Business Ecosystem Patterns

Figure 27: Research Framework of Guanxi and Collectivism's Effect on the Use of Taobao's Service

Indeed, Rong et al. (2018b, pg. 251) find that customers embedded in guanxi as well as those influenced by collectivism are more likely to use the chat tool. At the same time, the use of said chat tool is found to have a positive correlation with customers’ intent to use Taobao’s service (Rong et al., 2018b, pg. 252). Also, the authors claim that in using the complementor, customers build trust in Taobao’s platform which, in turn, increases the likelihood of the customer using the e-commerce platform (Rong et al., 2018b, pg. 253). Therefore, the authors conclude that “the online environment is not detached from local cultural norms and behaviours” (Rong et al., 2018b, pg. 260) and that businesses must adapt to the cultural context their business ecosystem is set in (Rong et al., 2018, pg. 260).

Rong et al. (2013a, pg. 75ff) studied the platform strategies of business ecosystems and linked these with different stages of the business ecosystem life cycle as conceptualised by Moore (1996, pg. 68-81)³. In doing so, they broke down platform strategy into three dimensions, namely technology, application, and organisation (Rong et al., 2013a, pg. 75ff). While the dimension of technology signifies the underlying technology to which an array of products or services is tied, application stands for the actual products or services offered to the customer (Rong et al., 2013a, pg. 79). On the other hand, organisation refers to the way platform strategy impacts the way ecosystem partners interact with one another and how this interaction is governed (Rong et al., 2013a, pg. 79). The data in this study was gathered by case analyses of three companies (ARM, Intel and MTK⁴) which are all platform leaders within their business ecosystems (Rong et al., 2013a, pg. 81-86). In looking at how platform strategy developed along the business ecosystem life cycle, the authors came to the following finding summarised in Figure 28.

Figure 28: Platform strategy along the business ecosystem life cycle (1)

3 See Chapter 2.3.2

4 All three studied also by Liu and Rong (2015, pg. 809ff). See Chapter 3.2.1 Organising Business Ecosystems.

Source: Rong, K., Lin, Y., Shi, Y., & Yu, J. (2013). Linking business ecosystem lifecycle with platform strategy: a triple view of technology, application and organisation. International journal of technology management, 62(1), 75-94.

What Figure 28 shows is that platform strategy (in terms of technology, application, and

organisation) depends on the status of the industry – i.e. whether the industry is characterised by uncertainty or less uncertainty (Rong et al., 2013a, pg. 87). Where an industry is uncertain, the platform leader tends to encourage contribution to the platform by other ecosystem partners (Rong et al., 2013a, pg. 87). The result is that companies implement a strategy that is not

completely closed (Rong et al., 2013a, pg. 87). These strategies are referred to as being less open (when it comes to technology), less diversified (when it comes to application), and less flexible (when it comes to organisation), so as to take into account that they are not completely open, diversified and flexible either. As such, the findings show that in industries that are less uncertain, platform leaders strive to ramp up productivity and to achieve quick response (Rong et al., 2013a, pg. 87). Consequently, the firms implement a closed strategy at birth, a less open (or less

diversified, or less flexible) strategy during expansion, and a closed strategy during authority and renewal (Rong et al., 2013a, pg. 87). What can also be seen is that platform strategy remains the same for all dimensions – i.e. technology, application, and organisation (Rong et al., 2013a, pg.

87).

Nevertheless, these are not the only findings presented by Rong et al. (2013a, pg. 75ff). The researchers also came up with three types of overall platform strategy, each of which take into account the three dimensions mentioned above (Rong et al., 2013a, pg. 89). These are the open platform strategy, the dominating platform strategy, and the opportunistic platform strategy (Rong et al., 2013a, pg. 89-90). The open platform strategy comes into use where partners seek to co-evolve and to gain support from one another (Rong et al., 2013a, pg. 89). As such, one can observe openness in technology, diversification in applications, and flexibility in the organisation network (Rong et al., 2013a, pg. 89). The dominating platform strategy, on the other hand, is implemented when control of the ecosystem development direction is sought and production volumes are to be scaled up (Rong et al., 2013a, pg. 89). Where this strategy is implemented, the platform leader’s core technology is closed, and only supplementary parts are opened so partners can develop complements (Rong et al., 2013a, pg. 89). Applications are still relatively

diversified, but partner alliance is closed, leading to an inflexible organisation network (Rong et al., 2013a, pg. 89). Finally, the opportunistic platform strategy is used to seek out appropriate substitutes to help renew the ecosystem (Rong et al., 2013a, pg. 90). When resorting to this strategy, substitutes are used on both the technology and the application level to help market penetration in existing markets (Rong et al., 2013a, pg. 90). In terms of organisation, the focus

shifts back to support of network partners (Rong et al., 2013a, pg. 90). Figure 29 shows at which stages within the business ecosystem life cycle these strategies are typically implemented.

