About ecosystems (and some blockchain)

Published in

Game of Life

9 min readNov 4, 2019

Introduction

Ecosystems — a definition

Quotes. I had to use quotes around “ ecosystem”. Everything seems to be an ecosystem today. And that’s true, at least if you look at nature. With “An ecosystem is a whole of fauna and flora in an area and how they interconnect to each other and their environment.” (1) as definition, we understand a natural ecosystem focuses on the connections between each other and the whole surroundings. In that sense, parasites and killerbees are also just part of the ecosystem. Nature is brutal, sometimes.

Business ecosystems are probably not that different, insofar there is a lot of interconnectivity and sometimes an unequal balance of power. The assumption that an ecosystem is nice and shiny, seems a bit too optimistic. Anyway!

Apart from the interconnectivity, Moore explores another crucial aspect of ecosystems in nature. He points out that there is a positive driver to look after the whole. Every part of the ecosystem increases its chances to survive through its connection to the ecosystem. At the same time, the possibility of the ecosystem to survive increases by the number of the living organisms that are connected to it. This creates a double purpose: a continuous reinforcement of the own survival and the strength of the ecosystem.

The different ecosystems

An overview

A single company

A company on its own has a focus on repetitive tasks with a predictable outcome. This allows to scale until customers need are satisfied. Defined by the theories of Keynes and Friedman, companies focus on profitability and growth. In the realisation of this focus, a burden is created on resources. This is however seen as an economic externality and as such usually ignored. The company culture and sales policy drives individual behaviour: decision making is atomized and I will pursue my own needs.

A single business is the most atomic start of every successful enterprise: someone starts his/her own company. All profits are for the owner, in person, or for his/her company. On the other side, profit generated also only comes forth from the company’s activities. If there is none, there is no profit neither. The company is the source but also the boundary of every economical activity. Decisions are made by the board of directors or the owner. They’ll have to face the result, they’ll make the call. Plotting the course is a matter of getting input, procrastination and a strategy roadmap for the years to come.

Whatever value is generated, becomes contributed to the company and its shareholders. This is an ego-system, it’s all about the company and profit for its stakeholders.

A platform ecosystem

A platform ecosystem is built around one central party. This party is the pacesetting entity, the determining factor in the platform ecosystem. Other entities contract and deal with this central party, not with other partners. To put it blunt: the ecosystem only exists in the eyes of the owner of the platform. All other stakeholders are connected one on one to the central platform, they barely know of each other’s existence.

In a platform ecosystem, the central party will seek out other successful companies to team up with. While they both want to capitalize on network effects, they’re only interested in each other’s success insofar lack thereof could put stress on the collaboration. If something goes wrong, they’ll look for other partners. Profit is generated by transactions from the central party and the platform, while the strategy remains largely the property of that central party. Value returns to or stays in the platform. Most of all, there is still a central party that can decide and steer the platform in any direction they want.

In one phrase: a platform ecosystem evolves around the question “What can company X do for me?”. It’s inward looking, self-centered in its collaboration. A platform ecosystem is a construction built by the entity in the middle.

A business ecosystem

While formulated in absolute wordings, companies are of course in a constant state of change. The general trend is to move to a higher grade of collaboration and true business ecosystems thinking. A business ecosystem remains mostly a theoretical endpoint, for the moment and as far as I know.

A business ecosystem delivers value for each entity and for the whole. The participating companies not only look after themselves, but also genuinely care about other entities. This results in “care” between legal entities: the weakest link determines the soft spot of the ecosystem.

The boundaries of profit generation are determined by the partners in the ecosystem: the more the merrier, but you have to look after the weaker ones (a bit like the EU does, in fact). Governance is no longer with one party who arbitrary decides, it’s a more collaborative way of reaching consensus. The consensus could be to appoint a centralized governing entity or representative unit. The vision of the ecosystem must fit in the vision of the individual parties and the other way around: what they envision, should strengthen the ecosystem. Internal and external collaborations, in which entities actively look after contributions from their fellows in the ecosystem, create an extra value flow out of new and previously unattainable customers.

