Business Ecosystem Performance

evolutionary process when the opportunity for a new complex product to be developed arises (Liu

& Rong, 2015, pg. 832). Here, the lead firm encourages other firms within the business ecosystem to align their vision as well as their innovation objectives (Liu and Rong, 2015, pg.

832). This includes communication between ecosystem participants in order to gain knowledge about each other’s capabilities and expertise – i.e. building alliance relationships, and formalising the methods of interaction so that knowledge sharing is facilitated (Liu & Rong, 2015, pg. 832).

Yet again, one can draw similarities between the ‘co-vision’ domain mentioned here, ‘vision developing’ (Rong et al., 2017, pg. 240), ‘incubating’ (Rong et al., 2015b, pg. 302), and the

‘initiation’ stage (Rong et al., 2018a, pg. 240).

Next, the CEP sees ‘co-design’ – i.e. ecosystem firms’ joint planning and designing of a new complex product (Liu & Rong, 2015, pg. 832). This domain involves, on the one hand, the sharing of knowledge on customer needs and the resultant propositions for relevant products, and on the other hand, the collaboration on developing a platform and appropriate solutions (Liu &

Rong, 2015, pg. 832). ‘Co-design’ can therefore be compared to ‘platform organising’ (Rong et al., 2017, pg. 241).

Finally, the CEP is characterised by ‘co-creation’, during which the value of the platform as well as the new product is enhanced (Liu & Rong, 2015, pg. 832). This is done by the ecosystem firms collectively, who coordinate their efforts to promote platform usage to external firms with the intent of convincing them to develop complementary applications, which, in turn, make the ecosystem more valuable (Liu & Rong, 2015, pg. 832). At the same time, the ecosystem partners join forces in sharing product design knowledge and thereby improving and optimizing the manufacturing process (Liu & Rong, 2015, pg. 832). Hence, one can detect similarities with

‘integrating’ (Rong et al., 2015b, pg. 303) and ‘extension’ (Rong et al., 2018a, pg. 243).

sustainability by listing different CSR practices and explaining how they impact business ecosystems’ long term survival, while Leataifa (2014, pg. 288ff) deals with the

value-creation/value capture dilemma throughout the business ecosystem life cycle. Also included in this cluster is a study by Rong et al. (2018b, pg. 247ff), in which the authors prove how local culture can have an impact on business ecosystem performance.

Graça and Camarinha-Matos (2017, pg. 1ff) ask the question of how to measure the performance of collaborative business ecosystems. They point out that no concrete literature on performance indicators for business ecosystems as a whole exists, as any research on this topic is yet to be done (Graça & Camarinha-Matos, 2017, pg. 2). As such, the authors conducted a literature review of related research fields in order to determine which performance assessment methods can be borrowed and applied to the field of business ecosystems (Graça & Camarinha-Matos, 2017, pg. 9-24).

The first suggestion Graça and Camarinha-Matos (2017, pg. 9) make for those attempting to measure the performances of a business ecosystem is to apply enterprise performance indicators such as the balanced scorecard. Although the challenges a collaborative network is faced with differ from those an individual organisation is faced with, the authors note that attempts have been made to adjust the balanced scorecard in order to take into consideration the specifics of a collaborative network (Graça & Camarinha-Matos, 2017, pg. 9). Next, the area of value systems is brought up, as the researchers argue that identifying collaborative (economic or social) core values allows for actors in the ecosystem to align their value systems, thereby detecting potential conflicts that could negatively impact the performance of the network (Graça & Camarinha-Matos, 2017, pg. 12-13). Furthermore, Graça and Camarinha-Matos (2017, pg. 10-12) indicate how studying the benefits of collaboration in general, although not necessarily tailored towards business ecosystems, can be helpful in developing indicators with which to measure ecosystem performance. In addition, the authors mention the analysis of supply chain collaboration as an area providing many metrics that can be used to study business ecosystem performance (Graça &

