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.