In one phrase: a business ecosystem grows around the key question “What can I do for company X?”. As such, it creates bonds across business domains and industries, based on genuine concern and innovative new business models. A business ecosystem can not be build, it’s cultivated.

Bring in the Blockchain!

For which ecosystem is blockchain adding value?

The added value of a blockchain in every type of ecosystem is vastly different. Taking into account that a blockchain is used to register “the truth” (about data, documents, pictures, a backup of a PC, a process,…) on a moment all parties agree on the existence and conformity of this truth, a few key elements become clear: multiple parties, collaboration and consensus.

Parties will read from a blockchain when they’re looking for secure, permissioned access to data which they can consider as the truth in their transactions. Almost the same key elements are present: multiple parties, collaboration. It’s safe to add processes.

In a single company, a blockchain is rarely useful. There are no multiple parties, collaboration is not required, consensus is present by default and processes are governed at will. However, some large (multinational) companies could easily be considered as a consortium of multiple legal entities collaborating, with a stern focus on the finding “the truth” in their internal processes. There is a vast difference between a “large company” and “one company”.

In a platform ecosystem, value is created between several companies in collaboration. With one party as central governing entity, the ties between the companies are not that strong. Blockchain could add value in avoiding legal recourse, by storing proof of the transactions. Whenever evidence is needed, or audit requires information, there is this central ledger on which information is stored which no party on its own could have changed. Insofar discussions and/or legal recourse happen frequently, using a blockchain adds more and more value. Eventually, blockchain will always add some value if parties rely on the data present whenever they doubt what happened inside the platform ecosystem.

Its value related to the characteristics of a digital business stack

The yellow bar indicates the relation blockchain has : it’s a catalyst for collaboration in a holistic approach where the ecosystems grows through collaboration between the parties involved. It could be useful when only few companies collaborate or when you’re building a platform: it functions like an airbag, just to be used when things go wrong. In vast business ecosystems, with data transfer amongst parties in a value chain, a blockchain adds value to ensure/secure the data access and, most likely, to take care of the underlying financial transfers. Click here to read more about how to use blockchain in a business context.

Founder led / consortium driven blockchain initiatives

The impressive 2nd Global Enterprise Blockchain Benchmariking Study shows that over 80% of all blockchain projects are still founder led. In that sense, they do look more like a platform ecosystem in which a central party created blockchain driven interconnectivity with its suppliers and customers along its end to end value chain. Which is — to make things clear — a good thing to do, probably an essential first step.

It also means there is a limit on the amount of process improvement to be done, and the amount of involvement from the different stakeholders. Sooner or later, to scale or to make a business model which is also interesting for the other stakeholders, expansion will be needed. Either by talking to competitors of the central party, or by talking to customers / suppliers of the satellites in the platform ecosystem. Either way, by increasing the interconnectivity and the amount of data placed on the blockchain (onchain or offchain but evidenced on ledger), there will be an evolution towards a business ecosystem.

I sincerely hope that the amount of founder led consortium will decrease over time, as platforms get entwined in business ecosystems and gain confidence in blockchain driven data and financial exchange.

Conclusion

In a nutshell (it’s November after all):

Ego-system / single company : blockwashing, unless your company is a congomerate of several different business units / legal entities.
Platform ecosystem : useful as audit trail / proof of transport of transaction data, largely depends on the size of the ecosystem and the power balance between the parties involved.
Business ecosystem : new data driven marketplace without a central third party who acquires and redistributes data. Aim to add the payment rails between the companies as well to vastly improve backend processes through atomic trades.

The purpose of this article is to shed some light on egosystems (with many thanks to Prof. Bjorn Cumps of Vlerick for the highly valued input). It’s a constant evolution, but few companies are still able to work as pure ego-system today. I guess it only works when you have a state approved monopoly. Other than that, collaboration and process improvement is the way forward. In some penultimate form, this will result in business ecosystems in which legal entities operate with “care” for each other, always looking to add value for someone else, just like everyone else is looking to add value for them. It’s not a land of milk and honey, it’s more a concrete floor, reinforced with blockchain, to create new data driven business models upon.

(1) Moore, J. (1993), “Predators and Prey: A New Ecology of Competition.”, Harvard Business Review. 71(3), 75–86.