Business Ecosystem

Starting in the early 1990s, James F. Moore originated the strategic planning concept of business ecosystem, now widely adapted in the high tech community. The basic definition came from Moore's book, The Death of Competition: Leadership and Strategy in the Age of Business Ecosystems.

The concept first appeared in Moore's May/ June 1993 Harvard Business Review article titled "Predators and Prey: A New Ecology of Competition," and won the McKinsey Award for article of the year.

Moore defined business ecosystem as:

An economic community supported by a foundation of interacting organizations and individuals--the organisms of the business world. The economic community produces goods and services of value to customers, who are themselves members of the ecosystem. The member organisms also include suppliers, lead producers, competitors, and other stakeholders. Overtime, they coevolve their capabilities and roles, and tend to align themselves with the directions set by one or more central companies. Those companies holding leadership roles may change over time, but the function of the ecosystem leader is valued by the community because it enables members to move toward shared visions to align their investments, and to find mutually supportive roles.

Moore used several ecological metaphors, suggesting that the firm is embedded in a [business] environment, that it needs to coevolve with other companies, and that "the particular niche a business occupies is challenged by newly arriving species." This meant that companies need to become proactive in developing mutually beneficial ["symbiotic"] relationships with customers, suppliers, and even competitors.

Using ecological metaphors to describe business structure and operations is increasingly common especially within the field of information technology. For example, J. Bradford DeLong, a professor of economics at the University of California, Berkeley, has written that "business ecosystems" describe "the pattern of launching new technologies that has emerged from Silicon Valley." He defines business ecology as "a more productive set of processes for developing and commercializing new technologies" that is characterized by the "rapid prototyping, short product-development cycle, early test marketing, options-based compensation, venture funding, early corporate independence." DeLong also has expressed that the new way is likely to endure "because it's a better business ecology than the legendarily lugubrious model refined at Xerox Parc--a more productive set of processes for rapidly developing and commercializing new technologies."

x----x

This blog entry is sponsored by Mang Inasal.