Mapping and Strategising Across Business Ecosystems

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By Hervé Legenvre and Isabelle Herbet

Business ecosystems are the new unit of analysis for strategic thinking; they offer fertile grounds for innovation. This article discusses how managers can map, analyse and take advantage of business ecosystems. It is illustrated by a nice case study inspired by the work done at Groupe Seb, a leader in Small Domestic Appliances and Cookware industry.

 

Mapping and analysing ecosystems is about identifying, testing and selecting options to create and capture value. It is about forming new hypotheses and defining how they can be tested and implemented.

Business strategies should be established based on how a business ecosystem is likely to evolve, not on what we think we can excel at. Mapping and analysing ecosystems is about identifying, testing and selecting options to create and capture value. It is about forming new hypotheses and defining how they can be tested and implemented. To achieve this, a new approach is needed that will help to navigate the complexity and uncertainties of the business ecosystem landscape.

With the ongoing transformation of the business landscape, many industry boundaries have drifted, blurred and changed. New players emerge while other business activities are unbundled. Value chains are continuously sliced and reshaped. Radical innovation and experimentation are led by communities of small disruptive players while cost competitiveness has to be built on the back of existing and emerging champions that leverage scale effect. In between, collaborations with integrators and technology leaders can remain essential to succeed. In this context, thinking in terms of industry and value chains can be misleading; the business landscape is best described as a continuously changing ecosystem where some relationships and collaboration need to be abandoned while others need to be strengthened, initiated or nourished.

Evidence for this is plentiful. The automotive industry has to re-invent itself with the development of self-driving car technologies and the rise of mobility services. For many years the key players tended to work within closed circles. But now they turn to new players to access technology and capabilities that are new to the industry. In other industries such as banking or logistics, startups are challenging established players without disrupting the industry. This leads established and emerging players to simultaneously compete and collaborate. Utility companies need to co-create smart technologies with industrial science leaders in order to offer new business models and services. In the current economic and business environment, companies have to reconfigure their ecosystem of clients, suppliers and partners to transform their value proposition, their business models and secure new competitive advantages.

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Navigating a business ecosystem requires new frameworks, tools and checklist to map where the key players are and to take effective decisions. Executives and professionals have to confront a few fundamental questions. They need to define how they can strive for success in the future. They have to foresee against whom they might compete. And they should explore with whom they will build the needed partnerships and alliances. A great value proposition needs the right business model to deliver its full potential, scale up and capture profit. A great value proposition and a great business model can only flourish if a fertile ecosystem exists. Winning in times of change calls for a certain level of alignment between these three
strategic lenses.

Since the late 1970’s, Traditional Strategy Frameworks have been widely used across business functions. Strategy teams look for entry barriers and attractive positions within an industry. Marketing teams identify where competition comes from and the most profitable market segments.  Procurement teams see where they can best leverage competition across suppliers and where they might have to face risks of dependency. However, to go further and address the full business ecosystem we have identified 4 key requirements that should help us to enrich the traditional analysis:

1. Adopting a broad perspective while diving when necessary: Focusing on the main lines of tension with customers, suppliers and competitors should not prevent us from zooming out and looking at the broader perspective to see where opportunities and threats are forming. When the broad view is secured, it is possible to look at more specific sections of the ecosystem.

2. Thinking collaboration: We need to move beyond looking mainly at who competes with whom and dedicate similar levels of attention to who collaborates with whom across the full ecosystem.

3. Being future-oriented: Analysing the current business game is useful but limited. Looking ahead to anticipate forthcoming transformations and to keep options open is of equal importance.

4. Searching for new sources of competitive advantages: Looking at how existing entry barriers currently canalise profit in certain directions, should be complemented by understanding how new business models, technology, data, patents or other specific business advantages could change the rules of the game in the future.

