SME’s (surviving) thriving guide to business ecosystems

Tiina Valjakka @tiinavaljakka & Katri Valkokari @valkatti

Businesses operate in broad interlinked networks – business ecosystems – where the variety of habitats is as wide and competition as fierce as in natural ecosystems.

ekosysteemi

Some food chains in the ecosystem are easier to depict than others. Each firm has its own perception of the closest network and its position within it. Typically, each firm also tends to find, or draw, their own business as the core of the network and the closest collaborators around it. In practice, this is one of the reasons why attempts to manage a network often fail or create no response, while the network actors have not considered the interests of others, or even the existence of the further away ecosystem.

Due to their network position, firms have different opportunities to influence or control other actors, network relationships, and the whole network. Even with a more objective view of their surrounding habitats, managing the network position is a hard task.

Small businesses have traditionally been in the outskirts of business ecosystems but digitalization, e.g. sensor technology and the real-time data available is providing them with new means to become a more valuable and influential actor in the ecosystem. Our case firm here is an example of an SME that has looked around when formulating new strategy and offering concept.

Lännen Tractors- a Finnish SME exploiting the opportunities in the outcome economy

Lännen Tractors develops and manufactures machines for demanding applications. The long term objective has been to become a strong international player.  Three global megatrends: climate change, resource efficiency, and urbanization, set the base for the new ambitious strategy of the firm.

The analysis of a Lännen Tractors’s own position among the networks as well as different networking directions offered new ideas how their business networks will look like in the future and who are the relevant network actors and partners to contact and collaborate.

The strategic aim of the firm is to change the industry in the direction they believe is profitable to them and also to the other actors in the ecosystem (service purchasers, service providers, and contractors). The vision of the management is that “less is more”; that the modern mobile multi-purpose machinery is more productive and environmentally friendly than conventional solutions that have often led to sub-optimization on work sites.

The keystones of the offering in the new strategy are multi-purpose, mobility, productivity and sustainability and the concept is marketed as the “Heavy-duty multifunction backhoe loader with all terrain mobility”. The core capabilities are relevant to a single-machine contractor, to a service provider managing a larger fleet and also from service purchaser’s perspective. The aim of the concept is to concretize the meaning of “less is more” – productivity, and productivity goes hand in hand with environmental sustainability. One multipurpose machine compared to separate machines means less fuel consumption and less staff. Utilizing the full qualities of multi-purpose machinery increases productive work time and lowers the impact on the environment by decreased exhaust emissions, decreased noise levels, less disruption to traffic and residential areas and lower impact on the landscape.

See also:

DIMECC REBUS  programme final publication

Practices for Network Management – In Search of Collaborative Advantage

 

 

What’s all that fuss about business ecosystems?

Magnus Hellström, Åbo Akademi University, Sari Mäenpää, Tampere University of Technology & Katri Valkokari, VTT

What is a business ecosystem?

In the outcome economy, the success of your innovation crucially depends on other actors in your business ecosystem and competitive advantage is built on the capabilities a company can access through it. Therefore, it is important to align the interests and the activities in the ecosystem.

The difference between a business network and a business ecosystem is rather vague, and perhaps more a question of different contexts and schools of thought. Typically, an ecosystem is understood as a broader entity, connecting a larger variety of actors and crossing industrial boundaries. In an ecosystem the actors concurrently both collaborate and compete with each other. That increases the dynamics of an ecosystem.

What are the basic elements of an ecosystem?

From a practical point of view, there are some salient aspects of an ecosystem:

  1. There has to be a holistic aspect to it (i.e. the system value is larger than the sum of its parts). This means that by organizing and doing things differently, an ecosystem can create more value based on the same input, be it through producing more innovations, competing with each other, or working more efficiently.
  2. This ecosystem level outcome entails increased interaction and interdependence between the involved actors. That is, firms are ever more dependent on each other to be successful. This means the firms ought to be viewed as a system of interacting parts rather than as individual entities.
  3. Ecosystems often span conventional industrial boundaries. Hence, they provide a cross-sectoral view to value creation rather than the narrower sectoral view that still dominates the economic debate today.
  4. Like in its biological role model, an ecosystem is dynamic and undergoes constant co-evolution and change from intentional and emerging actions of ecosystem actors. A business ecosystem does so to better fit in its environment.
  5. The existence of a unifying platform and even the absence of a clear focal company is a common condition for ecosystems.

The common notion that competition is moving from the firm level to the ecosystem level builds on these insights. In short, by acting or organizing differently, for example by establishing new connections or by deepening the collaboration between certain parts of the ecosystem, or by making greater use of digital technologies, things can be done better than in other competing ecosystems.

How does a business ecosystem operate in practice?

In the DIMECC REBUS program, business and innovation ecosystems have been studied from a number of different perspectives, which all illuminate the above five and some further aspects of business ecosystems. The case of the Baltic Sea logistics system highlights the need for data transparency in ecosystems and how an electronic marketplace constitutes a unifying platform. The case of Tieto examines different strategies for data integration platform and IT company’s roles and positions in a changing ecosystem. Seaside Industry Park case pinpoints the need for an external party supported systematic approach for co-innovation and knowledge integration through increased interaction. The information-sharing platform developed by Wärtsilä is showcased in boosting digitalization in an industry characterized by vertical fragmentation and vulnerable information logistics. Common to all of them is the importance of sharing knowledge and enabling the integration of knowledge from different sources, and organizations, in an effective and efficient way.

The fuss about ecosystems is strongly connected to the outcome economy and we urge more companies to think about which ecosystems they are involved in and how their innovations could benefit from and change that system.

Do you want to learn more?

More detailed stories on these cases and other results regarding the physics, chemistry and biology of business ecosystems can be found from the DIMECC REBUS final publication:

http://hightech.dimecc.com/results/final-report-rebus-towards-relational-business-practices

Welcome to REBUS final seminar 30th May at the MPD2017 days to hear more and participate to discussion!

https://www.dimecc.com/events/revolution-business-highlights-dimecc-rebus/