Organising Business Ecosystems

As mentioned above, the first cluster of scholarly articles deals with focal firms’ efforts to organise a business ecosystem around their product, service or innovation. As is shown in the literature, the authors repeatedly develop step-by-step processes of business ecosystem

organisation, which all display many similarities, suggesting that researchers are in agreement upon how this development takes place. The studies included in this cluster are by Rong et al.

(2017, pg. 234ff) who take into account three mechanisms influencing the organisation process, Rong et al.(2015b, pg. 293ff) who study an internationalising company’s efforts to nurture its business ecosystem in a newly entered market, Rong et al. (2018a, pg.234ff) who look at business model development as a result of the company’s business ecosystem context, and Liu and Rong (2015, pg. 809ff) who analyse the components of the so-called co-evolutionary process in business ecosystems.

Rong et al., (2017, pg. 234ff) deal with the topic of how focal firms organize their business ecosystems and which mechanisms influence this process. According to the authors, there exist three key operating mechanisms which a focal firm has to make use of in order to develop its business ecosystem (Rong et al., 2017, pg. 240-241). The first mechanism is ‘vision developing’, which means that the company must share its vision of the future of the industry with partners in order for them to start working on innovative complements (Rong et al., 2017, pg. 240). The second mechanism, as put forth by Rong et al. (2017, pg. 241) is ‘platform organising’, where the focal firm must convince its network of stakeholders to adopt its platform and to engage in its production system. The third mechanism is referred to by the authors as ‘institution

reconfiguring’ and signifies the focal firm’s efforts to develop a dominant industry design and to achieve social adaptation (Rong et al., 2017, pg. 241).

In a study of four different business ecosystems in the emerging electric vehicle (EV) industry, Rong et al. (2017, pg. 239-242) additionally identified four types of ecosystem configurations with different strategies based, on the one hand, on whether the ecosystem targeted the mass market or a niche, and on the other hand, on whether the ecosystem was located in an advanced economy or in a developing economy (i.e. advanced mainstream, advanced niche, emerging mainstream and emerging niche).

Among the main points to take away from contrasting the four configurations is the fact that intermediate actors such as governments, associations or universities appear more likely to partake in driving the organizing mechanisms when the mass market is targeted, as opposed to when a niche is targeted (Rong et al., 2017, pg. 241-242). Here, however, it must be noted how the researchers uncovered that intermediaries in the advanced economies subsidised the demand side of the ecosystem while in the developing economy particularly the government was found to

“promote the supply and demand side to speed up the commercialization process of the focal firm’s products by sharing the vision, encouraging supplier collaboration with focal firms and also issuing industry-friendly regulations” (Rong et al., 2017, pg. 241). On the other hand, it was discovered that in the emerging niche ecosystem, it even took persuading the government for the focal firm to be allowed to produce its EVs (Rong et al., 2017, pg. 241). As such, Rong et al.

(2017, pg. 234ff) contribute to the literature on business ecosystems in proving that despite the existence of common mechanisms of organizing a business ecosystem, different configurations of an ecosystem can arise even within one and the same industry, something that will be discussed in Chapter 3.2.3 as well.

Similarly to Rong et al. (2017, pg. 234ff), Rong et al. (2015b, pg. 293ff) also investigate which steps need to be taken in cultivating a business ecosystem. This, however, is done in the context of internationalisation of a focal firm (Rong et al., 2015b, pg. 296). Here, the researchers

conducted a longitudinal case study which followed the road map method (Rong et al., 2015b, pg.

299). They analysed the timeline of ARM, a leading provider of microprocessor intellectual property, as it entered into the Chinese market and successfully built up a business ecosystem around its product for which there was previously no demand (Rong et al., 2015b, pg. 293ff). In doing so, they developed a model that depicts the three stages of nurturing a business ecosystem they identified in their analysis of ARM’s journey (Rong et al., 2015b, pg. 302). This can be seen in Figure 19 below.

Figure 19: The stages of nurturing a business ecosystem

The model points to three stages of nurturing a business ecosystem in a newly entered foreign market which are ‘incubating’, ‘identifying’ and ‘integrating’ (Rong et al., 2015b, pg. 302).

‘Incubating’ involves the building of an environment that will support the new product or technology that is to be introduced (Rong et al., 2015b, pg. 302). This involves, for example,

Source: Rong, K., Wu, J., Shi, Y., & Guo, L. (2015). Nurturing business ecosystems for growth in a foreign market: Incubating, identifying and integrating stakeholders. Journal of International Management, 21(4), 302.

encouraging universities to disseminate the knowledge about a given new technology as well as the provision of training opportunities for potential partners (Rong et al., 2015b, pg. 302). Indeed, Rong et al. (2015b, pg. 302) state that during this stage, the focal firm shares its vision with complementors and non-direct business parnters, wherefore it is very closely related to the ‘vision developing’ mechanism described by Rong et al. (2017, pg. 240). The next step, ‘identifying’, involves the seeking out of so-called leader partners – i.e. key customers whom the focal firm intends to work with closely and with whom they may co-develop future products (Rong et al., 2015b, pg. 302). Again, this step can be compared to the mechanism of ‘platform organising’

proposed by Rong et al. (2017, pg. 241). ‘Integrating’, as a final step, follows the aim of encouraging complementary ecosystem partners to autonomously work together (Rong et al., 2015b, pg. 303) and is therefore not too dissimilar from ‘institution reconfiguring’ as described by Rong et al. (2017, pg. 241).