Mapping and strategising across ecosystems do not always require lengthy analyses. This needs a structured and systematic approach that can be used to sense and frame opportunities. It is best used as an iterative process that can be extended and refined over time. It should not be approached as a solitary, short and dense analysis that is quickly set aside. While the templates proposed here are a good basis for communication and decision making, the real value is in the quality of the interactions established to gather all the useful pieces of information together. In some instance, one person is able to access the key people who hold the relevant information to sketch a first set of hypotheses that can be enriched, challenged and tested. In other instances, multifunctional or even consortium teams might be needed. In such cases, the value includes the enriched perspective and mutual understanding gained by all players.

The rest of this article offers a six step process that managers can use to map, analyse and take advantage of business ecosystems. It is illustrated by a case study on blenders. It is inspired by the work carried out at Groupe Seb, a leader in Small Domestic Appliances and Cookware industry. The case is meant to illustrate the use of the six steps process. It is not meant to describe accurately how Groupe Seb approaches its business ecosystem.

The key steps proposed: (see Figure 1)

 

 

1. Define the scope

To start on the right foot, you need to clearly define the scope. This can include expressing specific business segments, market segments, and type of transformation you will investigate. In any case it is essential to state the orientation you want to base your ecosystem analysis on.

The SEB group is a/the leader in Small Domestic Appliances and Cookware industry. It has multiple brands and each brand has a specific positioning. One of the products present in more than one of the brands is a blender. A blender is used for food preparation; it mixes things together by liquidising, chopping or pureeing ingredients. The major components of a blender include: the motor, the electronic components (PCBA), the glass Jar, blades and material housing. In order to understand how the supplier network and the wider ecosystem could support the different product segments and brands, it is essential to understand and focus on how the brands try to differentiate from each other.

  • KRUPS values: Precision(high cooking performance) – Reliability (Robust design) – Passion
  • MOULINEX values: Intuitive (easy to use and clean) – Performing solutions (multi-function) – liberate desire

It was also decided that the focus should be on the European Market as markets dynamics differ throughout the world.

 2. List key trends

Thinking in terms of trends before mapping ecosystems is very valuable. It helps to anticipate forthcoming transformations. It ensures that important future players that are not yet on the Radar are more likely to be identified. Beginning with megatrends is a nice starting point. Many companies have already looked at the impact of the megatrends on the business as part of their strategic planning process. Then it can be useful to survey the business trends that can affect the company and its ecosystem. A simple but useful checklist consists of expected changes in terms of economic conditions, customer needs, market evolutions and technology development. Finally evolution if the political, legal or environmental context can be considered. Cross functional work interviews can be used to ensure that important trends are identified. They should be precise enough to foresee their possible implication for the company and its ecosystem. For Groupe SEB and the analysis of the blender ecosystem, the following trends were identified:

  • The European market is mature and therefore the growth potential is low
  • Omni channel retailing (connection between stores, e-commerce, Apps and Social Media) is becoming pervasive across Europe
  • Cooking is becoming a valued life experience. TV series such as MasterChef play an important role in driving
    this change
  • Couples and individuals have active lives. They value everything that is fast, efficient and easy for daily cooking. However they enjoy being more sophisticated, elaborated for occasional cooking (friends, family…)
  • Touchscreens are increasingly used for high end
    domestic appliances
  • New technology (electronics, sensors and actuators) are being integrated in the final product
  • Healthy food as well as simple, nice and tasty cooking is more and more valued by consumers. This includes smoothies and whole-fruit juice.
  • There is a growing tendency to offer connected products to consumers
  • European standards & norms are strict about material
    & safety

3. For each trend, identify relevant players or clusters of players

The next step consists of identifying the players or cluster of players that could be relevant to include in the ecosystem. Existing partners, suppliers or distributors are easy to identify. The trends can help identify the ones that are taking a rising role or that could play a role in the ecosystem in the future.

