Yerebakan And ironically, that happens not because a company strays from its core competencies, but because it can even better concentrate on them. At SDX, the digital exchange operated by SIX, we can leverage our status as a regulated securities exchange while at the same time exploring distributed ledger technology possibilities with partners.
By the way, I share the view that the financial industry needs to catch up technologically, which is also the explanation behind the large number of FinTech startups. But the financial industry benefits from having a kind of natural affinity toward ecosystems. The financial sector has always functioned like a network. Just think of the process that ensues when I use an automated teller machine at Bank A to withdraw money from my account at Bank B.
Lingens Good point. We can see that also with the Swiss mobile payment app TWINT. From a purely doctrinal perspective, this network would be too big to function as a business ecosystem. But since the partners – Swiss banks and SIX – were already networked with each other prior to the advent of TWINT, the coordination between them nevertheless works.
How big, then, can a business ecosystem be?
Lingens As small as possible and as large as necessary. During the setup stage of a business ecosystem, having too many partners is an impediment – and a cost factor. For the involvement of four to five partners, for instance, the orchestrator of the ecosystem has to calculate in two to three full-time job equivalents for the coordination.
Yerebakan Coordination between the partners in a business ecosystem has already come up a few times in our conversation. The orchestrator is the central partner that handles the coordination work. The other partners chip in products or services that drive a joint value proposition, which is the most important element and the starting point of a business ecosystem. As the orchestrator, I have to ask myself what missing elements I need to obtain to fulfill the value proposition. That question guides my search for partners.
Suppliers also provide companies with missing elements.
Yerebakan But that’s a traditional supply chain. If I, as a company, am no longer satisfied with Supplier A today, I switch to Supplier B. Both supply more or less the same product. In a business ecosystem, in contrast, the crucial aspect is that the products that the partners develop aren’t generic. Each element in itself should represent an innovation. Only that way do business ecosystems create added value and maximize their growth potential. And growth ultimately is the motive for establishing a business ecosystem.
Lingens Organization theory tells us that we save transaction costs when we manufacture in-house or design simple supply chains. For business ecosystems, this means that the generated added value must exceed the additional transaction costs caused by the coordination expenditure. Whether it does in the end largely depends on customers’ willingness to pay. That’s why business ecosystems do not prove successful in all industries. For example, the food and beverage industry, with its low profit margins, will probably find it difficult to break away from the supply chain. A cup of coffee, after all, is a cup of coffee. Customers won’t be willing to pay considerably more for it.
But every company has to come up with its own way of pursuing innovation to fulfill its value proposition. This can also mean acquiring another company or setting up a new division instead of an ecosystem.mpetitive countries on the planet, as the World Economic Forum’s Global Competitiveness Report attests year after year.