The idea of a business ecosystem has two origins in business writing. In one strand, you can see the idea of a very distinct, contractually committed community at work. This is the innovation ecosystem. It is the ecosystem as a partnership network. Big companies often allied to big with some investment in startups and more in new initiatives.
The other way to look at the ecosystem is its power really stems from the power of advocacy.
If you have a thousand organisations or individuals in your ecosystem, you have a thousand advocates. That means you build up a significant foothold in the information market around your product, service, platform. The information market is critical – it is what, in the past, companies bought through marketing and PR. In the modern age the ecosystem can give you multiples of what PR spending can.
This latter view of the ecosystem though is not an innovation ecosystem. While companies in Apple’s apps ecosystem build new products and services, they don’t innovate with Apple on the fundamentals of the iPhone or the platform. In that sense they are not partners.
As Nick Vitalari and I pointed out in The Elastic Enterprise this new type of ecosystem is spontaneous and often fractious, a meeting of peers built on common terms and conditions rather than on bilateral contracts. It calls on a very high order of community management skills.
Why does the difference matter? Well here’s why. Many companies are confused by the difference. They set out with an innovation ecosystem strategy hoping to gain the benefits of the advocacy ecosystem. By understanding neither very well they end up achieving few of the benefits of either.
In my view GE has fallen victim to this problem. I am a GE fan as SHIFT should make clear. CEO Jeff Immelt has done immense work. A recent HBR article though pointed out some issues arising with its ecomaginati0n program. Ecomagination, GE claims, has earned it over $160 billion. But what is it?
Launched in 2005, ecomagination has always been a bit amorphous. Is it a marketing campaign? A corporate strategy? A guide for product and service development? In truth, ecomagination is all of these and more.
Now, a sensible riposte to this is who cares. It made $160 billion. But the way it made revenues was by selling GE sustainability R&D. Ecomagination isn’t any particular product or service; it is a strategy to pursue green objectives in energy products. In that sense it is a business line, as much as anything, so it is bound to make money.
GE has tried turning ecomagination into a platform. Its strategy now “includes a new open innovation program that encourages ideas to reduce greenhouse gases from Canadian oil sands production.” Prior to that it hosted two open innovation challenges around green tech in partnership with VCs.
GE has tried similar platform plays in cancer diagnostics (healthymagination) and industrial data.
You can see very much the “innovation ecosystem” approach at work in these examples, In healthymagination GE tried to build up its diagnostics business with a $6 billion investment around crowdsourcing diagnosis of cancer, particularly breast cancer. However, the crowd was actually quite a small number of companies, allied to GE’s relationship with VCs, just as in ecomagination. Five years in, in 2014, GE made just seven investments. It is likely that GE’s attempts to remake its business around platforms would be better served by acquisitions – by buying into companies at the leading edge of data and diagnostics like Illumina.
In industrial data, GE has repackaged its turbine maintenance data and made it available to the wider world, using that experience to pivot to a big data strategy in healthcare as well.
Initially the Predix program looked like being an apps-type play with the data made available to the developer community to build new business. Right now GE boasts of a much smaller innovation ecosystem (there is another partner ecosystem here). There is still some momentum in the apps store for industrial data concept. However, it is complex to sign up for the Predix community and nor is it universally available. Many of the contributors have GE email addresses, so are presumably GE staff. Nonetheless there is a substantial set of GitHub projects, though it is unclear how much engagement these have created.
As an innovation ecosystem, GE’s strategy is a mixture of old fashioned PR, intelligent packaging and sound investments. But it doesn’t spill over into an advocacy ecosystem.
An advocacy ecosystem would be the tens of thousands of SEO experts who quickly advocated for Google Page Rank as a breakthrough in search relevance. That was back in the early 2000s. Or the hundreds of thousands of developers who worked on iPhone apps. Or the millions of businesses that transact with customers through Alibaba.
In each of these cases the activities of the ecosystem pitched the platform to the world and closed the sale!
Healthymagination by way of contrast has not created a powerful advocacy network of analysts, developers, writers, users who want to rewrite the narrative on cancer.
What it has done has provided a strong banner under which GE has made significant investments in reducing cost for health care providers, for example. Here’s a list of achievements.
That’s no mean feat but it is not what the ecosystem is really about. It dresses itself in the language of ecosystems without really engineering them with a platform strategy.
If that sounds negative it is not meant to be. GE is a great company. In Shift I spelled out how I think platforms become disruptive and summarised some of these points here and again here. One key element is how you win the information market or information layer.
GE has not captured the information market through an ecosystem. It has bought it in industrial data through its power, financing and muscle, whereas in health it can barely be said to own it at all. That means it loses out on many of the benefits of true platform ecosystem.
I’m doing a deeper dive on the issues in my new book. But to summarise this issue there are of course different types of ecosystems. The innovation ecosystem is distinct from the advocacy ecosystem. Tomorrow I will spell out how those differences arose