It’s Not All About You: Understanding Your Business Ecosystem

Developing an external focus for your business is often translated to be the same as customer-oriented. But in the world of strategy, customers are just the beginning. To develop truly effective business strategy – and to open the door to ground-breaking innovation, you must look at all the players who can influence your business success. Partners, vendors, competitors, regulators – you need to stay on top of everyone in your business ecosystem.

Your business ecosystem is, according to Investopedia.com, “The network of organizations – including suppliers, distributors, customers, competitors, government agencies and so on – involved in the delivery of a specific product or service through both competition and cooperation.” As Ron Adner, professor of strategy at the Tuck School of Business at Dartmouth and author of The Wide Lens: What Successful Innovators See That Others Miss, writes, “In our increasingly interdependent world, winning requires more than just delivering on your own promises. It means ensuring that a host of partners -some visible, some hidden- deliver on their promises, too.”

As the first step in developing an effective strategy – and planning for implementation – is a situational analysis, that is a great time to change your thinking to evaluate your ecosystem. While the business ecosystem – and the relative importance of each type of player in it – may be different for every company, here are six main areas for consideration and examination:

  1. Cooperative Environment. Look at all individuals with a vested interest, those who benefit along with you from your company’s success. Do you sell through distribution? Do you sell products or services delivered by other companies? Make sure that everyone is doing what they should be doing to promote and deliver your brand, and that, where appropriate, you follow-through on delivering. With consolidation in the retail and online distribution systems, this is more important than ever. (Hint: Implement pulse surveys to effectively monitor channel partners.)
  2. Competitive Environment. How do you compete with others in your market? Are there opportunities for growth – whether by acquisition or competition? Understand your competitive advantage (from the customer’s perspective) and learn more about your competitors’ capabilities, strengths, and weaknesses. Do some “what if” analysis on potential competitor actions. (“What if my main competitor raises his price by 10%.” Do they have the financial strength to do that? How will the market change?)
  3. Economic Environment. Continually monitoring the macro and micro economy is a critical factor, because the economy impacts everyone else in the ecosystem. Is labor becoming a challenge? Is inflation driving wages and prices up? How should your company respond to these changes in pricing, hiring, purchasing, and operations?
  4. Social Environment. Changing public opinion can be a threat or an opportunity – or both! In marketing research, surveys that used to be done by phone moved to the computer, and now to mobile devices. Companies that saw that coming and adapted quickly benefit.  Marketing research is key to successfully implementing these strategies.
  5. Political Environment. Even at the small, local business level, regulation and government are key players in your business ecosystem. Obviously, all businesses must comply with regulations, but actively participating in politics may also be a strategy for your company.
  6. Legal Environment. Laws impacting businesses as employers, as well as in providing goods and services, can have a major impact on your cost structure. Not only do you need to ensure your business is in line with best practices and compliance, but keeping track of emerging legislation is also important to make sure you prepare for potential changes.

After you have learned everything you can about your ecosystem, think about how it will impact the various strategies you are planning. Look at your company’s past and present: what’s working and why? Where are your roadblocks? Who is in your ecosystem? Will your new product be successful if distributors won’t pick it up? Will you be able to hire the talent you need for your new division? Is an attractive competitor struggling who might be open to a merger? Use your understanding of your business ecosystem to project into the future – and build your strategy from there.

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