Figure 29: Platform strategy along the business ecosystem life cycle (2)

As can be seen above, the open platform strategy tends to be used at the ecosystem’s birth, or during its expansion phase (Rong et al., 2013a, pg. 91). As the ecosystem moves on to the authority stage, the dominating platform strategy comes into play more frequently (Rong et al., 2013a, pg. 91). In the end, when the ecosystem must either renew itself or face death, platform leaders are most likely to implement an opportunistic platform strategy (Rong et al., 2013a, pg.

91).

Rong et al. (2015a, pg. 1ff) conducted a study on the nature of business ecosystems in Internet-of-Things-based sectors. They opted for a case study approach and selected six companies based in Germany, France the United Kingdom, and China, whose business ecosystems were analysed more closely over a period of two months in 2013 (Rong et al., 2015a, pg. 9-10). The firms selected were Car2go, which represented the car hire industry, Weixin/WeChat, representing the mobile internet sector, Continental, representing the automotive industry, BesTV, representing

Source: Rong, K., Lin, Y., Shi, Y., & Yu, J. (2013). Linking business ecosystem lifecycle with platform strategy: a triple view of technology, application and organisation. International journal of technology management, 62(1), 91.

television, MapBar, representing the cartography sector, and Hikvision, representing the

security/CCTV industry (Rong et al., 2015a, pg. 9-10). What all these companies had in common was the fact that their business ecosystems were based on the Internet of Things (Rong et al., 2015a, pg. 9).

What was found was that for IoT-based business ecosystems, there exist three patterns in which the focal firm, the ecosystem product or service, and other stakeholders (including the customers) interact with one another to varying degrees (Rong et al., 2015a, pg. 23). Indeed, the findings largely echo what was already discussed two years before by Rong et al. (2013a, pg. 75ff). In the first pattern, the platform is widely open, meaning that stakeholders such as customers or other industry players are able to use the product, obtain data from its use, and then improve or enhance the product via the open platform, while the focal firm assists them in doing so (Rong et al., 2015a, pg. 24). The authors suggest that such open ecosystem platforms are typical for industries that are still in their infancy, and where products are not yet complete, thereby warranting further improvement (Rong et al., 2015a, pg. 24-25). The second pattern is termed by (Rong et al., 2015a, pg. 24) as ‘semi-open’, since, on the one hand, stakeholders are still invited to engage in product improvement and modification, but the focal firm largely maintains control over product development (Rong et al., 2015a, pg. 24-25). As the authors put it, such a semi-open platform is most commonly encountered in industries that are a little more mature (Rong et al., 2015a, pg.

25). In the third platform, the ecosystem is only open to a very small degree (Rong et al., 2015, pg. 24). Here, customers or other stakeholders still provide the focal firm with feedback, but it is the focal firm that decides upon any further steps within the product development process (Rong et al., 2015, pg. 24). As Rong et al. (2015, pg. 24) note, industries that are very mature, in which the business ecosystem is dominated by one focal firm tend to adopt this pattern. Figure 30 provides an overview over the different types of relationships/interactions between the ecosystem actors that occur in the three patterns identified by Rong et al. (2015a, pg. 1ff).

Figure 30: Three patterns of the IoT-based business ecosystem

Sun et al. (2018, pg. 420), in analysing the business ecosystems of waste electrical and electronic equipment (WEEE) business ecosystems in China, also identified two types of business

ecosystem, according to which ecosystems could be classified. These are the embedded

ecosystem on the one hand, and the central business ecosystem on the other (Sun et al., 2018, pg.

420). In the embedded ecosystem, the actors are divided into a ‘connection leader’ and

‘independent followers’, whereby the former connects different nodes (i.e. other actors) both within its own ecosystem and across ecosystem borders in order to enhance ecosystem

productivity (Sun et al., 2018, pg. 420). As a result, the latter are faced with an increased number of options in terms of the flow of material, money and information (Sun et al., 2018, pg. 420).

