Today’s technology behemoths – Apple, Amazon, Google and Facebook – have achieved dominance because of several factors. First, they understand that consumers, not enterprises, are adopting their products and services (even if ultimately the consumers import their phones and tablets into the office). Second, and more important, they are organising the economics of the markets and the industries in which they operate.
Businesses that are dominant organise the economics of the markets in which they operate
Take Apple. Steve Jobs’s legacy will be about the beautiful products his team created as well as the fact that he took on two industries where innovation was stifled in the early part of this century: music and mobile carriers. He invented a revolutionary business model that cut in the little guys: the artist; the publisher; the consumer of music; and the developer. By giving everyone a share of the pie, Jobs changed the way the game was being played.
Or witness Monitise, the mobile payment technology specialist founded by Alastair Lukies in 2003. The genius of Monitise was not to attempt to disrupt the banks, but to enable them. Lukies helped the banks get into the world of mobile money. His partnership with VocaLink in the UK, where Monitise originated, gave him a rail into the banks’ systems. From there, he was able to get any mobile banking transaction to be treated as "just another ATM transaction", a piece of technological and business brilliance.
Lukies knew that if mobile money was going to be an industry, it would have to work for everyone including the banks, mobile carriers and users. He thought long term. He dared to believe that he could create an industry and that a simple "win, win, win" attitude could create a monster firm. Today, Monitise powers more than 250 financial institutions. Its services are used by someone in the world every 20 seconds. Visa has backed Monitise four times; other institutions such as Standard Chartered Bank, PCCW and Flemings and Co have also become shareholders.
Another example is BeatThatQuote, the price comparison website started by John Paleomylites in 2005 and snapped up by Google for £37.7m in March last year. Ever wondered why a billion-dollar company would pay that much for a newcomer with an EBITDA of only £250,000? It’s because Google felt threatened. Its own business model offered consumers no economic benefit for their personal data – it was hoarding the lion’s share of profits. BeatThatQuote, on the other hand, had developed an innovative business model, offering cashback deals to customers. It was reshaping the whole financial services price-comparison sector, and its strategic value was massive.
There are always natural allies for your success, but you may have to think laterally and find the adjacent, non-obvious players for your game of chess. And remember: the game can change in an instant. At the time that Skype was climbing towards 10m users daily (late 2004), I sat at a lunch with the CEO of a major incumbent telco. He dismissed Skype as a "young start-up" and failed to grasp that the telecoms world was in freefall.
If you can share the investment into building an ecosystem, keep the customer top of mind and focus on growing the pie as opposed to defending existing revenue, you have a good chance of winning. Users will always flock to the systems that incentivise them to participate.
The next decade will see the emergence of new business ecosystems in smart cities, mobile money, digital health and broadcast media and entertainment. Business is no longer a zero-sum game: companies will expand when more people are able to participate and share the economics. Winning today is about imagining and orchestrating the economic model for your sector.
This article first appeared on http://economia.icaew.com/Opinion/August12/The-era-of-ecosystem-economics
Julie Meyer is the CEO of Ariadne Capital and a member of the economia editorial advisory board. Her new book, Welcome to Entrepreneur Country, is available now.