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Online Communities and the Business Ecosystem November 26, 2007

Posted by Jeff in Business, collaboration, enterprise 2.0.
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Introduction

After writing a number of postings on technology and business processes, we noticed that the readership stats for collaborative technology and collaborative business processes are now about equal.  To us, this provides a confirmation that it is time to focus on the business ecosystem that is created by using these two concepts together.  We discussed this a few times back in Spring 2007 in our posting on “Enterprise 2.0“.

What is a business ecosystem?  The following definition comes from Ray Wang of Forrester:

These ecosystems increasingly specialized and rely on the intellectual property (IP) innovation networks of Partners, Suppliers, Financiers, Inventors, Transformers and Brokers.  As software vendors and systems integrators expand into new markets, they will form solutions-centric ecosystems to enable exclusive, complementary, and “co-opetive” relationships.

What are examples of the content in a business ecosystem?

  • Products directories
  • Supplier directories
  • Best practices
  • Industry news
  • Leads, Deals
  • Forecasts

While many of the ideas of business ecosystems go back to the first-generation B2B era of 1998-1999, leading companies are now re-evaluating them.  The reason is primarily that in today’s environment, online communicates are far more viable than prior years.  Today’s online communicates are more than a messaging system, they are ones in which feedback and review is provided, so that trust is built and knowledge is shared.  The best current examples are the Web 2.0 and social networks that allow people and organizations to collaborate, and these networks allow organizations to improve business processes and performance.  Here are some examples of the interactions:

  • Partners can share information such as plans, priorities, and best practices
  • Customers can share information about preferences and plans
  • Suppliers can share information about availability and capability
  • There is more information within the ecosystem which includes feedback and review.

Online communities and ecosystems are present in many places today, from auctions, to books, to gaming.  Over the past weekend, I helped a project team analyze pricing data from auctions in the online game World of Warcraft, carrying out the same kind of analysis that MBA teams were performing on eBay auction pricing 6 years ago.  Though the players of the online gaming world may not realize it, they are part of ecosystem that behaves just like a ‘real money’ ecosystem.

Another example is in the fabless semiconductor industry, where the ecosystem acts as a center for best practices in the industry.

Economic Benefits

Digital Business Ecosystem Evolution
Adapted from a study of digital business ecosystems.  

Today’s Online Communities

During last summer, we completed a survey of software applications for collaboration, content management, and online community building.  From that survey, we determined the following features as being important:

  • Easy navigation to new content
  • Search (by category, date, author, etc.)
  • Editing of content
  • Posting comments (hence the information flows in the community are two-way)
  • Support for extended record types, such as polls
  • Theme support (flexibility of presentations)
  • Personalization of searches, presentation
  • Support for technological standards (e.g., XML, Databases, web)

Examples of these community-building tools include blogs, wiki’s, and CMS’s.  We now use these on a day-to-day basis.  Examples of online communities using such tools include many schools, project teams, governments, etc.  For instance, the Indianapolis Museum of Art has a web site that provides educational content, schedules, blogging, online purchasing, and member services.  It is two-way because you can enter comments and feedback.  In addition, your membership at this site can be shared with other museum sites.

Another example is the Bootstrap Network, which allows entrepreneurs to share ideas and approaches to starting businesses.

Moving up one level in the stack to the features for the business communities, they include all of the above plus the following:

  • Search (in this case the search is more advanced, typically dealing with product attributes, schedules, preferences, etc.)
  • Comparisons
  • Posting of feedback, including scores and ratings
  • Referrals on deals
  • Correspondence, and integration with email
  • Payments, including commissions and cross-rates
  • Reconciliation
  • Workflows
  • Knowledge “notebooks” that contain best practices
  • External content: such as public information
  • Privacy
  • Community administration, to control access
  • Support for business content standards (e.g., RosettaNet, FedEx API, etc.)

This list goes beyond what is supplied in the typically CMS or blogging software.  The primary difference is that the CMS-based systems are typically built around managing text, while this more advanced list requires collaborating on semi-structured records, such as invoices, orders, product descriptions, etc.

Specific features for a typical marketplace/ecosystem management application:

  • Management Dashboards and Vendor Scorecards: Provides management, and users with in-context information such as supplier performance.
  • B2B Portal:  Allows buyers to collaborate with suppliers on transactions such as material forecast, purchase orders, change orders, schedules, VMI.
  • Rules-based Transaction Engine:  Automates the processing of most transactions.  Provides each user with a configurable view of the entire material replenishment and supplier collaboration process.
  • Content Management facility:  Stores all content in a consolidated form, and provides search and access tools.

