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Ecology of competition
Competition and cooperation coexist in business ecosystems in different forms throughout their evolutionary lifecycles.
Competition vs. cooperation: a paradox resolved?
The business ecosystem
Several ecosystems can vie for survival and dominance, just as in its biological equivalent, a prairie grassland is succeeded by coniferous forest, which in turn gives way to complex forests dominated by hardwoods.
Moore discusses how Apple's strategy of working with business partners, protecting its proprietary technology, and talking about "evangelizing" to encourage co-evolution contrasted with rival Tandy's strategy of vertical integration -- a simpler and "tighter" ecosystem that resulted in faster initial growth but did not harness as much capital and talent through participation with other companies.
The evolution of a business ecosystem
Stage 1: business proposition
Stage 2: expand and consolidate
It was in Stage 2 that IBM stumbled by not being able to satisfy the demand created when it entered the personal computer market. Its mistakes set the stage for the rise of a new ecosystem with Microsoft and Intel as leaders. Walmart, on the other hand, successfully developed the organizational capabilities that permitted expansion and built the bargaining power that made it a leader in Stage 3.
Stage 3: standards and vision
To maintain its dominance in Stage 3, a company must constantly innovate and also inspire its ecosystem partners to do so. A well researched and well articulated vision supports this process. According to Moore, IBM failed to keep innovating in personal computers or even to achieve economies of scale, allowing power to shift to chips and software (areas in which IBM did not excel).
Stage 4: innovation or catastrophe
threatens the ecosystem
Dominant companies can attempt to counter these changes by:
Moore cites the pharmaceutical industry's response to generic drugs -- limiting their growth through legislation --as an example of the first strategy. Drug companies used the second strategy -- incorporating the threat instead of trying to limit it -- with biotechnology companies.
The pharmaceutical industry will probably have to use the third strategy (restructuring) to meet the challenge posed by the clamor for reduced health care costs. This may involve limiting and carefully focusing R&D expenses, designing a testing process that emphasizes cost/benefit over mere efficacy, and refocusing sales and marketing efforts away from individual doctors and toward third-party payers and government.
Implications of the ecosystem theory
The need for expanded horizons
Business intelligence: a critical
We modified Moore's table to reflect the information requirements of each evolutionary stage (see below). How such information is acquired changes, reflecting technical advances, economic pressures, and the impact of the ecosystem theory itself.
New models for acquiring information
Ecosystem information requirements
Biology is not the only discipline whose conceptual underpinnings are being pressed into service to explain the effects of global information networks on business strategy. See the discussion of Xerox's use of anthropology to design a copier repair knowledge base in our Briefing, "CFO's Guide to Intellectual Capital." The Briefing also highlights the contributions of organizational psychology in identifying and reporting on "information seeking behaviors" and their impact on the bottom line. For a sociologist's perspective on the dynamics of E-mail, see Lee Sproull and Sara Kiesler's book, Connections: New Ways of Working in the Networked Organization (MIT Press, 1992).
Davenport's proposed model for "information ecology" includes the following elements: