Creating a business ecosystem
July 26th, 2005The name of the game in business today is ecosystem creation and it’s amazing how many companies just don’t get this. In this day of open source software, global project collaboration, and the like, it’s amazing that more companies aren’t viewing their businesses as ecosystem providers.
One of the best examples of a corporate ecosystem is eBay. eBay loves to tout the fact that hundreds of thousands of people are making their living exclusively through the site. People are selling handmade crafts, scrounging for sweet threads at the thrift store to resell on the site, and devloping software and services to help buyers and sellers, large and small. By providing these services, eBay is becoming an indispensible product to thousands if not millions of loyal customers/users. By opening their product, eBay has expanded the business and made their service even more useful. Brilliant.
Another example of this new economy thinking comes from Cisco. Cisco made a tough decision early on to focus on creating an ecosystem business instead of closing the system. Instead of offering training, certifications, and installation services, Cisco chose to support third parties in building their businesses around Cisco’s business. Imagine choosing networking equipment from two vendors: one vendor provides just the equipment and another is your only source for the equipment, the installation, and the support. Clearly it would be easier to go with the one stop shop but what if these guys lock you into a system that’s expensive to maintain? You’re pretty much at the mercy of your supplier at this point and the one stop shop isn’t looking so hot anymore. Clearly this has worked well for Cisco as they continue to dominate the networking business.
In my own entrepreneurial ventures I’ve come across a few companies that I wish would embrace the ecosystem model so I could build a business around thier businesses. Take for example VRBO.com, a vacation rental by owner listing service. Paul and I created Safarium because VRBO was (and still is) doing a terrible job with their site and we knew we could offer a better service to both owners and renters. Clearly our site hasn’t caught on as well as VRBO and I tried to think about how we could join ‘em since we can’t beat ‘em.
Leah and I came up with the idea to offer a VRBO/online marketing service for vacation home owners so they could essentially “outsource” many of the mundane details of building and keeping a rental listing online (you know, mailing keys to renters, collecting payment, uploading photos, etc.). Unfortunately, VRBO has a very clear policy against “property management” companies from listing on their site (not sure why, who are they protecting?). But their core (paying) customers are very wealthy and probably don’t have the time or the inclination to learn how to create their own listings online so they continue to pay exhorbitant fees to traditional property management companies. By opening up their ecosystem, VRBO could benefit from savvy marketers who can reach new and profitable customers.
Another company I would love to see “open up” is Active.com. I would kill to have a feed of their mountain bike races (filtered by state if possible) to list on Singletracks.com for my users. Users would benefit from having the information in one place while Active would benefit from the registrations I send their way. Seems like a win-win huh? Instead, others try to build their own race listing services and only capture part of the information (type mountain bike race into google and see how many random sites come up). If Active.com were to step up and say, “we are the place to find out about and sign up for races,” I’m sure many of us would agree that makes sense and we would gladly link to their registration forms. With the proliferation of web services today it really doesn’t make sense to keep things like this closed.
