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Boundaries between companies are dissolving, too, as the value the ecosystem creates must be shared among multiple partners and physical assets are increasingly separated from value capture.īeing successful in such a world requires a new mindset. Boundaries between industries are dissolving as ecosystems span sectors and incumbents are attacked by tech players and platforms that they had never considered competitors before. Here we summarize the findings and conclusions from our analysis, answering the following questions:Įcosystems and digital platforms challenge traditional ways of thinking about strategy. On average, the ecosystems we studied had existed for 6.8 years and had raised funding of $185 million.

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Our database contains B2C, C2C, and B2B ecosystems and includes social networks, marketplaces, and software solutions as well as payment, mobility, entertainment, and health care services. We identified an ecosystem as a failure if it was dissolved, shrank to an insignificant market share, or was acquired for an amount substantially below its initial funding.

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To understand how to improve the odds of success, we studied more than 100 failed ecosystems in a variety of industries and compared them with their more successful industry peers, using a systematic quantitative and qualitative analysis. And this does not include the failed investments of incumbents that try to emulate the ecosystem model. If we assume a failure rate of 85% for these ecosystem investments, more than $50 billion of capital is lost every year.

Based on an analysis of individual financing rounds above $250 million, we estimate that 60% of these investments went into digital platforms and ecosystem business models. According to data from Preqin, in recent years $100 billion has been invested annually in venture capital funds. If we want to harness the power of the ecosystem model, we need to understand not only the reasons for success but also the reasons for failure. Research by the BCG Henderson Institute found that fewer than 15% were sustainable in the long run. However, there is a hidden and inconvenient truth: most business ecosystems fail. Given all these advantages, it is no surprise that startups and established companies are rushing to build their own platforms and ecosystems. Moreover, ecosystems are very flexible and resilient their modularity enables both high variety and a high capacity to evolve. Once launched, ecosystems can scale much faster than an individual business because their modular structure makes it easy to add partners. There are good reasons for the success of the ecosystem model: in an ecosystem’s startup phase, this model can quickly provide access to capabilities that may be too expensive or time-consuming to build within a single firm. This was impressively demonstrated during the early days of the COVID-19 crisis, when scores of new ecosystems emerged to coordinate health care services and balance utilization, to offer 3D printing capacity to produce medical equipment, to develop smartphone applications for virus tracking and protection, and more. Such collaborative networks are also playing an increasing role in addressing the world’s biggest challenges. Our smartphones, smart cars, and smart homes are powered by ecosystems of hardware suppliers and application developers we increasingly order our food, transportation, and accommodation on digital marketplaces and industrial companies are revolutionizing the way they collaborate by moving to IoT platforms.

Most of today’s business ecosystems are built around digital platforms. The traditional model of the integrated firm with its hierarchical supply chain is increasingly being replaced by business ecosystems, dynamic groups of largely independent partners that work together to deliver integrated products and services. We are in the midst of a paradigm shift in the way businesses are organized. Other installments address more key questions: “ Do You Need a Business Ecosystem?” “ How Do You Design a Business Ecosystem?” “ How Do You Manage a Business Ecosystem?” “ How Do You Succeed as a Business Ecosystem Contributor?”

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This article is part of a series of publications offering practical guidance on business ecosystems.

Technology, Media, and Telecommunications.

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