Refreshed perspective on dynamics of ecosystems

What did we get right?

I’m happy to say that, after a decade, I have not been able to find anything in this research report that was wrong. Our key messages were that business ecosystems can take many different forms and that there is an untapped opportunity to deploy and manage dynamic ecosystemsⁱ where the focus is on helping all participants to learn faster and accelerate their performance improvement.

A decade later, our taxonomy of ecosystems remains valid – and something that can be very helpful for executives as they assess how to best leverage ecosystems to support their initiatives.

Over these years, we have also been putting our research into practice. In Europe, Center for the Edge has applied our “Zoom out, Zoom in” ecosystem strategy approach to address challenges in the complex systems of health, food, energy, and personal finance. In these focus areas, we run ecosystem initiatives connecting stakeholders across sectors, industries, and organizational boundaries to make an impact.

However, dynamic ecosystems remain a significant untapped opportunity. If anything, the potential of dynamic ecosystems has significantly increased over the decade. Digital technology has enhanced our ability to measure performance in real-time and can provide a much richer view of the context that shapes our performance. As a result, we can learn a lot faster about the actions that produce the highest performance and evolve our actions as we see what impact they have achieved. More broadly, digital technology has evolved so that we can connect more and more people at lower and lower cost.

Dynamic ecosystems are not just an opportunity. They are increasingly becoming an imperative because digital technology continues to produce mounting performance pressure, making it essential to find ways to accelerate learning and performance improvement. Those who continue to ignore the potential of dynamic ecosystems will find that they are increasingly marginalized in a world marked by intensifying competition, an accelerating rate of change and a growing frequency of extreme, disruptive events.

We live in a world where investors are increasingly demanding growth, and not just profitability. In addressing growth strategies, organizational leaders still focus on two options: make or buy. Growth is either organic, occurring within the organization, or can be driven by acquisitions.

This framing of growth strategies ignores a third option that is becoming increasingly feasible and necessary – leveraged growth. Leveraged growth occurs when we mobilize a growing number of third parties to deliver more and more value to our stakeholders and find ways to capture some of that value for ourselves. Leveraged growth requires deepening our capability to participate in larger and larger ecosystems and becomes even more powerful when we harness the potential of dynamic ecosystems.

What should we have explored further?

Of course, at one level, the answer to this is: everything. Everything is connected and we will have much greater insight when we understand how everything is connected. In this context, we have done a lot of research on the long-term forces that are reshaping our global economy and society. We call it the Big Shift and believe it will lead to a profound transformation of our world ^ii.

But, let’s not get carried away. Are there certain things that would increase our ability to scale dynamic ecosystems more rapidly and achieve even greater impact?

In this context, we should have paid more attention to the challenges leaders will face as they seek to harness the potential of ecosystems in general, and especially dynamic ecosystems. Our research has suggested that leaders do not just need to master new management techniques in ecosystems – they will need to master new management techniques within their organizations.

In fact, these new management techniques will require a fundamental transformation of their organizations. In other research that we have done, we have described this transformation as a big shift from an institutional model of scalable efficiency to an institutional model of scalable learningⁱⁱⁱ .

This change can be very challenging. In a world of mounting performance pressure, more and more leaders are consumed by the emotion of fear – they view the future as very threatening and scary. While very understandable, the emotion of fear can also be very limiting – they tend to shrink their time horizons, they become more risk averse and they lose trust in others^iv. The result is that leaders are increasingly overwhelmed by the challenge of change – it’s far too risky, so the better option is to just continue doing what led to success in the past. This is a key reason why dynamic ecosystems remain such a significant untapped opportunity.

So, what needs to be done? First, leaders need to acknowledge their own fear and the fear that is consuming the participants in their organizations, and see how limiting its effects are. Then they need to find ways to move beyond fear and cultivate emotions that will help them to have an impact that is much more meaningful.

Different approaches to strategy can help leaders and participants to move beyond fear. In other research we have done, we have explored the power of the “zoom out, zoom in” approach to strategy^v . This approach to strategy was originally pursued by some of the most successful technology companies in Silicon Valley.

The zoom out, zoom in approach to strategy focuses on two very different time horizons. The zoom out time horizon is 10-20 years and, on this horizon, the key questions are “what will our relevant market or industry look like 10-20 years from now and what is a really big opportunity that we could pursue in that future? The zoom in horizon is 6-12 months and the key questions on this horizon are: what are the 2-3 initiatives that we could pursue in the next 6-12 months that would have the greatest potential in accelerating our movement towards the longer-term opportunity we have identified, do we have a critical mass of resources committed to these initiatives and how would we measure progress towards the bigger opportunity?

