How giant business ecosystems are grown-up- a case from China

1. Ecosystem as a stepping
stone of corporate growth
Based on a research paper <Learning Club, Home Court, and Magnetic
Field: Facilitating business model portfolio extension with a multi-
faceted corporate ecosystem> Published in Long Range Planning 2020
1

2. While
via @MartinSherv @PlusYourBiz
Have you ever wondered how such giant ecosystems are grown up?
These infographics tell us what (static) but not how (dynamic)!
2

3. Literature: limitations and inspirations
Literature
domains
Desired attributes of the intended theory
Corporate level Boundary spanning Process-based
Ecosystem
Anchored on a focal innovation in a
specific business domain
Corporate
strategy
Focuses on firm-internal resources
and diversification performance
BM portfolio
Says little on the process through
which a portfolio could evolve
Dynamic resource
leverage beyond
scale economies
(Hamel and Prahalad,
1993; Markides and
Williamson, 1994).
Ecosystem as
potentially vast
solution space for
the BM designer
(Amit and Zott, 2015)
Actor orientation
of ecosystem
coevolution (Moore,
2006; Fjeldstad et al.,
2012)
Cross-fertilising for
problem-solving
3

4. Research requestion and relevant definitions
RQ: How could a BM owner leverage its
corporate ecosystem to launch a new BM?
• Firm growth or ecosystem expansion is
the result of continuously launching new
BMs into markets
• The process of BM portfolio extension,
instead of the BM portfilo itself
• Ecosystem (actors and resources) is the
stepping stone of such a process
Ecosystem -an intentional
community of actors under a
focal firm's influence (Moore,
2006, 1996; Rong and Shi,
2014; Teece, 2012).
BM portfolio -the range of
different ways a firm
delivers value to its
customers (Sabatier et al.,
2010)
BM - a system of
interconnected and
interdependent activities
that determines the way
the company “does
business” with…(Amit
and Zott, 2012; Zott and
Amit, 2010).
4

5. Ecosystem Leverage for corporate growth
Launching new BM one another based on a firm’s ecosystem is not
unlike launching new products based on a firm’s internal capabilities,
through which the firm keeps growing and the ecosystem keeps expanding
5

6. A single longitudinal case study
• JD is among successful BM innovators who benefit from their ecosystems. JD's
ecosystem consists of diversified internal and external actors, including JD's own
operations (e.g., JD Retailing, JD Logistics, and JD Finance), strategic shareholders
and allies (e.g., Tencent, Walmart, and Google) and other close partners (e.g., brand
producers, the 3rd party sellers, offline retailers and franchisees).
• JD experienced enough BM launch events for our observation and theorisation. The
involved BMs are of varying degree of novelty and include both digital and physical
ones, to-consumer and to-business ones, and platform-based and non-platform-based
ones, thereby increasing the richness and generalisability of potential findings.
• We delimit our analysis in the period from 2004 when this company terminated the
offline business to dedicate itself to JD.com, to 2017 when the gross merchandise
volume (GMV) achieved 1 trillion RMB (appr. 147 billion USD).
China's largest retailer (both online and offline) and China's largest Internet company by revenue.
6

7. Finding 1- Intended leverage often encounters challenges
Consider
• BM launch as a task
of looking for right
performer of
constituent activities
• while the established
ecosystem as a pool
of actors and
activities
Ideal
scenario
Reluctance
Incapability
Out-of-stock
No
available
from
existing
actors
7

8. Finding 2- Ecosystems can help address all three challenges
Incapability challenge Reluctance challenge Out-of-stock challenge
Ecosystem as Learning Club- a
realm where relevant knowledge or
resources are stocked and learning
facilities are provided.
Ecosystem as Home Court- a realm
where the focal actor enjoys
conveniences of advancing itself to
get the desired actor on board.
Ecosystem as Magnetic Field- a
realm where established BMs
complement the one under launch
to amplify its attractiveness
• Knowledge complementarity
• across actors
• Capability complementarity
• across activities
• Service complementarity
• across BMs
Multi-facets of an ecosystem
8

