Innovative ecosystems make companies tick

Let's face it. No company can do it alone, especially when leveraging a new technology or entering a new market.

By Shalini Verma

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Published: Wed 30 Oct 2019, 8:00 PM

Last updated: Thu 31 Oct 2019, 3:06 PM

There is an Aesop's fable about the Four Oxen and the Lion. The lion was prowling in a field for a meal, when he chanced upon four oxen. They cleverly came together in a back-to-back formation so that the attacking lion was met with their horns from all sides. After many failed attempts, the lion gave up and waited for the right time. Opportunity struck when the oxen quarrelled and wandered off to other pastures. The lion attacked each one and made a hearty meal of them one by one.
This tale of cooperation is an apt lesson for any organisation faced with a seemingly insurmountable challenge - be it customer acquisition, competition or even the economy.
Let's face it. No company can do it alone, especially when leveraging a new technology or entering a new market.
When other mobile operators were still getting their head around the new possibilities with 3G, iMode, the mobile Internet service provided by the Japanese telecom giant NTT (NTTDoCoMo) was already a success. It offered games, music, news and a host of other services on 3G phones. They took a mere 9 per cent as commission, allowing an entire industry of mobile content and service providers to grow in 1999-2000. At a nascent stage of an industry when transactions are relatively low, it is absolutely prudent to nurture the ecosystem. NTT with its deep pockets helped to do precisely that by charging a pittance as commission on its mobile data platform.
It takes tremendous foresight to build an ecosystem around your business. And even more courage to invest in that ecosystem. The supply chain consisting of customers and suppliers is always a one-way street. We invest time and resources in our customers, but we pay scant attention to our suppliers who could be our biggest asset after our employees. 
In a natural habitat, there is a delicate balance between organisms that rely on each other. If this balance is disturbed, then the entire ecosystem falls apart. In the late 1950s, Mao Zedong's communist government in China launched the Four Pests Campaign. The mission was to eliminate rats, flies, mosquitos, and sparrows. The kill-sparrows campaign was executed to perfection and gave the insects a free pass to destroy the crops. This ecological imbalance was a key cause of the Great Chinese Famine.
The same balancing rule applies in your business ecosystem. Every player in your business ecosystem plays a role. A broken link in the ecosystem can derail your business. There are numerous examples of Big Tech destroying its ecosystem by incorporating the capabilities of their partners and eventually competing with them, thus killing off their partners' base. Not a good idea, especially in the long run. Amazon has been famously gobbling up the business of its cloud application partners. The same Amazon took a more constructive approach with its Kindle.
Sony launched its e-reader before Amazon launched its Kindle. It did not consider the main concern of publishers and authors about digital rights management and did not build a compelling online store. The publishers did not sign on. In the following year, Amazon launched the Kindle, which was inferior to Sony's e-reader. Kindle was larger, weighed more and even had an inferior screen. Yet it was Amazon that transformed the book publishing industry by ensuring a robust digital rights management system, thus protecting the key business interest of publishers. It also sacrificed profits to protect the fledgling ecosystem and took a long-term view of nurturing it. 
It is often difficult for businesses to have a holistic view of their ecosystem. Each company needs to map its ecosystem against its own competencies, gaps, and strategic initiatives. Quite often companies fall into the low-cost trap. You think you got a great deal when you squeezed your supplier to deliver a product or service for half the market price.
While you pat yourselves on the back, did you consider that the partner was actually telling the truth that it was offering it at zero or negligible margin, sometimes even at a loss to just stay in the game? This would mean that the supplier would do the same with its own supplier to make up for the loss in margins. It would then be forced to cut corners on quality and in the end, you would pay more to address the quality loss. And so, the cycle continues. The entire ecosystem becomes focused on cost leadership rather than competencies. The good guys are not able to sustain, while those left behind offer poor quality. The myopic view of cost will drag down the entire ecosystem, in a race to the bottom.
While cost cannot be entirely ignored, businesses do not innovate in a vacuum. As entire economies are going digital, the interdependencies are becoming extremely deep and complex. In a nascent market, it is important for businesses to handhold their suppliers, strategically guiding them as an investor would do. In a constellation of innovative partners, you could discover a unicorn that is ripe for acquisition. This is how businesses can take a wide-angle view of their business transformation.
Shalini Verma is CEO of PIVOT technologies

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