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Network or Ecosystem?

It’s been good two weeks since our “Discussion Starter Event” took place. After the event, we have received lots of comments and supportive messages – and some questions as well. Thank you for those! It is great to see that the topic is catalyzing thoughts in all fronts – academia, business and consultants alike.

One of the first questions that many of you have asked is: “What is the difference between a networked organization and an ecosystem?” While the answer is a subject to debate, the simple answer relates to the nature of the ecosystem. Networks, for example supply or distribution networks, are based on mutually binding contractual frameworks. Ecosystems on the other hand are driven by mutual purpose and include development actions that cannot be 100% defined in the beginning.

Picture: An attempt to illustrate the difference between networks and ecosystems

Networks: Contract based

The networked economy is based on supply and demand, and to simplify the nature of different networks, we decided to classify them as the following:

  • Supply Networks consist of “downstream” activities of a key organization, or network between a company and its suppliers to produce and distribute a specific product to the final buyer
  • Distribution Networks consist of “upstream” activities or in other words it is a chain of businesses or intermediaries through which a good or service passes until it reaches the final buyer or the end consumer
  • Subcontracting Networks vary – but typically they related to a well-defined set of activities driven by a key function or functions, the practice of assigning, or outsourcing, part of the obligations and tasks under a contract to another party

The common nominator for the different networks is that they are legally well-defined. Supply Networks are bound with quality, quantity and time -related performance indicators that are often strategic in nature. Distribution Networks include similar performance indicators and often some kind of joint go-to-market initiatives. Subcontracting Networks on the other hand have specific targets related to the scope of services included. While networked organizations are often strategic in nature, they are different from ecosystems.

Ecosystems: Purpose driven

Sometimes ecosystems are seen as loose networks of different types of organizations. There is time and place for discussion, and oftentimes discussion is much needed to discover problems and identify the key organizations and people needed to solve them. Purpose and commitment to drive growth through joint development activities is what defines an ecosystem. From the organizational point of view, ecosystems are driven by open innovation principles and share much looser legal frameworks. We identified three different “architypes” of ecosystems:

  • Business Ecosystems consist of different organizations involved in developing a solution to a defined customer need/scope or in other words a 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.
  • Innovation Ecosystems includes universities, government, corporations, startup accelerators, venture capitalists, private investors, foundations, entrepreneurs, mentors, and the media. Each plays a significant role in creating value in the larger ecosystem by transforming new ideas into reality through access and financial investment
  • Knowledge Ecosystems are similar to innovation ecosystems, but its’ main interest and outcome is in the creation of new knowledge through joint research work, collaboration, or the development of knowledge base.

The main difference between different types of ecosystems is time. As business ecosystems are focused on an unsolved customer problem that a single organization cannot solve alone, innovation ecosystems typically work on broader conceptual problems or grand challenges with a clear solution focus. Knowledge Ecosystems on the other hand are working on solving problems from more conceptual point of view, and often transforming to innovation or business ecosystems over time.

To Ecosystem or not to Ecosystem?

Collaboration in ecosystems in is a powerful way to speed up growth and recovery from crisis. Whether it is new business development, innovation or generation of new knowledge – sharing ideas is typically a powerful way to test and validate one’s thinking. Impact, either on business or in the broader socio-economic sense is the key driver for collaboration. We believe that it can be improved by aligning organizations and people both rationally and emotionally.

So, today’s question is not so much about to ecosystem or not to ecosystem, but rather how to do it. That’s the challenge that motivated us to write the Ecosystem Handbook. It provides a a fresh view on the topic and new tools for anyone collaborating in ecosystems.

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