Camarinha-Matos, 2017, pg. 13). Most notably they draw attention to the use of composite indicators where each supply chain partner gathers information on their own performance in relation to economic, environmental and social factors, which are then combined in order to create said composite indicators (Graça & Camarinha-Matos, 2017, pg. 14). Finally, Graça and Camarinha-Matos (2017, pg. 19-23) discuss social network analysis which provides metrics to measure the structure of a network such as centrality and cohesion which, in turn, are tools to

assess organisations’ reciprocity and their dependence on the network. As such, they argue that social network analysis is amongst the most promising fields from which performance indicators for business ecosystems can be borrowed (Graça & Camarinha-Matos, 2017, pg. 25). Figure 22 summarises Graça and Camarinha-Matos’ (2017, pg. 1ff) work by first showing their proposed research strategy towards developing performance indicators that can be applied to collaborative business ecosystems.

Figure 22: Research strategy towards the elaboration of performance indicators for collaborative business ecosystems

The proposed research strategy above shows the different research fields (yellow) that lend metrics to the performance measurement of collaborative business ecosystems. Moreover it is depicted how identifying and aggregating the most appropriate of these metrics comes after determining the context of business ecosystems and assessing their contribution to the business ecosystem’s objectives via the use of simulation models.

While Graça and Camarinha-Matos (2017, pg. 1ff) aimed to identify performance indicators for business ecosystems, Winter et al. (2018, pg. 1ff) explored which factors lead to the success of a mobile business ecosystem by studying Google’s Android ecosystem. However, in contrast to Kapoor and Agarwal (2017, pg. 531ff), the authors looked at the ecosystem as a whole, and not at the success factors of individual complementors (Winter et al., 2018, pg. 1ff). In doing so, they came up with four general findings (Winter et al., 2018, pg. 20-24).

Source: Graça, P., & Camarinha-Matos, L. M. (2017). Performance indicators for collaborative

business ecosystems—Literature review and trends. Technological Forecasting and Social Change, 116, 237-255.

The first finding is that, as Google’s operating system is independent of hardware (meaning that it can operate on a multitude of different devices, as opposed to Apple’s iOS, which only operates on iPhones), the company is able to direct its focus on cloud services, as well as on software and content (Winter et al., 2018, pg. 20). This ‘platform-agnostic business model’, as the authors refer to it, has contributed to the success of both Google and its partners within the Android ecosystem (Winter et al., 2018, pg. 20). The second finding is that on the one hand, the Android platform continuously evolves its functionality and has sufficient application programming interfaces (APIs) that enable app developers to develop meaningfully differentiated products, and on the other hand, Google keeps those software components that differentiate the Android platform as a whole from its competition closed source (Winter et al., 2018, pg. 21). The third finding is that while the aforementioned architectural openness has led to much innovation and added value with respect to complementor products, it has also led to a high degree of fragmentation (Winter et al., 2018, pg. 22). Finally, Winter et al. (2018, pg. 23) find that the Android ecosystem’s strong market position, alongside its extensive brand recognition appeals to all kinds of complementors (i.e. device-building OEMs, mobile broadband operators, app developers) as well as to consumers who “enjoy an unrivalled variety in Android devices, accessories, and applications” (Winter et al., 2018, pg. 23). Figure 23 depicts the ecosystem success factor model developed by the authors which indicates how their level of analysis moves firm-level analysis to platform analysis, and ultimately to ecosystem-level analysis (Winter et al., 2018, pg. 24-25). The model, as Winter et al. (2018, pg. 25) put it, is highly relevant due to the fact that it is not only specific to Android, and that the research framework can be applied to other mobile business ecosystems such as the iOS ecosystem or the Windows Phone ecosystem.

