A tale of two ecosystems

If there were a hall of fame for management think-pieces, James Moore’s 1993 Harvard Business Review article, “Predators and Prey: A New Ecology of Competition”, would be a strong first ballot contender. The piece was the first to appropriate the biological concept of an ecosystem into a business context. As Moore put it: “in a business ecosystem, companies co-evolve capabilities around a new innovation: They work cooperatively and competitively to support new products, satisfy customer needs, and eventually incorporate the next round of innovations.”

While the term has been around for the better part of two decades, it has become increasingly mainstreamed over the last few years. Across almost every sector, business leaders recognise that falling behind the innovation curve is an existential threat to their organisations. They understand that, if they want to leverage the latest technology to power new products and to create new back-office efficiencies, they have to think of themselves as part of a complex and evolving ecosystem of buyers, suppliers, and partners.

In our recent research on “The Make-Buy Decision”, we suggested that—as far as clients are concerned—there are actually two different types of ecosystem. Clients create individual sub-ecosystems around different functional areas; they will have a “cybersecurity ecosystem”, a “distribution ecosystem”, and a “manufacturing ecosystem”, for example. And the type of ecosystem that they build depends heavily on how important they see that function as being.

For functions seen as core to the organisation’s value proposition—R&D, for example—clients want to create a network of relationships with themselves in the centre. They want to take the lead in finding new partners and suppliers, and they want to proactively manage and direct the growth of their ecosystem. When it comes to core business functions, most clients think it is not acceptable to outsource the task of ecosystem curation to a third party; they might use consultants to help shine a light on new technologies or innovative start-ups, but at the end of the day the client will seek to maintain the final say about who they partner with.

But clients take a very different approach when it comes to building an ecosystem to support business functions they view as non-core. In these cases, clients are much more willing to, in effect, plug into an ecosystem that has been built by someone else.

Legal services are a good illustration of this. Most clients recognise that the legal profession is on the cusp of radical technology-driven change; AIs will soon be able to complete tasks like document discovery and contract review faster and more accurately than human lawyers, for example. But few clients are chomping at the bit to go out and build relationships with the start-ups pioneering these new technologies. Instead, they expect the law firms they contract with to do that job for them. Clients still want access to the latest innovations; but they don’t want to have to find them themselves.