Business ecosystems are on the rise. In 2000, just three among the S&P top 100 global companies relied predominantly on ecosystem business models. In 2020 this number had grown to 22 companies, which together accounted for 40% of total market capitalization. Among the 772 startup firms that achieved unicorn status (a valuation of more than $1 billion) between 2015 and 2021, 179 (23%) were built on ecosystem business models.
It is no wonder that many leaders of established companies are afraid of missing out on this trend and feel compelled to come up with their own business ecosystems. Among the 2020 S&P top 100 global companies, more than 50% have already built or bought into at least one business ecosystem, most of them within the past five years. In a recent BCG global survey, 90% of multinational companies indicated that they were planning to expand their activities in business ecosystems.
Most of these incumbent firms seem to assume that they need to become orchestrators of their own ecosystems. However, not every company is in a position to play the role of orchestrator. Fortunately, being a contributor to an ecosystem can be just as attractive. Remember that the biggest winners of the California gold rush in the 19th century were the suppliers of pots, pans, and jeans. Acting as contributors to existing or emerging ecosystems presents huge and neglected business potential for many companies, and their leaders should be more strategic in exploiting these opportunities.
THE GROWING ROLE OF ECOSYSTEM CONTRIBUTORS
Admittedly, most of the largest and best-known ecosystem players, such as Alibaba, Amazon, Apple, Facebook, Gojek, Grab, Tencent, and Yandex, have built their success on owning the platforms and being orchestrators of their ecosystem, which we define as a dynamic group of largely independent economic players that create products or services that together constitute a coherent solution. As orchestrators, they build the ecosystem, encourage others to join, define standards and rules, and act as arbiter in cases of conflict. However, a successful ecosystem needs not only orchestrators but also contributors. Actually, for every orchestrator there can be hundreds to thousands of contributors (as in smart-home ecosystems), or even up to several million (as in large marketplaces or mobile operating systems).
Not every company has the capabilities to be an orchestrator. You cannot unilaterally choose to be the orchestrator; you need to be accepted by the other players in the ecosystem. As we explain in another article of this series, there are four requirements to qualify as ecosystem orchestrator. First, the orchestrator needs to be considered an essential member of the ecosystem, and it must control critical resources, such as a strong brand, customer access, or key skills. Second, the orchestrator should occupy a central position in the ecosystem network, with strong interdependencies with many other players and the ability to coordinate effectively. Third, the orchestrator should be perceived as a fair partner by the other members, not as a competitive threat. Finally, the best candidate is likely to be the player with the greatest net benefit from the ecosystem and a correspondingly high ability to shoulder the large upfront investments and risk.
Besides orchestrators, there are two types of contributors to an ecosystem: complementors and suppliers. Complementors contribute to the ecosystem solution by directly providing customers with products or services that enhance the value of other ecosystem components. In this way, complementors grow the offering of the ecosystem, contribute to its variety, and drive innovation. Customers can freely decide which complementors to engage with. Examples are vendors on a digital marketplace, weather data providers in a smart-farming ecosystem, and app developers for mobile operating systems. In contrast, ecosystem suppliers are upstream providers of products or services to other partners in the ecosystem. Suppliers may enable the entire ecosystem (for example, by providing the cloud or payment infrastructure) or serve individual players (for example, by offering cleaning services to Airbnb hosts). With their more generic offering, suppliers can serve ecosystems from different domains, but they typically do not have direct access to the ecosystem’s customers.
In the past, most startups and incumbents that considered engaging in ecosystems were attracted by the orchestrator role and its position of power as the rule maker, gatekeeper, allocator of profits, and judge and jury of the ecosystem. The contributor role seemed much less appealing because contributors depend on an ecosystem that they can hardly influence. They are exposed to a high level of uncertainty regarding the development of the scope, composition, and governance of the ecosystem. Moreover, many potential contributors are afraid of being commoditized by the orchestrator—of being forced to share critical data and relinquish their direct access to customers, thus losing their differentiation.
However, there are also substantial benefits from being a contributor to an ecosystem. For starters, contributors do not face the high upfront investment risk for building the ecosystem. The broad scope of the orchestrator role comes with the bulk of responsibility for ecosystem success and for the sustained level of investment that is required to get the ecosystem going. In contrast, contributors can typically choose among multiple competing ecosystems and join the most attractive one. What’s more, they can limit their exposure, hedge their bets, and increase their strategic flexibility by participating in more than one ecosystem at the same time. In this way, contributors may have a strong bargaining position vis-à-vis the orchestrator. In particular, if they provide essential or bottleneck components to an ecosystem, contributors can secure a substantial share of the overall profits.
Indeed, the contributor role can be as financially attractive as the orchestrator role, or even more attractive. For example, the mobility platform orchestrator Uber achieved an impressive annual revenue growth rate of 24% between 2016 and 2020, but it was clearly outperformed by one of its less well-known suppliers, the payment services provider Adyen, which achieved an annual growth rate of 43% over the same period. Moreover, Adyen earned a cumulative EBITDA of $1.1 billion over the five-year period, whereas Uber accumulated losses of more than $20 billion. Adyen recently surpassed Uber even in terms of market capitalization, reaching $82.8 billion (versus Uber’s $81.3 billion). We observe similar trends in many industries and contributor domains. Several companies with significant strategic focus on ecosystem contributor plays are in the S&P top 100 global companies as well. Among them are smartphone manufacturer Samsung, streaming service pioneer Netflix, and software specialist Adobe.
Not surprisingly, ecosystem contributors increasingly attract the attention of investors, as reflected in the list of startup firms that achieved unicorn status. For many years, the share of ecosystem contributors among new unicorns has been on the rise, and in 2019 they surpassed the number of ecosystem orchestrators for the first time. Two parallel trends explain this situation. On the one hand, given the recent growth and proliferation of business ecosystems, the opportunity space for new ecosystem business models is shrinking. On the other hand, the emerging large platforms and their ecosystems, such as mobile operating systems, cloud platforms, and digital marketplaces, open up new opportunities with considerable scale for contributors.
By Ulrich Pidun, Martin Reeves, and Balázs Zoletnik
Read the full article at https://www.bcg.com/en-mx/publications/2021/how-to-succeed-as-a-business-ecosystem-contributor.
