Q1: What defines an ecosystem?
The word “ecosystem” gets thrown around quite loosely nowadays. It is used in the contexts of biology, blockchain layer-1s, Silicon Valley and well, even co-working spaces. The question is — do all of these contexts fit the bill for ecosystems? Let’s find out.
An ecosystem is defined by what in academia is referred to as complementarities (I will be using this word a lot in this piece). Complementarities can be seen as that which enables two or more entities (whether they be organizations or humans) to coordinate and create value that exceeds the sum of the individual parts. Think, for instance, of how a collaboration between a consulting firm and technology services company can yield greater value for a client that is looking for recommendations, and subsequently for those recommendations to turn into implementation. This is an example of how two entities, or components, enable additional value through better coordination of two evident needs for a client. It’s this sort of paradigm that justifies the major corporations like Accenture covering it all in-house.
In some contexts, these complementarities are not only value-enhancing — they are absolutely necessary. Think of how many components that must come together to make a cell phone functional, and how it is the coordination between the various manufacturers that allows you to have something to pick up at your local electronics retailer. Point being, that if the coordination of various parties within a constellation does not enable some value generation beyond that of the separate nodes, it’s difficult to justify calling the constellation an ecosystem. In other words, if there is no alignment around incentives for entities, they will not be benefitting from either supermodular complementarities (Accenture example), or unique ones (cell phone example). Common denominators among parties thus become an outright necessity in how ecosystems can emerge and converge.
This may lead one to think that these common denominators are what an ecosystem needs to be built around, and to some extent, this might be true. This is why orchestration, or the foundation setting of ecosystems, often revolves around targeting particular segments with similar visions and goals to increase the probability of interactions becoming meaningful and collectively value-enhancing. One could then perhaps imagine that a co-working space that is made for a particular audience (say, medium-sized SaaS companies) is bound to enable more complementarities and thus take on more of the expected traits of an ecosystem than a traditional WeWork. However, this doesn’t provide the full picture.
First, it is worth thinking of the magnitude of value that comes with a particular complementarity. Sure, being in the space as multiple like-minded people and organizations day in and day out may serve some sort of value — but how much of a difference could that be making in the success of a particular organization, both in the short- and long term? I’m sure there are anecdotes of how co-working spaces have united parties and led to magical success on various ends, but compare that to the number of times this doesn’t happen, and you may question the extent to which a co-working space could be considered an ecosystem.
In addition, none of this is to say that these commonalities are, in any way, shape or form, obvious. In the context of fueling meaningful innovation, for instance, often the best way to approach things is to avoid putting a finger on what serves as an enabler. Steve Jobs’ example of how a calligraphy class, which seemed pointless at the time, served as a complementarity for Apple’s typography is one that comes to mind. Often, these complementarities transcend every form of categorization we deploy — industry, type of task, desired skill set… I can go on. It is for similar reasons that value creation often takes a very different trajectory from a consumer standpoint than what the producer had in mind.
This is where we resort to different platforms to offer flexibility and abundance of access. Through platforms, we provide consumers (both internal and external to an ecosystem) with a significantly higher probability of utility through what is called network effects. For Uber, those network effects are enabled by making sure there are enough drivers to get to consumers’ locations within a reasonable timeframe, but equally that there are enough consumers requesting rides for drivers to make a proper living. So, to enable these sorts of complementarities on a mega scale, while equally being humble about the degree to which we can draw conclusions about how entities and people collectively create value and innovate, is what serves as a true prospect for ecosystem sustainability (yes, naturally one also wants these organizational constellations to be robust, dynamic, and stand the test of time).
There is, however, always a “but.” This expansion of complementary dynamics does, naturally, come with its own caveats. As the complexity of these ecosystems grows and the ambitions to induce collaborative value creation increase, you will have trickier interdependencies to deal with. These interdependencies require more attention and will become the focal point of a future post, but let’s just say they largely define the extent to which ecosystems sustainably can enable collaborative value creation.
On the one hand, the most basic type of complementarity (think co-working spaces again) is a relatively straightforward undertaking — but the impact of such complementarities is limited. On the other hand, implementing the structures that enable the strongest of complementarities is the tallest of order and will often be susceptible to changes in the environment (ecosystems must not only be built, but also managed over time). So, where do you set the bar?
The mission of building the finest of ecosystems thus becomes a matter of being relentless in optimizing the interplay between interdependencies and complementarities. The better your structure manages interdependencies between entities, the more complementarities it will be able to accommodate, thus further aligning with the point of an ecosystem — to generate value beyond the sum of the parts. This will become FuzeQube’s chief priority as we continue validating our model.
To ensure I’m not understating it — this is immensely difficult. There is no delusion around this. Experts in so many disciplines, like economics, sociology and psychology, have been trying for ages to define the incentives of society and people to optimize the ways by which we operate, with no golden rules yet to have been found (despite significant strides). But, once again, if we are humble about the extent to which our axioms are useful, we improve our ability to be proactive and strongly intentional about managing incentives and interdependencies to benefit the larger whole.
This is what makes FuzeQube’s work all the more important — we want to revise the incentives on every level to ensure everyone prefers (rather than feels forced) to play by rules that benefit the collective outcome. If anything, this endeavor will have meaningful interactions and resulting complementarities become the priority of the ecosystem. The road ahead is long — but the gap is evident, and the challenge is certainly a worthy one.
I will stop here for now, but if I ask again: “what makes something an ecosystem?” I hope you’ll have some idea. 😊
Bardia Bijani
Managing Partner, FuzeQube Group