For  Groupe SEB, existing important players for blenders include, traditional distributors, specialist retailers, motor suppliers, the electronic components (PCBA) suppliers, the glass Jar suppliers, blade suppliers and material housing suppliers. From the trends a number of players who will play a more significant role in the future were identified. They include:

  • Online distributors and Social Media players as part of the Omni channel trend
  • Nutritionists due to the healthy food trends
  • Ergonomists due to the ease of use and safety imperatives
  • Technology suppliers further down the value chain (touchscreen, electronics, sensors, actuators)
  • Connected technology startups due to the connected product trend

After a quick check it was identified that new material suppliers who were traditionally seen as suppliers of suppliers should also be taken into consideration in the analysis as their importance was growing.

4. Map players within the ecosystem

The evolution of an ecosystem results from the knitting of collaboration and competition forces over time.

When most players have been identified, the ecosystem can be mapped. Four groups of players can be identified: (1) customers, (2) existing value chain players, (3) potential or rising members of the value chain, (4) influencers. They can be displayed on a map as presented underneath. Existing value chain players can include players that are not directly in contact with the company studied. The supplier of a supplier can be considered as part of the ecosystem. It is not necessary to be exhaustive. Only key players in relation with the scope and ambition of the ecosystem analysis should be considered. We mention both potential and rising players in the third group as when ecosystems change, fast clear cuts cannot easily be made. Influencers are typically organisations, institutions and groups of people who can influence the evolution of the ecosystem without being part of the overall supply chain. They influence on decisions, enable or hinder changes without having a strong economic stake in the process. Standardisation bodies, economic development organisations and non-profit making organisations figure often as influencers.  Here, in terms of influencers, two new players were identified: Standard Bodies and Social Regulation Bodies.

 

 

5. Analyse the dynamics across the ecosystem

At this stage, we have adopted a forward looking perspective and identified all the key players within the ecosystem. To analyse the potential evolution and the dynamic of the ecosystem it is important to identify on the one hand: Who competes with whom today? Who could compete with whom in the future? And on the other hand who collaborates with whom today? Who could collaborate with whom tomorrow? The evolution of an ecosystem results from the knitting of collaboration and competition forces over time.

Here a number of questions can be used to support such an analysis.

 A first level of questions include:

  • Across the ecosystem, who competes with whom? Today? Tomorrow?
  • Across the ecosystem, who collaborates with whom? Today? Tomorrow?

Second level questions to deepen the analysis can include:

  • Which players have similar agendas or interests?
  • Which players have conflicting agendas or interests?
  • Who is attractive to whom as a partner?
  • Who could own specific data, patent, assets or other special business advantages that will be critical in the future?

For the analysis of the Blender ecosystem, we present some of the main areas of competition and collaboration. What appeared here are opportunities to widen existing collaboration to new players (see Figure 3 below).

 

 

6. Establish some recommendations

Building on the previous analysis, some recommendation should be developed. This can include a diversity of action or even a set of “what if” scenarios. However classic key actions can be classified in three broad areas and include:

  1. Scouting and intelligence
  • Performing Scouting activities to gain further market and technology intelligence or to find new partners
  • Monitoring of specific evolutions and development within the ecosystem
  • Taking an active role in knowledge exchange hosted by clusters or other networks
  1. Early exchange of information
  • Establishing accelerators and innovation centre to engage new players in exploratory activities
  • Encourage key people to start exchanging with specific ecosystem players
  • Establishing early exchanges with specific key players within the ecosystem.
  1. Managing a portfolio of collaborations
  • Establishing new collaborations with one or more ecosystem players
  • Reducing progressively the level of collaboration with some ecosystem players
  • Strengthening existing collaborations

For the Blender Ecosystem, the conclusion was that it would be fruitful to encourage collaborations amongst:

  • Motor and blades suppliers, and nutritionists
  • Designer and glass jar supplier, and ergonomists
  • Housing material and Tier 2 material suppliers
  • PCBA supplier, Electronics suppliers and some start-ups which are working on connected technologies

Each brand would be expected to take the lead in specific areas while sharing information as progress materialises.

The focus included the development of a strong relationship with key motor manufacturers in order to develop high performance motors while leveraging the market power of the company to source cost effective motors with variable power or speed.

