How to apply a business ecosystem management strategy

Most business owners view their market as a series of causes and effects, but as the economy becomes more interconnected, a new management style has emerged to capitalize on it—the ecosystem strategy.

This approach treats the whole market—not just your own business—as a guide for management, cooperation, and competition. By taking advantage of a thriving market, your business can not only see greater profits, but also new opportunities for innovation and long-term growth.

What is a business ecosystem?

A business ecosystem is the dynamic network of independent organizations, stakeholders, and other influences whose interactions produce products or services. It’s a useful way of understanding how that process happens in your market.

A business ecosystem management strategy entails running your business not as distinct, but as one part of a web of interactions. It’s a fundamentally collaborative strategy that entails using and improving the whole ecosystem to improve your business.

What are the benefits of business ecosystem management?

Ecosystems are webs of interactions

Most business models consist of actions between two entities, but ecosystems consist of interactions between groups. This means ecosystem management focuses more on the properties of systems than their individual parts, which means you’ll be better equipped to analyze how disruptions in one area of your market can impact a different area, and how you can improve your business by strengthening your industry as a whole. 

However, much like in biology, ecosystem analysis can also help you understand how individual businesses survive, adapt, cooperate, compete, and go extinct.

When analyzing your ecosystem, consider focusing on at least these three interaction networks:

• Customer network: Interactions between customers and products
• Innovation network: Interactions between competing and collaborating businesses
• Supply chain network: Interactions between manufacturers and distributors

Ecosystems are highly compatible and flexible

Ecosystems are well-suited to businesses that make and use compatible products—those you create independently but are meant to function with other companies’ offerings, such as healthcare, food service, interior design, fashion, electronics, auto repair, and construction products. These businesses in particular benefit from industry-wide advancements, so a purely vertical strategy will fall short compared to a systemic one.

Even if you offer standalone products, ecosystems are more flexible overall. A healthy system will disperse risk more evenly across its businesses, and these risks will be more predictable and manageable, allowing for reliable projections and sustainable long-term growth.

Ecosystems are collaborative (as well as competitive)

In an ecosystem, joint ventures, partnerships, and compatible products are natural extensions of each business strategy. Even limited cooperation reduces risk for individual businesses and strengthens the whole system by encouraging sharing and innovation, delivering better products than any one company could achieve alone.

For example, software developers may develop applications for a technology company’s platform, or a brick-and-mortar business can partner with local companies to stock their shelves. 

Should you use a business ecosystem strategy to manage your business?

An ecosystemic approach can help you understand and influence the interactions that create success in your market. However, you’ll always have limited control over the whole ecosystem, as its resilience to external stressors relies on continued competition and cooperation between other businesses.

This lack of control makes ecosystem management less beneficial in more volatile markets. If your market is generally predictable with small-scale variations from extreme events (e.g., retail, healthcare, manufacturing), then a business ecosystem approach may be beneficial. If your market is generally unpredictable and highly variable (e.g., finance, technology, popular media), then the business ecosystem may be too out of your control to produce reliable long-term growth.

Tips for successful business ecosystem management

Collaborate with other businesses to capitalize on your ecosystem

Transitioning to an ecosystem management style requires a shift from thinking in terms of cause-and-effect to thinking about interactions. This shift necessitates a shift in how you structure your company and treat competitors. 

While you’ll compete with other businesses, you can increase value and promote innovation by identifying clusters and paths in your ecosystem map, then exploring compatible products and collaborative events that strengthen the system for your benefit.

Track both subjective and objective measures of success

The aim of any business management strategy is to increase revenue long-term, so in addition to standard KPIs like net profit margin and customer lifetime value, collect data on customer experience metrics like satisfaction, net promoter score, and customer engagement—including across your ecosystem where possible. 

In addition, don’t ignore aspects of customer experience that can’t be quantified. For example, you might be able to increase the quantitative metric of ‘average time spent browsing in-store’ by improving the experience qualitatively, such as by creating a more comfortable or familiar atmosphere. 

Fit your map to your ecosystem, not the other way around

Unlike other management styles which attempt to create causes and effects, ecosystem management seeks to instead influence outcomes. Any attempt to micromanage parts of your ecosystem outside your control will be a poor use of resources, and may hamper your growth.