This approach to strategy has many key benefits, but a significant benefit is that it can help people to overcome fear. On the zoom out side, focusing on a really big, inspiring opportunity can help people to shift their view of the future from one dominated by threat to one shaped by opportunity. The zoom in side helps to overcome the natural skepticism that many people driven by fear will have since it can start to quickly show tangible progress towards the bigger, long-term opportunity.

Another, related approach to strategy can also be very helpful in motivating participants to move beyond fear. We have done significant research on an approach to strategy that we call “shaping strategy”^vi . Shaping strategies focus on looking ahead and imagining how a market or industry could be shaped to create much more value for its participants. Rather than viewing the future as a given, beyond one’s control, this approach to strategy emphasizes that, in a world of accelerating change, we have more degrees of freedom to shape our futures. Shaping strategies also focus attention on the growing role that ecosystems can play in shaping our future. By emphasizing our ability to shape our future, this approach to strategy can help us to overcome our fear and to become excited about the opportunities we can pursue in the future.

Platforms: A key to developing ecosystems

There’s also another perspective that can help us move beyond fear. This research report focuses on the role of ecosystems and the different kinds of ecosystems that can evolve to help participants create more value. We did not focus enough on another dimension that is key to the scaling and evolution of ecosystems – that’s the role of platforms^vii, which we have later done a lot of research on.

Everyone is talking about platforms today, but few make an effort to define what platforms are and how they are different from, but help to support, ecosystems. When we talk about ecosystems, we focus on the participants and interactions that are required to achieve specific objectives. In contrast, when we talk about platforms, our focus shifts to the governance structure and incentive structures that can be most helpful in bringing together the right participants and focusing on the interactions that can have the greatest impact. While technology can be very helpful in scaling platforms, we emphasize that platforms are much less about technology and much more about how to foster the interactions required for the success of an ecosystem.

As an example, we are developing our Center for the Edge dialogues (Conversation on the Edge, Amstel Dialogues, Dining to Net Positive), as platforms to accelerate impact within certain ecosystems. They do not depend on technology, but utilize a few well-considered rules and protocols.

By focusing on platforms, we can help people to move beyond fear by exploring tangible ways that they can design and deploy platforms to scale the ecosystems that can be most helpful to them. In this context, we have highlighted one type of platform that has not been pursued aggressively enough – learning platforms.

When we talk about learning platforms, we are not referring to platforms that deliver video courses to participants. That’s learning in the form of sharing existing knowledge. The most powerful and necessary form of learning in our Big Shift world is learning in the form of creating new knowledge by coming together and addressing previously unseen problems and opportunities. The primary design goal of learning platforms is to help all participants to learn faster in the form of creating new knowledge together. Learning platforms represent a significant new opportunity that can be very helpful in launching and scaling dynamic ecosystems.

Bottom line

While we have used these principals when addressing cross-industry social challenges, dynamic ecosystems remain a significant untapped opportunity. In fact, they are not just an opportunity, but an imperative in a world of mounting performance pressure. The good news is that long term forces are also shaping a world of exponentially expanding opportunity that make it more and more feasible to create and scale dynamic ecosystems.

To address this opportunity and imperative, we will need to recognize and address the profound transformation that will be required in how we manage and operate our institutions. In order to drive this transformation, we will need to overcome the emotion of fear and find ways to cultivate emotions that will excite participants and drive them to come together to achieve much more than they could on their own.
 

Let’s connect

As value creation shifts towards ecosystems and platforms, we want to learn from the people creating new value at the edges of these environments.

We would love to hear your thoughts and suggestions on this subject, and invite you to connect with Daniel Sunde-Hansen.


References

^i.Hagel, John, John Seely Brown, and Duleesha Kulasooriya. “Performance  Ecosystems: A Decision Framework to Take Performance to the Next Level”. West Lake, TX: Deloitte University Press (2012).

^ii.Hagel, John, John Seely Brown, Maggie Wooll, and Andrew de Maar. "The Paradox of Flows: Can Hope Flow from Fear?." 2016 Shift Index (2016).

^iii.Hagel, John, and J. Seely Brown. "Institutional innovation. Part of a Deloitte series on innovation." Deloitte Insights (2013).

^iv.Hagel, John. The Journey Beyond Fear (McGraw Hill, New York, 2021)

^v.Hagel, John, and J. Brown. "Zoom out/Zoom in an Alternative Approach to Strategy in a World that Defies Prediction." Deloitte Insights, May 16 (2018).

^vi.Hagel, John, John Seely Brown, and Lang Davison. "Shaping strategy in a world of constant disruption." Harvard Business Review 86, no. 10 (2008): 80-89.

^vii.Hagel, J. "Business Ecosystems come of age; The power of platforms." (2015)