recent clashes between Apple and Spotify and some of the lawsuits that Google and Amazon have been suffering in court are the best known examples of this.

As stated at the beginning, this is just the beginning of the journey for business transformation. And that journey is arduous and has to be exhausting. In addition, other factors such as a decentralized internal structure with scalable agile methods and a data management and use model are also essential. But a clear configuration of the ecosystem and the interactions to be built paves the way for the future challenges that a platform will face such as governance, monetization and network effect generation. It’s starting to do the right thing the right way.

Fernando Teixeira da Silva

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