Why did the iPhone win over Blackberry? When I started my career, Blackberry was still the default phone for business use. It was secure, had a large screen, a full keyboard, all what a young associate can dream of. In fact, until 2010, Blackberry still had around 20% market share. But as you know, it collapsed very quickly to become almost negligible today. So the question again is, why? Of course, like any complex enough business phenomenon, this has multiple reasons. Technological, BlackBerry didn't shift fast enough to touchscreen. Commercial maybe, BlackBerry was too complacent at the start, when Apple was not interested in the professionals' market. But there was one reason, more strategic in nature. RIM, the manufacturer behind the BlackBerry, was still competing as a single company, while Apple was not coming to battle alone. Think about it. How many different organizations make your experience with the iPhone what it is? First of all, you have the telecommunication company that provides you with the connectivity. And that probably have subsidized the iPhone more than the Blackberry. Then you have the device itself, designed by Apple, but where the Gorilla Glass is coming from, Corning and the assembly is done in different Asian manufacturers. Then, you have the apps built by a variety of developers, ranging from the passionate teenager in his garage, to full-fledged companies. And the list goes on with artists on iTune, banks on Apple Pay, reseller stores. BlackBerry was not defeated by the touch screen device, it was defeated by a full ecosystem that provided an integrated experience. This is also how Amazon Kindle outperformed Sony's eReader. Amazon leveraged its partners to launch 88,000 E-books ready for download from basically day one. Those are all examples that part of the value generated by a business can increasingly reside outside of the business organization itself. So let's read this more, let's go back to 2012. When Instagram was acquired by Facebook for $1 billion, it had 13 employees. 13, 1, 3. The value of the business didn't come from how much work can be done by this group of people, but from the community of users they have built over time. 30 million people around the world, that were willing to produce daily contents and put it on Instagram servers for free. In a similar way, part of Uber's value, comes from the ecosystem of users, drivers and cars. And part of eBay or Ali Baba's value comes from the ecosystem of sellers and buyers willing to trust the service. Irrespective of your industry today, this notion of ecosystem is critical to understand. What exactly is a business ecosystem? The phrase was used since the 90s, but the idea was not new at all. You can think of it as a network of organizations and individuals exchanging information and goods to create certain value. In it's simplest form, an ecosystem can be composed of a supplier, manufacturer and a customer. Like in a value chain. Between those players, you have an exchange of goods and services, as well as an exchange of information. For example, Walmart, and its supplier, Proctor and Gamble, exchange merchandise, but they also share information about customer demand in order, for example, to optimize inventory levels. In practice though, an ecosystem is a bit more complex. The manufacturer can have multiple suppliers who have suppliers of their own and customers can be distributors who interface with other retailers before reaching different communities of end users. We have seen in module one how the drop in transaction cost has caused the value chain links to become looser. And the topology of the network became more complex as the players can interact more fluidly with each other. In certain industries, this had led to the stack structure that we have already discussed. This is a specific kind of ecosystem where innovative players at the top of the stack can fail without impacting the scale players at the bottom. In other industries, the ecosystem adopted different forms. With some players acting as dominant tops or orchestrators, while others were very independent. Some other players succeeded in crossing many industry verticals acting as enabling platforms, while other remained specialized. Lastly, the ecosystem contributors are not limited to the traditional value chain roles. And customers, for example, can also be producers. This is our Instagram example. Suppliers and distributors can also be product development partners. And even governments or non-profit organizations can be seen as industry enablers or advocates. So if you are a company, how exactly can you leverage this diversity to create more value? The first step is a change in mindset. While in traditional businesses, we used to think of what is outside the company, as forces against the creation of value, competitors, substitution agents, strong suppliers, etc. Today, we see more fluid forms of relationships emerging. You would have certainly heard the words copetition a mix of cooperation and competition. This requires a higher level of openness compared to traditional organizations. Some cities like Singapore or Amsterdam have done a great job in this. Opening up their databases and preparing standard development kits for entrepreneurs to create new services After the change in mindsets, companies need to find the right partners to ensure successful ecosystem. If you look at a stack-based industry, there are basically three main ways of partnering. Companies can partner horizontally, for example with competitors. Vertically, with their suppliers and customers. Or they can partner with a company outside of their industry stack. Let me give you some examples. Horizontal partnerships are usually used to solve capacity constraints or to neutralize risks. A good example here is the joint venture recently formed by BMW, Daimler, Ford and Volkswagen. The objective is to build a high powered charging network for electric vehicles across Europe. Think of it as if they are creating a new enabling layer in their industry stack. But at a scale that none of the individual players would have reached. The vertical partnerships can either be up or down the value chain. They are relatively more common. But they have a variation that digital technology has accelerated. Partnership with end users. We have seen examples of this before, with Netflix crowdsourcing improvements to its recommender system, or NASA doing the same for their solar advanced prediction model. There are even platforms now like Kegel, to organize this form of open innovation process. Cross-industry partnerships are less common, but fascinating when they work. The one that can unlock a lot of value today can be between banks and telcos. The combination of their capabilities can bring financial inclusions to under-served populations, especially in emerging markets. But I must say, the business model there is yet to be proven. So let me summarize the most important take aways is from this video. A business ecosystem is a network of organizations and individuals exchanging goods and information. In order to create value and ultimately to ensure mutual survival. To set up an ecosystem, the first step needs to be a shift in mindset. From an exclusive focus on competition, towards more cooperation. This is what we called the copetition mindset. Then, the second step is to connect with the right ecosystem partners. Either horizontally, with competitors, vertically, with suppliers and customers, or with other complimentary players from different industries.
