"For most companies today, the only truly sustainable advantage comes from out-innovating the competition"
-- James F. Moore
Moore (1993) suggests to perceive a firm as part of a business ecosystem that crosses a variety of industries.
Successful businesses are those that are innovating heavily. Yet this innovation is not created in a vacuum. Firms co-evolve capabilities around an innovation. They work cooperatively and competitively.
Every business ecosystem develops in four distinct stages:
1. Birth
At this stage companies bet on innovation that can lead to revolutionary products. Entrepreneurs define the right customer value proposition and design a business that can serve the potential market.
2. Expansion
Each ecosystem tries to convince suppliers and customers to join in. There is a competition against other ecosystems to control strategic markets. Generally, two major conditions need to be met for an expansion to occur. First is stimulating a demand and second to scale up the business concept based on customer value proposition.
3. Leadership struggle
The fight for control in an ecosystem occurs if there is a strong enough growth and profitability pool and if there is a stable market structure.
Moore has observed that at this stage of ecosystem development companies try to maintain the bargaining power by controlling key elements of value. There is also a constant innovation and the value is created that is critical for the ecosystem’s price vs. performance improvement. Central companies reinforce their role by making important innovative contributions. Followers value a central contributor because of its grip on customers.
4. Self-renewal or death
This stage is triggered by threat of rising new ecosystems and innovations or alternatively an "earth quake" – a sudden change in government regulations, buying patterns, etc.
Moore (1993) suggests to perceive a firm as part of a business ecosystem that crosses a variety of industries.
Successful businesses are those that are innovating heavily. Yet this innovation is not created in a vacuum. Firms co-evolve capabilities around an innovation. They work cooperatively and competitively.
Every business ecosystem develops in four distinct stages:
1. Birth
At this stage companies bet on innovation that can lead to revolutionary products. Entrepreneurs define the right customer value proposition and design a business that can serve the potential market.
2. Expansion
Each ecosystem tries to convince suppliers and customers to join in. There is a competition against other ecosystems to control strategic markets. Generally, two major conditions need to be met for an expansion to occur. First is stimulating a demand and second to scale up the business concept based on customer value proposition.
3. Leadership struggle
The fight for control in an ecosystem occurs if there is a strong enough growth and profitability pool and if there is a stable market structure.
Moore has observed that at this stage of ecosystem development companies try to maintain the bargaining power by controlling key elements of value. There is also a constant innovation and the value is created that is critical for the ecosystem’s price vs. performance improvement. Central companies reinforce their role by making important innovative contributions. Followers value a central contributor because of its grip on customers.
4. Self-renewal or death
This stage is triggered by threat of rising new ecosystems and innovations or alternatively an "earth quake" – a sudden change in government regulations, buying patterns, etc.
Hence, companies should track new trends that may upend the ecosystem. It is crucial to build a management team that can, if necessary, start a new ecosystem. However, the stability and change should be balanced by incorporating new successive generations of innovation.
"From an ecological perspective, it matters not which particular ecosystems stay alive; it’s only essential that competition among them is fierce and fair"
-- James F. Moore
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