Figure 23: Ecosystem Success Factor Model

In addition to Winter et al. (2018, pg. 1ff), Hsieh et al. (2017, pg. 1ff) also analyse the success factors of a business ecosystem. Nevertheless, Hsieh et al. (2017, pg. 1ff) do this in an entirely different setting, namely in Taiwan’s circular economy (i.e. waste management, recycling and reuse). The authors argue that previous research on business ecosystems has failed to take into account how business ecosystems’ operations could positively impact overall (environmental) sustainability, and how studying the circular economy has the potential to uncover how lead firms can create ecosystems that are sustainable both in terms of creating economic value and

environmental value (Hsieh et al., 2017, pg. 1-2). Therefore, Hsieh et al. (2017, pg. 7ff)

conducted a case study of Spring Pool Glass, the leader in Taiwan’s glass-recycling ecosystem.

One of the success factors of Spring Pool Glass is that it continuously searches for new forms of using its recycled glass in order to combat the large imbalance between the supply of waste glass and its demand (Hsieh et al., 2017, pg. 10). By doing so, Spring Pool Glass, as a lead firm, connects with other ecosystems in order to develop new business models, thereby ensuring the health of its own ecosystem (Hsieh et al., 2017, pg. 11). Moreover, Spring Pool Glass leverages its entrepreneur’s personal network in order to grow its own value network and business

ecosystem (Hsieh et al., 2017, pg. 11). Furthermore, Hsieh et al. (2017, pg. 11) point to the

Source: Winter, J., Battisti, S., Burström, T., & Luukkainen, S. (2018). Exploring the success factors of mobile business ecosystems. International Journal of Innovation and Technology Management, 15(03), 1850026.

importance of Spring Pool Glass’ brand image and its CSR activities for the success of the ecosystem, as this encourages external stakeholders to collaborate with the company. Also, having distinct core capabilities and engaging in continuous R&D are essential for supporting value-capturing activities (Hsieh et al., 2017, pg. 12). Finally, as Hsieh et al. (2017, pg. 12) note, reacting to government policies that affect the circular economy, such a new recycling projects, is equally important for Spring Pool Glass as it must adapt to newly defined mechanisms of trading with other stakeholders. Thus, by comparing the research done by Winter et al. (2018, pg. 1ff) and Hsieh et al. (2017, pg. 1ff), one can see how, from industry to industry, different factors lead to business ecosystem success.

Joo et al. (2017, pg. 1ff) also deal with the topic of sustainability in connection with business ecosystems, yet they do not consider the circular economy per se, as do Hsieh et al. (2017, pg.

1ff), but focus instead on focal companies in general and their CSR (corporate social

responsibility) activities. In their research, they use a business ecosystem approach in order to show how CSR is related to firm competitiveness (Joo et al., 2017, pg. 2). In order to map out how a firm’s CSR activities, social capital, social value and firm competitiveness are connected via a virtuous cycle (Joo et al., 2017, pg. 2), the researchers conducted case analyses of seven companies, three of which are based in South Korea and four of which are based in the United States (Joo et al., 2017, pg. 5). The framework proposed by Joo et al. (2017, pg. 8-16) is depicted in Figure 24.

Figure 24: Relationships among business activities, sustainable business ecosystems, and firm competitiveness

First, as is stated by Joo et al. (2017, pg. 8), in carrying out CSR activities that complement their core business, companies contribute to achieving their business ecosystem’s shared purpose, wherefore they help build a sustainable business ecosystem. At the same time, the social value (i.e. shared values and stakeholders’ trust in the authenticity of the company) created by CSR activities leads to increased social capital within the business ecosystem (Joo et al., 2017, pg. 11).

Here, social capital, although having many different definitions in the extant literature, can broadly be considered as a resource for firm productivity based on the relationships with other stakeholders developed within the business ecosystem (Joo et al., 2017, pg. 2-3). Moreover, the authors posit that customer participation in CSR activities (as they recognise the shared purpose that lies in participating) helps to accumulate a business ecosystem’s social capital (Joo et al., 2017, pg. 13). In consequence, it is ultimately found that the business ecosystem’s social capital, which is accumulated through CSR measures, positively affects a firm’s competitiveness, as it allows the firm to secure and mobilise resources, and to seize new market opportunities (Joo et al., 2017, pg. 16). Hence, Joo et al. (2017, pg. 16) argue that the business ecosystem, in fact, acts as a mediator between a firm’s CSR activities and its competitiveness.