In another comparable study, Rong et al. (2018a, pg. 234ff) conducted seven case studies of companies in the emerging 3D printing industry. Here they develop their argument that there exists a three step process by which a value-creating and value appropriating business model is developed within a certain type of business ecosystem (Rong et al., 2018a, pg. 235). Hence, it is assumed that “a business ecosystem forms the context in which a business model evolves” (Rong et al., 2018a, pg. 235) and that the ecosystems identified within the 3D printing industry are either product-based, platform-based, or some combination of both (Rong et al., 2018a, pg. 237).

Moreover it is explained how product-based platforms, on the one hand, evolve “to produce key products to end-users and it is incumbent upon focal firms to organize a supply chain based industrial system” (Rong et al., 2018a, pg. 238), while in platform-based ecosystems, on the other hand, the focal firms “have less influence and control, and the organisation of the ecosystem is more democratic based upon the interaction of partners within the platform” (Rong et al., 2018a, pg. 238). At the same time Rong et al. (2018a, pg. 235) also point out how the capabilities of scalability, flexibility and extensibility “foster and facilitate the outcomes of interactions between the business ecosystem and the business model” (Rong et al., 2018a, pg. 235).

The first stage of business model development, as is indicated by Rong et al. (2018a, pg. 240), is the ‘initiation’ stage, in which the focal firm communicates its vision to other stakeholders in the business ecosystem and encourages them to work together. The second stage is the ‘execution’

stage in which value-creation and value appropriation is under way, but where stakeholders are fine-tuning the business model in order to balance value distribution and to create some form of

standardisation (Rong et al., 2018a, pg. 240). The third stage is the ‘extension’ phase which accounts for the evolution of the business model as a result of exogenous and endogenous change towards more sustainability (Rong et al., 2018a, pg. 243). As such, particularly the first two stages allow for close comparison with the mechanisms described by Rong et al. (2017, pg.

234ff) and the stages introduced by Rong et al. (2015b, pg. 293ff).

In addition though, the authors also imply how scalability (the capability to convince the other stakeholders in the ecosystem of the benefits of the proposed business model) comes into play during the ‘initiation’ phase, which is more difficult in a platform-based ecosystem, but which can result in the creation of more business model permutations in such an ecosystem (Rong et al., 2018a, pg. 240). Moreover, it is highlighted how flexibility is important during the ‘execution’

stage, and that product-based ecosystems more commonly have flexible business models (Rong et al., 2018a, pg. 242). Finally, it is claimed that during the ‘extension’ phase, extensibility is more likely to lead to business model adaptation in platform-based ecosystems, as it allows for more stakeholders, resources and ideas to be involved, the business model to be renewed and sustainability to be improved (Rong et al., 2018a, pg. 243). Figure 20 offers an overview over the research framework by Rong et al. (2018a, pg. 234ff) discussed above.

Figure 20: Research framework of ecosystems’ business model development process

Source: Rong, K., Patton, D., & Chen, W. (2018). Business models dynamics and business ecosystems in the emerging 3D printing industry. Technological Forecasting and Social Change, 134, 234-245.

In addition to Rong et al. (2018a, 234ff), Rong et al. (2017, pg. 234ff) and Rong et al. (2015b, pg.

293ff), Liu and Rong (2015, pg. 809ff) contribute to the literature on the organisation of business ecosystems by investigating the nature of what they refer to as the co-evolutionary process

(CEP). This process, according to them, is widely referenced throughout the literature on business ecosystems, but has not been dealt with in much detail (Liu & Rong, 2015, pg. 832). Hence, they undertook a qualitative study of three business ecosystems in the mobile computing industry based in China, the United States and the United Kingdom, namely those of ARM², Intel and MediaTek (Liu & Rong, 2015, pg. 811). In doing so, they attempted to show which mechanisms constitute the co-evolutionary process (Liu and Rong, 2015, pg. 819ff), as is illustrated by the data structure shown in Figure 21.

Figure 21: The Nature of the Co-Evolutionary Process – Data Structure

The authors identified three domains of activity which, as they put it, “support innovation practices for complex product development” (Liu & Rong, 2015, pg. 831-832). The first of these domains is ‘vision’, during which a business ecosystem’s lead firm initiates the

2 Also studied by Rong et al. (2015b, pg. 293ff)

Source: Liu, G., & Rong, K. (2015). The nature of the Co-evolutionary process: Complex product development in the mobile computing Industry’s business ecosystem. Group & Organization Management, 40(6), 819.

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).