IEX 171: 3 Capabilities for Business Ecosystems
We see ecosystems evolving all around us. But what actually drives them and how can you participate effectively?
Still trying to claw back the hours! Enjoy this week’s read…
The industries of electric power generation, distribution, and consumption has had only a cursory overlap with automobiles for almost the entirety of the 20th century. Yet the 21st century will see them mashed together to create entirely new products, services, businesses, and ecosystems. The word ecosystems is commonly used today, and my colleague Frank Diana has some excellent thinking on ecosystems. But I also got to thinking about how we describe ecosystems? What are their characteristics?
We could borrow from Network science and consider size and density. Size is just the number of nodes in a network or entities an ecosystem, where as density is the average number of connections between nodes. In a dense network, each node is directly connected to many others. Think of a tightly knit set of friends, where everybody knows each other. Or traditional automotive supply chains where most suppliers and manufacturers are interconnected. In a sparse network, the average number of connections between nodes is low. Perhaps a gym, where each member knows a few others but nobody knows more than half a dozen people. An example of a sparse network might be a geography based distribution network where each distributor runs an independent territory and there are few connections between them.
Its clear that as ecosystems mature and grow older, they will often tend to get more dense, building more and more inter-connections, like a jungle, aka an inter-dependent network of trees, vines, bushes, and weeds that grows into each other. People working in a company grow more collectively intimate over time. A supply chain of component makers and auto makers over time will build more collaboration and inter-dependence. New networks are by nature sparse. It's like the first day of school for the whole class. So if you think of the urban mobility ecosystem I started with, many players are still getting to know each other.
Some ecosystems are natural and some are 'purpose-directed'. By that I mean specifically created for a mission. The sustainability ecosystem is coalescing around the need to save the planet. But the farming ecosystem has been around for thousands of years, and doesn't require much orientation.
Our interest is in the ecosystems that are forming now. They aren't dense yet. They aren't historic. They've been corralled by a purpose that is probably new. They're formed by the blending of hitherto unconnected networks or completely new players. For example battery makers, software firms, and telecom companies, along with e-scooters, energy providers, venture capitalists, are all now part of a newly coalescing urban mobility ecosystem. An advantage of a forming ecosystem is that entry is easy. But what's driving this?
For one, the relentless influence of computing on core operations. As every business becomes a technology business, their core operational technology becomes increasingly computing-oriented. Automation and scheduling systems for broadcasts, robotic warehouses for logistics providers, or PLC systems in factories. This move to computing started with integrated, black box, and custom systems but has increasingly moved to standardised hardware and open, modular software. In parallel, the technology component in products keeps growing. This has enabled the emergence of maven businesses. (Remember Malcolm Gladwell’s Tipping Point and the roles of mavens and connectors?) Companies such as Tesla, Google, Apple, or Netflix, build deep competences across multiple exponential technologies - from computing, 3D manufacturing, advanced materials, genomics, or telecommunications. And are using technology to create new industrial patterns. Tesla's success so far has been an important reason for the evolution of the urban mobility ecosystem which comprises the hitherto disparate ecosystems of auto makers, battery tech, and energy management. Even companies like Lucid, headed by Tesla's former head of engineering, and recently valued at over $100b is an example of operating at the crossroads of technologies.
A second is the evolution of communications. Connectivity is an expectation today, not a miracle. Between 4G/ 5G, wifi, GPS, and other protocols such as LoRa, or Zigbee - every part of the earth and almost every device or object can be connected across production and consumption environments. This is the reason we can think about smart grids and energy ecosystems where we can all become prosumers with connected solar panels, domestic batteries, and drive improved grid performance and more sustainable consumption. Ubiquitous 5G and edge computing capabilities will open up additional and new patterns.
The combination of computing and communications gives us the 3rd critical building block of ecosystems - Data Sharing. In reality, this can take ages, impacted by policy. Open Banking policies in the UK have greatly enhanced the financial services ecosystem. Whereas in healthcare, we're still hamstrung by the lack of effective data sharing. Last week, we bid for innovation funding for an innovation project which would involve building common data models across health and social care, enabling joined up operations for both groups, and even shared risk and prediction models. This should have happened years ago. But integrated care is only now being mooted across Europe.
We will see many more ecosystems flourish and morph over the next years, as computing, communications, and data brings these myriad and diverse businesses onto common platforms and purposes. They will bring huge value and unintended consequences - such as Norway's tax problem. They will demand a focus on systems thinking. Perhaps the metaverse will thrive better as an ecosystem than the creation of any single company, much like the internet - arguably one of the most successful ecosystems ever. But to play in an ecosystem, you have to build competence in compute, communications, and data sharing. The starting gun has already gone.
Reading This Week
HealthTech: The connection between microbiomes and autism is explored a little bit more.
Weird and Wonderful: Next year, an elephant will become a 'person'. The notion of a 'person' in US law is a very fascinating and flexible one, apparently. This is good news for said elephant.
Healthy ageing: Retirees are unretiring. This is a good thing, and not just for the labour market. Staying productive for as loong as possible has clear health and wellbeing benefits.
The Pixel: A Book. Ed Catmull wrote a great book about Pixar's creative work (Creativity Inc.). Here's another co-founder - Alvy Ray-Smith with the story of the pixel and another perspective on the hardware company that turned into an awesome storyteller.
The Week: How did we settle on this 7 day model of living? A combination of industrialisation, religon, and habit? An interesting history including people who have tried to change it. (New Yorker)
Artificial Intelligence: The annual state of AI report - the most definitive guide to AI published by Nathan Benaich and Ian Hogarth. A must read if you're in the space.
Beginning of the universe: Apparently it wasn't a big bang (Medium)
Blockchain: Understanding the NFT marketplace. (HBR)
Twitter 2.0: Voice platforms, a new paid service, and a return to APIs, and a dev friendly Twitter. Was there ever a better advert for ecosystem development than the plateauing of twitter since it blocked developer platforms.
Design Fun: Who doesn’t like an anamorphic 3D billboard?