9. Finding 3- Focal actor needs to take pertinent leveraging strategy
Ecosystem as Learning Club Ecosystem as Home Court Ecosystem as Magnetic Field
Knowledge Orchestrator- To
stimulate knowledge exchange in
ecosystem by setting collective
learning agendas and developing
BM-specific facilitating tools.
Capability Bundler- To develop
capabilities pertinent to the new
BM by bundling sub-capabilities
that have been nurtured in
established BMs.
Service Aggregator- To arrange
managerial and technological
linkages across BMs to address the
desired actor's multi-point
demand.
9

10. Summary: three configurations of ecosystem leverage
Trigger/BM launch challenge
Ecosystem facet
Leveraging strategy Incapable existing actors No existing actors
Ideal scenario
Existing actors are
both willing and capable
e.g., similar partner’s similar activity
Reluctant existing actors
An activity
desired by
a BM
Ecosystem as Learning Club
Knowledge Orchestrator
Ecosystem as Magnetic Field
Service Aggregator
Ecosystem as Home Court
Capability Bundler
The disposition of desired actors
Theabilityofdesiredactors
Willing Unwilling
CapableIncapableChallenge of leverage
The focal actor’s
pertinent behaviour
Potential
complementarity
nested in
ecosystems
10

11. A dynamic model of
ecosystem-based
BM portfolio
extension
11

12. Differentiating between and crossfertilising BM and ecosystem
Business Model Business Ecosystem*
Co-creation Co-evolution
Activity system Resource/actor pool
Economic embeddedness Social embeddedness
Rational design of stucture Self-organising
Focal value proposition Focal firm
Links of doing business Links under influence
Roles/Activity performer Actors/Resource holder
*Ecosystems can be viewed from multiple perspectives, for in-depth discussion see Hou and Shi (2020), Technovation
Implications and contributions
12

13. BM Competition can be determined by factors beyond BM itself
In competition, a BM can gain support from the underlying ecosystem
• as Learning Club where relevant knowledge can flow faster than elsewhere
• as Home Court where the BM owner can enjoy customer and partner intimacy
• as Magnetic Field where complementary services can be aggregated to recruit BM partners
A differentiated ecosystem may provide the focal BM with superior strategic factors and
information, as well as with increased switching costs and reduced transaction costs.
All the four strategic themes of BM design (Zott and Amit, 2010), namely novelty, locked-in,
complementarity and efficiency, can be conditioned by the ecosystem where the BM is nested
Nowadays, competition is not occurring between individual BMs, but between sets of
dynamically interlinked BMs, i.e., ecosystems
Implications and contributions
Firm BM Eco
13

14. Opening the dialogue between
ecosystem and corporate strategy
This is the first literature discussing ecosystem at the corporate level
The logic of dynamic resource leverage at the ecosystem level: generative property of ecosystems
• We support Hamel and Prahalad (1993) by arguing that the output of the established ecosystem can be
maximised with deliberate manipulation.
• We echo Ciborra's (1996) notion of platform organisation by revealing ecosystems' ability to generate new
elements that can support the organisation of new BMs for capturing market opportunities.
• Also consistent with Markides and Williamson (1994), what is highlighted by the notion of EL is not to reap
the economies of scale and scope, but to create new strategic assets, such as knowledge, capabilities, partners.
However, as ecosystem leverage involves external relationships
• The process could be more complex with explicit consideration of both the supply-side context (ecosystem)
and the demand-side context (BM) at a system level.
Implications and contributions
14

15. While
via @MartinSherv @PlusYourBiz
How such giant ecosystems are grown up?
➢ A new form of Positive Feedback
➢ Ecosystem as the steppingstone of corporate growth
➢ Not only supply-side economies of scale or scope
➢ Not only network effects (demand-side economies)
➢ But also economies of generativity
Thanks for listening!
15