In order to contribute to improve the cooking performance, it was decided to initiate with a transversal team – including participation from purchasing, marketing and R&D – some technical workshops with motor suppliers, blades suppliers and nutritionist partners. The idea was to run some “design thinking” workshops with all the players in the same room. At the same time, the team decided to gain market intelligence related to technologies from
other industries.

As the glass jar has a big impact on the design, R&D and Purchasing decided to work together to facilitate the collaboration between the Designer and the glass jar manufacturer.

R&D and marketing decided to work upstream and prepare a middle-long term (5 years) roadmap defining in which direction do we want to go in terms of Cooking Performance and share with the members of the future collaboration before the organisation of workshops with players from the ecosystem.

It was also decided to identify some start-ups working on connected technologies and to initiate a co-development with PCBA suppliers, key tier 2 components and a start-up.

Finally through Market Intelligence, it was also decided that the company should identify new material with new performances, new aesthetic, and decoration or painting process.

 

Conclusions

As existing value chains are sliced, diced and experience significant transformation; mapping and strategising across business ecosystems becomes a critical capability companies need to master.

As existing value chains are sliced, diced and experience significant transformation; mapping and strategising across business ecosystems becomes a critical capability companies need to master. The process outlined above is a proven starting point to progress in this direction. Each step is essential but most importantly this needs to be turned into a continuous
collaborative process.

The following diagram outlines how ecosystem mapping integrates with other strategic lenses such as the business model canvas and the value proposition designer (Alexander Osterwalder, 2014) (see Figure 5 below). Combining the three views provides a truly holistic view of how a business can co-evolve with its environment. This also outlines that Ecosystem mapping can benefit from being used in conjunction with other business tools.

 

 

How This Nethodology was Developed

Over the past 5 years, one of the co-authors has taught a course on the topic of innovation and entrepreneurship. Participants were executives and a high potential population working in procurement departments of large and middle-sized companies. The course led them through the use of innovation frameworks to sense, seize and realise business opportunities. If many existing tools and frameworks were readily applicable by the participants, it quickly appeared that the traditional ways of looking at the supply market needed to be significantly expanded. Participants required new techniques to snorkel and dive across business ecosystems to anticipate forthcoming changes and spot new opportunities ahead of others. As the need for new tools and frameworks was recognised, a multiyear action learning initiative was quickly on its way. The methodology was enriched over time and evolved into a solid methodological flow that has been applied with great learning to many business contexts. Participants of the course used and tested it individually as well as in small groups to study a diversity of industry challenges. This methodology owes a lot to the many people who embarked on this learning Journey. Their challenges, questions and suggestions nourished the development of the methodology. They used, bent and sometimes changed it according to their needs.

The second author was keen to use and experiment with the methodology within her own company environment. The blender ecosystem appeared as a very interesting case that was rich, easy to understand and illustrative of the key methodological issues. The co-author was keen to refine her early work and contribute to the development of a case to be used for dissemination of the methodology to a wider public and for educational purposes. The case presented in this paper has been adapted from real business challenges and relevant experiences. However, it has been simplified to first avoid any confidentiality concerns and secondly to offer pedagogical value.

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About the Authors

Hervé Legenvre is Professor and Global Executive MBA Director at the EIPM, a Training Institute for Purchasing and Supply Management. He manages educational programmes for global clients, conducts researches and teaches in the fields of innovation, and sustainability across the value chain. Hervé holds a PhD from Université Paris Sud.

Isabelle Herbet is Asia Purchasing Director for raw material, components and subassemblies for Groupe SEB, and specialist in Cookware and Small Electrical Appliances. She seeks to bring a Sustainable Competitive Advantage for the Group, managing Purchasing centers, Purchasing Performance & Operation and Category Management in Asia to drive Value creation to serve the Business.

References

1. Alexander Osterwalder, 2014. Value Proposition Design: How to Create Products and Services Customers Want (Strategyzer). 1 Edition. Wiley.
2. J. Moore, “Predators and Prey: The New Ecology of Competition”, Harvard Business Review, vol.71, no.3, 1993

 

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