Monthly Archives: April 2013

Business Models and Ecosystems, What Is the Link?

I have recently finished reading Ron Adner’s book on ecosystems, the Wide Lens.  As luck would have it, during one of my research presentations on business models, an audience member asked me to clarify the difference between business models and ecosystems.  I found it an interesting question, and that is what I will attempt to answer in this post.

Ron’s main argument in the book is that in order to innovate firms have to apply a wide lens,  not only considering their customers’ needs and implementing their ideas well, but they also have to be aware of what their complementors and competitors are working on – that is considering the whole ecosystem instead of looking only at their own strategy.  Ron used several examples of innovation failures that I found useful and informative – for instance, he explained how Michelin failed to implement new run-flat tires, or how Nokia rushed too quickly with the launch of its first 3G phone.  Here is a video where he explains what happened to Michelin:

Interestingly, Ron also used several successful (or expected-to-succeed) examples about which I also talk in my business model classes such as Apple, M-Pesa, and Better Place.  So coming back to the original question of this post – what is the difference or the link between business models and ecosystems?  Basically, Ron’s point is that ecosystems matter in today’s business world.  The premise is also similar in the business model research – given the more complex world we live in today, more novel business models are introduced in addition to simple product innovation seen in the past (Zott and Amit, 2010; Teece, 2010).  Whereas ecosystem research takes the “wide lens”, business model research keeps the strategic focus on the focal firm.  Although the assumptions are similar, the locus of attention is different in these two burgeoning research streams.

How to attract resources?

One of the pressing questions for any burgeoning entrepreneur is how to attract the oh-so-needed resources for her venture?  Family and friends are the usual suspects, but often it is far from enough.   In the entrepreneurship research, two answers focus around symbolic management and bricolage before turning to the “real” investors such as business angels or venture capitalists.

Symbolic management is basically about using symbols to persuade your audiences about your credibility and legitimacy.  Why should your future customers, partners, or employees trust a newly minted start-up with a lot of ambitions and a laptop?  An office in a good neighborhood, a suit for the occasion, an award or a good recommendation can all do the trick.  Being skillful in symbolic management might be very helpful if other resources are missing, argue Chris Zott and Quy Huy in their research on the topic.

Taking a different road, Nelson and Baker picked up the old Levi-Strauss concept of bricolage and wrote a compelling story about how entrepreneurs can use various scrap resources to fulfill their needs at much lower costs than you would expect.  These are people that refuse to accept limitations their environment puts on them.

Finally, when talking about resource mobilization in the classroom, I use the following video by Amanda Palmer, who has her own very personal view on the topic – and some advice to share as well, especially given her recent successes raising money (a lot of money!) on Kickstarter for her own entrepreneurial projects.