In central ecosystems, the focal firm becomes the ‘controllable leader’ who exploits its central position in order to take control over large parts of the business ecosystem and to eventually become the actor responsible for most of the ecosystem’s value creation (Sun et al., 2018, pg.

420). Hence, the controllable leader can easily be equated to the physical dominator discussed by Iansiti and Levien (2004, pg. 75), as was mentioned earlier in Chapter 2.3.1, while the connection leader displays the main characteristics of a typical keystone company (Sun et al., 2018, pg. 421).

In consequence to the controllable leaders’ dominance, the other actors in the central ecosystem

Source: Rong, K., Hu, G., Lin, Y., Shi, Y., & Guo, L. (2015). Understanding business ecosystemusing a 6C framework in Internet-of-Things-based sectors. International Journal of Production Economics, 159, 41-55.

are termed ‘dependent followers’ (Sun et al., 2018, pg. 420). Figure 31 provides a visual representation of how the types of connections between ecosystem actors differ between the embedded business ecosystem and the central business ecosystem.

Figure 31: Embedded Business Ecosystem & Central Business Ecosystem

Peltola et al. (2016, pg. 1276ff) build on the model explaining the varying degrees of value-creation and value capture introduced by Letaifa (2014, pg. 288ff) as was discussed in Chapter 3.2.2. However, instead of analysing the value-creation/value capture dilemma over time, Peltola et al. (2016, pg. 1276-1277) imply that not all business ecosystems manage to achieve a situation in which value is jointly created and equally captured by all participants. The degree to which value-creation and value capture take place in an ecosystem depends, according to Peltola et al.

(2016, pg. 1276), on the type of stakeholders present in the ecosystem and the type of role they occupy. In this regard it is argued that “the connection between role and stakeholder is not fixed but is dynamic and dependent on characteristics of the local environment” (Peltola et al., 2016, pg. 1276). This notion is illustrated with the help of a comparative case analysis of two waste management ecosystems based in Brazil and Finland (Peltola et al., 2016, pg. 1272). The results imply that there exist four types of ecosystem with varying levels of value-creation and value capture (Peltola et al., 2016, pg. 1276-1277). These are summarised in Figure 32.

Source: Sun, Q., Wang, C., Zuo, L. S., & Lu, F. H. (2018). Digital empowerment in a WEEE collection business ecosystem: A comparative study of two typical cases in China. Journal of Cleaner Production, 184, 420.

Value co-creation, maximizing own value

capture

Ecosystem perspective

Company-centric

Complementors, strong dependency on others

The first type is a very company-centric ecosystem in which value is created and captured on the company-level, but not on the ecosystem level (Peltola et al., 2016, pg. 1277). Hence, joint value-creation and resulting value-capture are both low from an ecosystem point of view (Peltola et al., 2016, pg. 1277). The second ecosystem type is one in which value is jointly created to a certain degree, but the individual companies’ business models are still very company-centric, meaning they are unable to capture much of the jointly created value (Peltola et al., 2016, pg. 1277). In the third type of ecosystem, “value is jointly created to enforce the value capture of the whole

business ecosystem” (Peltola et al., 2016, pg. 1276). This implies that both value-creation and value capture take place on an ecosystem level, and not on a company level, wherefore it can be interpreted as being an optimum towards which business ecosystems should strive. The fourth ecosystem type is one in which companies create value by themselves (i.e. little joint value-creation), but are highly dependent on the whole ecosystem’s success, thereby capturing much of the ecosystem’s overall value (Peltola et al., 2016, pg. 1277). As such, while Letaifa (2014, pg.

288ff) postulates that ecosystems evolve throughout time from one stage to the next in terms of the levels of value-creation and value capture, Peltola et al. (2016, pg. 1276ff) suggest that the levels of value-creation and value capture in a business ecosystem depend on whether the participants adopt an ecosystem perspective or a company-centric perspective.

Adapted from: Peltola, T., Aarikka-Stenroos, L., Viana, E., & Mäkinen, S. (2016). Value capture in business ecosystems for municipal solid waste management: Comparison between two local environments. Journal of cleaner production, 137, 1277.

Value capture

Value -cre atio n

Figure 32: Different business ecosystem types in terms of value-creation and value capture