What is a 'Business Ecosystem'

A business ecosystem is the network of organizations — including suppliers, distributors, customers, competitors, government agencies, and so on — involved in the delivery of a specific product or service through both competition and cooperation. The idea is that each entity in the ecosystem affects and is affected by the others, creating a constantly evolving relationship in which each entity must be flexible and adaptable in order to survive, as in a biological ecosystem.

BREAKING DOWN 'Business Ecosystem'

In the 1930s, British botanist Arthur Tansley introduced the term ‘ecosystem’ to describe a community of organisms interacting with each other and their environments — air, water, earth, etc. In order to thrive, these organisms compete and collaborate with each other on available resources, co-evolve, and jointly adapt to external disruptions.

Business strategist James Moore adopted this biological concept in his 1993 Harvard Business Review article “Predators and Prey: A New Ecology of Competition” through which he paralleled companies operating in the increasingly interconnected world of commerce to a community of organisms adapting and evolving to survive. Moore suggested that a company be viewed not as a single firm in an industry, but as a member of a business ecosystem with participants spanning across multiple industries.

Advances in technology and increasing globalization have changed ideas about the best ways to do business, and the idea of a business ecosystem is thought to help companies understand how to thrive in this rapidly changing environment. Moore defined the business ecosystem as “an economic community supported by a foundation of interacting organizations and individuals — the organisms of the business world. The economic community produces goods and services of value to customers, who are themselves members of the ecosystem. The member organisms also include suppliers, lead producers, competitors and other stakeholders. Over time, they co-evolve their capabilities and roles and tend to align themselves with the directions set by one or more central companies. Those companies holding leadership roles may change over time, but the function of ecosystem leader is valued by the community because it enables members to move toward shared visions to align their investments and to find mutually supportive roles.”

In effect, the business ecosystem consists of a network of interlinked companies that dynamically interact with each other through competition and cooperation to grow sales and survive. An ecosystem includes suppliers, distributors, consumers, government, processes, products and competitors. When an ecosystem thrives, it means that the participants have developed patterns of behavior that streamline the flow of ideas, talent and capital throughout the system.

Ecosystems create strong barriers to entry for new competition, as potential entrants not only have to duplicate or better the core product, but they also must compete against the entire system of independent complementing businesses and suppliers that form the network. Being a part of a business ecosystem provides mechanisms to leverage technology, achieve excellence in research and business competence and compete effectively against other companies. Some other goals of a business ecosystem include:

  • driving new collaborations to address rising social and environmental challenges
  • harnessing creativity and innovation to lower the cost of production or allow members to reach new customers
  • accelerating the learning process to effectively collaborate and share insights, skills, expertise and knowledge
  • creating new ways to address fundamental human needs and desires
  1. Value Network

    The connections among individuals or organizations that benefit ...
  2. Uneconomic Growth

    Uneconomic is economic growth which produces negative environmental ...
  3. Monax (Cryptocurrency)

    Monax is an application platform for blockchain-based applications ...
  4. Industrial Organization

    Industrial organization is a field of economics dealing with ...
  5. Economic Network

    An economic network is a combination of individuals, groups or ...
  6. Core Competencies

    Core competencies are the resources and/or strategic advantages ...
Related Articles
  1. Investing

    Google's New Mobile Index to Bolster Search (GOOG)

    The company's move further reinforces the primacy of mobile in its ecosystem.
  2. Investing

    7 Companies That Pose a Threat to Apple

    Samsung, Dell, Google and many others are chewing away at markets that Apple helped define.
  3. Small Business

    Financial Professionals: The Benefits Of Joining An Association

    Make a name for yourself among your industry peers by joining a professional association.
  4. Tech

    Is EOS the New BTC? Pay Attention to Peter Thiel

    Thiel has a unique acumen for investing and picking winning startup ideas. Thiel is now making moves in the crypto world and we should pay attention.
  5. Tech

    What Happens If the Price of Bitcoin Crashes?

    For most experts, it is a matter of when, not if, bitcoin's price will crash. And what happens to the economy when it does?
  6. Tech

    Facebook's Ecosystem Emerges at F8 Conference (FB)

    While Facebook's ambitions might appear scattered, there have been few things Zuckerberg has touched that have not turned to gold.
  7. Investing

    How Blockchain Will Revolutionize Future Cars

    Blockchain has been flexing its muscles in several industries, but the automotive sector offers immense untapped potential.
  1. What strategies do companies employ to increase market share?

    A company's market share is the percentage it controls of the total market for its products and services. Learn about the ... Read Answer >>
  2. How do I determine my company's competitive advantage?

    Find out how to determine if your company has a competitive advantage and, if so, learn how to figure out how to make it ... Read Answer >>
  3. What are some examples of different types of business models in major industries?

    Learn what types of business models are currently being used in the marketplace as well as examples of models that work for ... Read Answer >>
  4. What are key points to a good corporate social responsibility policy?

    Learn the main components of a good corporate social responsibility policy, including communication with stakeholders, partnerships ... Read Answer >>
Trading Center