Many industries from IT to car manufacturing, robotic and biotechnology, competition is moving from the product level to the ecosystem level. The creation of an ecosystem by a rival and the consequent shift to ecosystem competition can be quite challenging for product-focused incumbent organisations who may find that they have a challenge to establish the reputation and legitimacy of their own new ecosystem. This article discusses the ways and means an incumbent organisation can adopt and mobilise their own ecosystem.
In many industries, competition is moving from the product level to the ecosystem level. Consider the competition between the Apple and Google in the market for smartphones. A user’s choice of smartphone depends not only on its technological features but also on the (largely third-party) apps that the phone allows the user to access and the deals offered by telecommunications carriers – on the ecosystems that have grown around the smartphones. Ecosystem competition is not limited to the information and telecommunications technology sectors. In diverse industries such as car manufacturing, robotics and biotechnology, managers increasingly need to know how ecosystems can be created and used to their firm’s advantage and how to compete against the ecosystems of their rivals.
The creation of an ecosystem by a rival and the consequent shift to ecosystem competition can be quite challenging for product-focused incumbent organisations. The momentum that ecosystem first-movers often attain means that there are adverse network effects working against subsequent efforts at ecosystem creation, as first-movers reap the benefits of having a greater number of users. Furthermore, the expectations of customers and potential ecosystem members are often shaped by first-movers, meaning that any response that the incumbent attempts will be judged in comparison to the strengths of their rival’s existing ecosystem and its established rules and structures, leading to difficulties establishing the reputation and legitimacy of a new ecosystem. Internally, the mindset of the incumbent organisation may be stuck in a product-centric logic, which is not conducive to understanding and tackling these challenges.
So how can incumbent organisations, threatened by a shift to ecosystem competition, mobilise their own ecosystem in response?