Life in business ecosystem

This blog post was published originally at Jakamo Offical Blog on 8 August 2013.

The term business ecosystem is increasingly used as a modern buzz-word referring to inter-connected businesses. Following an analogy originating from ecology, businesses form symbiotic constellations resulting in a collaborative advantage when the home ecosystem beats the competing ecosystem.

Taking a short look at the premises of business ecosystem one can discover that these systems function by two main coordination mechanisms: hierarchic mechanisms realized by corporations, and market mechanisms that emerge in the market place when buyers and sellers interact. These mechanisms do not, however, enable ‘symbiotic’ inter-firm collaboration. Hierarchic coordination is basically an inter-firm activity based on managerial authority, and the market mechanism is based on opportunistic self-seeking behaviour. These mechanisms have to be altered in order to achieve competitive business ecosystems.

Networking is often suggested to be the third mechanism to coordinate inter-firm activity. In networking-type of coordination business relationships are highlighted instead of firms as objects of interest. The point is to recognize the ‘grey area’ between firms which so often is uncontrolled and uncoordinated. Basically, the idea is to match firms by using the business relationship as the main cord for interaction.

Referring back to ecological analogies, business ecosystems can be seen as flocks of birds or schools of fish, where individual animals (firms) are connected with the closest ones through various senses. Ecosystems, like flocks of birds, are not hierarchically coordinated by someone powerful, but instead, are coordinated by aligned behaviour of the participants.  Quite similarly, living in business ecosystems requires firms to take care of their networking capabilities by which they build relationships and become coordinated with the others in the network.

What makes firms coordinatedly fly in a flock?

Swarm-intelligent birds and fishes use certain senses to check the distance and direction of the closest swarm-mates in a flock. Firms have similar senses too. In fact, there are three types of inter-connected ‘senses’ business organizations use as they try to move in parallel. There are individuals sitting in drivers’ seats using IT and organizational tools to coordinate their own firm with the closest ones in the network.

The quality of this threefold organizational ‘sense’ determines a firm’s capability to cooperate with the others in a network. There are many kinds of drivers’ seats that are important for organizational boundary spanning (e.g. marketing managers, supply managers, strategic purchasers, sales engineers). For networking purposes, firms have to define these positions wisely to enable the networking behaviour of the individuals holding these positions. Important networking qualities such as trust, unity, commitment, and cooperativeness are inherently social-psychological features originating from individuals’ behaviour. Thus, networking behaviour is individual-bound but also determined by the role (a position) a person is supposed to play within a firm’s boundaries.

Cross-border communication is crucial for firms to ‘swim smoothly’ with others. Various organizational and ICT tools are available for organizations to network effectively. Top management strategy meetings, quality groups, design-to-manufacturing cooperation and other cooperative forms alike represent the organizational tools for networking. Similarly, information technology offers a great variety of alternatives to cope with information and communication needs. The alternatives range from mere data exchange (as for example ERP integration) to more interactive information platforms (e.g. firm-specific extranets).

All in all, a firm’s organizational ‘sense’ to networking is a package including a person sitting in the driver’s seat and co-driving the firm by the organizational and ICT -tools so that the firm smoothly coordinates itself with the other firms in the business ecosystem.

From swarm intelligence to networking intelligence

In nature, swarm intelligence refers to the intelligent behaviour of a group of not so intelligent individual animals. The corresponding idea of business ecosystem highlights the power of firm-level networking simply assuming that a network is more than single firms. The difference between pure ecological behaviour and organizational networking is the individuals’ awareness of the goals of behaviour. As the swarm-intelligent behaviour of animals is a result of a million-year evolution, the formation of networks and business ecosystem is a result of managerial decision-making. However, networks are not a result of authoritarian managerial power, but a result of reciprocal matching of ends and means. Nor are networks purely the results of a ‘survival of the fittest’ through market mechanisms, but rather the reciprocal alignment of costs and values delivered in business relationships.

Networking intelligence as inspiration

I’m one of the co-founders of Jakamo. The roots of this collaboration platform are in the grey area between firms in business ecosystems. Having a twenty-year experience on practical development of firms’ relationships and business networks we recognize the huge potential of networking intelligence. Looking from a narrow perspective, the service is a managerial platform for networking and it is designed to be used by the individuals sitting in boundary-spanning positions to drive the firm coordinated with the others. Our thinking, however, coincides with wider networking intelligent premises of making business.

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