In an earlier paper, Joo et al. (2016, pg. 139ff) discuss a number of executive practices that, enhance sustainability within a business ecosystem. As such, they reflect to a certain extent the

‘creating social value’ component of Joo et al.’s (2017, pg. 4) framework (see above). The

Source: Joo, J., Eom, M. T. I., & Shin, M. M. (2017). Finding the missing link between corporate social responsibility and firm competitiveness through social capital: A business ecosystem perspective.

Sustainability, 9(5), 707.

authors argue that executives must adopt a business ecosystem perspective in order to be most effective when it comes to sustainable management (Joo et al., 2016, pg. 133), because they then have a clearer understanding of the value of the triple bottom line (Joo et al., 2016, pg. 139). As such, they interviewed 13 executives representing 12 companies in order to come up with five broad strategies that lead to what is referred to as a ‘virtuous cycle for sustainable management and business ecosystems’ (Joo et al., 2016, pg. 134ff).

The first such strategy is strategic alignment of ecosystem actors in terms of their values, as well as their business practices by conveying a shared purpose and through institutionalisation (Joo et al., 2016, pg. 141). This, is very similar to the mechanism of ‘vision developing’ identified by Rong et al. (2017, pg. 240) and the ‘initiation’ stage identified by Rong et al. (2018a, pg. 240) in connection with how firms organise their business ecosystems. Next Joo et al. (2016, pg. 141) suggest that it is important for executives to engage in management practices that other

ecosystem participants perceive to be authentic, which is in line with the social value generation through CSR activities dealt with by Joo et al. (2017, pg. 11). Moreover, it is argued that “it is necessary to raise customers’ psychological ownership as an actor of a business ecosystem through customer participation” (Joo et al., 2016, pg. 141). Again, this idea is echoed by Joo et al. (2017, pg. 13) when they discuss how customer participation in CSR activities contributes to social value generation. Furthermore, Joo et al. (2016, pg. 141) posit that collaborative innovation must be achieved, where ecosystem actors care for one another and actively work towards

resolving conflicts and overcoming trade-offs that may arise throughout decision-making processes. Finally, Joo et al. (2016, pg. 142) stress the importance of creating attractive infrastructure and of fostering the right kind of culture that facilitates cooperation between ecosystem actors and external stakeholders, such as NGOs. If implemented correctly, the five strategies presented here, as was mentioned above, lead to the emergence of a virtuous cycle (Joo et al., 2016, pg. 142), as is depicted in Figure 25.

Figure 25: A virtuous cycle for sustainable management and business ecosystems

Here, as Joo et al. (2016, pg. 142) put it, it is the corporate executive’s role to change society (or indeed the whole environment) in such a way that it is beneficial to its business ecosystem

“through balancing and harmonizing on the basis of shared purposes” (Joo et al., 2016, pg. 142).

Nevertheless, balancing and harmonising are, at the same time, executives’ means of achieving shared purpose (Joo et al., 2016, pg. 142), hence the virtuous cycle.

In a somewhat different approach, Letaifa (2014, pg. 288ff) analysed a business ecosystem with regards to its life cycle. In conducting a longitudinal case study of a Canadian ICT ecosystem, she took a closer look at the interplay between value-(co)creation and value capture throughout a business ecosystem’s life cycle (Letaifa, 2014, pg. 284ff). On the basis of the case in question, she proposed a model that features four distinct steps of how the value-creation/value capture dilemma unfolds over time within a business ecosystem (Letaifa, 2014, pg. 288) and provides recommendations for each step (Letaifa, 2014, pg. 290-292). Figure 26 depicts said model.

