Business ecosystems re becoming all the rage. To execute an ecosystem strategy, you must understand how to make an ecosystem work. This means not only offering a seamless value proposition but also doing the hard work of brokering attractive partnership arrangements and ensuring value capture. These two seemingly opposed yet interlinked forces form the yin and yang of ecosystem success.
All successful ecosystems have a strong yang — a value proposition that rests on seamlessly integrating various services for a customer. Consider Tencent, whose WeChat platform bridges the gap between Chinese mobile subscribers’ lives and their activities, from social media to payments. In Europe, Tencent built WeChatGo, which provides a prepaid SIM card that saves Chinese customers from costly roaming charges — but also offers an interface connecting Chinese tourists to local shops, museums and attractions. It offers them discounts in the app and delivers a seamless and intuitive experience.
Underpinning this simplicity for the customer lies a less visible but critically important challenge of careful strategic planning: the ecosystems’ yin. This refers to building the intricate, strategically calculated web of relationships that make an ecosystem work. When Tencent set up WeChatGo in Europe, it contracted with KPN, the Dutch telco operator, to obtain European SIMs with prepaid airtime that Tencent could send to Chinese tourists before they even stepped on a plane. Then, Tencent built an entire platform around KPN, hammering out deals with European retailers and attractions to make their offering truly valuable — both to Chinese tourists and those who wished to serve them.
Of course, companies can’t just build a system that benefits customers and aligns with partners. The orchestrator must also derive some value, sooner or later. Some ecosystems generate cash. Others rely on building future success by increasing customer stickiness, facilitating growth or heightening excitement for the customer. Ultimately, all ecosystems need to create some tangible value for the orchestrator.
As the world of ecosystems matures, we will see both impressive success stories and spectacular failures. Successful ecosystem strategy means shaping a yin that matches your yang.
(Michael G. Jacobides is a professor of strategy at London Business School)