Source: Joo, J., Eom, M. T., & Shin, M. M. (2016). Executive practices for corporate sustainability: a business ecosystems perspective. International Journal of Business Research, 16(1), 142.

Figure 26: The sequence of steps that unfold over time in the development of ecosystems

In this model, the first phase (upper left quadrant) is characterised by high levels of value co-creation and low levels of value capture (Letaifa, 2014, pg. 288). This means that the ecosystem is in its birth phase which is highly cooperative, and that management of the ecosystem as a community is key, in order to ensure optimal conditions for cooperation (Letaifa, 2014, pg. 290).

The goal is that everyone’s assets are leveraged and an ecosystem vision is created (Letaifa, 2014, pg. 290). The author therefore recommends electing a steering committee responsible for creating and expanding the capabilities of the ecosystem and appointing a coordinator that is able to lead the community (Letaifa, 2014, pg. 291).

In the second phase (upper right quadrant) both value-creation and value capture are high, signifying expansion and development within the ecosystem (Letaifa, 2014, pg. 288). Here, as Letaifa (2014, pg. 291) notes, ecosystem participants cooperate closely while competing at the same time (coopetition). Consequently the recommendation is that the steering committee and the coordinator should focus on encouraging projects that require ecosystem participants to

collaborate, and to make sure that non-cooperative behaviour is regulated (Letaifa, 2014, pg.

291). In this regard, Letaifa (2014, pg. 291) also suggests highlighting coopetitive best practices.

The third phase (bottom right quadrant) implies that the ecosystem is reaching maturity as value-creation is low (Letaifa, 2014, pg. 291). As a result, members of the ecosystem fiercely compete in an attempt to capture as much of the little value created (Letaifa, 2014, pg. 291). The author

Source: Letaifa, S. B. (2014). The uneasy transition from supply chains to ecosystems: The value creation/value-capture dilemma. Management Decision, 52(2), 288.

argues that where this is the case, the ecosystem should either re-direct its focus towards value co-creation, or begin the process of self-renewal (Letaifa, 2014, pg. 292). If this is not done, the ecosystem will move on to the final phase (bottom left quadrant), in which little value is created and little value is captured (Letaifa, 2014, pg. 292). As the ecosystem is already close to its death in this phase, the only options left are to try and regenerate the ecosystem by restarting the innovation process, or to dismantle the network altogether (Letaifa, 2014, pg. 292).

Rong et al. (2018b, pg. 247ff) contribute to the existing literature on business ecosystems by taking into account the effect of local culture. Specifically, they analyse the connections between guanxi (a notion specific to Chinese culture which emphasises relationship building and the establishment of trust between two parties) and collectivism on the one hand, and the use of an online chat function incorporated by an e-commerce company into its business ecosystem (Rong et al., 2018b, pg. 247ff). The case analysed is that of Taobao, an online retailer based in China which offers services comparable to those of Amazon and eBay, which, as opposed to its Western competitors, thrived after it introduced its own chat tool called Wangwang (Rong et al., 2018b, pg. 249).

The authors attempted to prove that Taobao’s success came about due to the fact that the messaging application, assumed to be a complementor product, acted as a mediator between customers and sellers (Rong et al., 2018b, pg. 249). One of the main propositions were that the communication tool allowed customers to talk directly to sellers in order to build a relationship and establish the necessary level of trust that is required for transactions to take place within a guanxi-based culture (Rong et al., 2018b, pg. 250-251). At the same time, Rong et al. (2018b, pg.

251) suggest that as the chat tool makes it easier for customers to exchange information and opinions, and to give recommendations, it exploits the characteristics of a collectivistic society which sees extensive social pressure to conform to the norms set by the community. Figure 27 provides a visual overview of Rong et al.’s (2018b, pg. 247ff) research framework.

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).