Examples of Business Ecosystems

Examples of communities that are present or appearing in the business community include:

  • Amazon’s marketplace
  • Ariba’s supplier network
  • TradeKey’s marketplace
  • Fuzing.com’s marketplace
  • Exostar’s marketplace
  • The SAP Ecosystem

The Amazon marketplace dealt only with books at first, but now includes all types of consumer goods.  Participants in the marketplace include major sellers such as Toys-R-Us and J&R Electronics, as well as specialty sellers such as independent craftsmen.

The Ariba marketplace includes B2B goods such as office supplies and services.  For instance, Staples is a part of the Ariba marketplace.  From the Ariba web site:

Ariba Supplier Network is one of the world’s largest open business transacting systems, providing a single point of integration in which organizations can trade globally in real time.  The Network encompasses hundreds of buying organizations transacting with more than 140,000 e-enabled suppliers.  The Network delivers remarkable value for suppliers, grossing $90 billion in annual spend and driving 16 million purchase orders each year.  Shared by suppliers in 115 countries worldwide, our Network provides you with a powerful solution to efficiently manage your entire prospecting-to-payment lifecycle.

Exostar is a marketplace for defense manufacturers.  From their web site:

Exostar provides a single point of connection for electronic security, commerce and collaboration for global manufacturers and A&D organizations. Today, more than 16 ,000 trading partners trust Exostar to provide highly secure, Web-based solutions that manage business processes and information across the extended supply chain.

Exostar’s Internet-based applications dramatically simplify and standardize the procurement process, streamlining the supply chain from end to end.  The bottom line? Reduced costs. Improved productivity.  Secure access.  Enhanced trading partner relationships.

Exostar gives your company direct access to a network of more than 300 global procurement systems, as well as thousands of suppliers worldwide

SAP offers an ecosystem.  From their web site:

SAP is building a comprehensive ecosystem to drive enterprise service-oriented architecture (enterprise SOA) adoption; foster co-innovation among SAP, customers, and partners – and deliver value for all participants. Leveraging deep industry knowledge, a diverse community of developers and partners, and SAP NetWeaver as the platform for product and service innovation, SAP and our ecosystem are driving new dimensions of collaboration – turning breakthrough ideas into innovative solutions for customers.

Advantages of the Business Ecosystem

Marketing/Sales

The rise of Customer Relationship Management (CRM) software has helped create the ecosystem for the marketing and sales function.  Through online communities, one can advertise new products and services.

A business ecosystem takes this one step further, making your community content viral.  Community members are empowered to invite others to join and participate.

Connecting customers is what it is all about.  A customer changes from being a one-time buyer, to being a member of a community, within which additional services are offered either on a free or paid basis.

By tracking the activity within the customer network, market intelligence can be gathered.  For instance, determine which offers are generating the most attention, or the most feedback.  Online dialog can also be used for the customer support function.

Partners

Ecosystems of partners are all about effective collaboration on projects to be carried out across multiple partners.  For instance, an ecosystem might combine product designers, manufacturing engineers, and QA engineers.  The ecosystem enables sharing and joint revision of specifications, review of development deliverables, schedule management, and more.  Two examples of such ecosystems include the open source software development community, and the political issues-based communities.

Since these communities are made up of people who rarely meet face-to-face, the online aspect must reduce these barriers and the time delays that they introduce.  One of the goals is to reduce the dependence upon email.

When the business ecosystem of partners includes marketing and customers, it can support the joint execution of marketing program development and product development, again leading to process improvements.  This can lead to substantial improvements in information transfer.

When customers are also included, new products can be rapidly designed based on surveys that obtain patterns of customer preferences.

Partner community systems are built around shared content, and evaluations and rating of such content.  Some systems include project management features; some include facilities for specific content types such as engineering specifications and blueprints, etc.

Shipment and Logistics

The deal isn’t complete unless there is a way to deliver the products.  There are a number of sub-marketplaces that supply shipping and logistics services.  One example is uShip:

Customers with something to ship post a request on the website, and service providers bid for their business. uShip certainly caters to customers who have a truckload of furniture to move, but the concept comes into its own when a customer isn’t shipping enough to fill a truck. Shipping companies tend to think in terms of full loads, making it difficult for consumers to get a quick quote for shipping an inherited pinball machine or the Eames chair they’re selling on eBay. On uShip, customers list their needs and a target price, and the bidding process keeps pricing competitive. Shipping companies benefit, too. Besides having access to an additional sales channel, they can find shipments for what would have otherwise been empty backhaul trips. Because carriers can efficiently fill extra cargo space, many offer discounts of up to 80% off their traditional prices.

Support

Set up social media assets, such as support forums and member-generated FAQs, to let your expert users help your novice users.

Two examples of online communities for support that we have seen include LiveWorld and Lithium.  LiveWorld describes the benefits of a support community as follows:

A true online community for your business is one that builds lasting relationships with and among your customers-the difference between simply operating community applications and creating solutions that meet real business goals. 

All communities form a culture, even if left to themselves. The best of them develop cultures pro-actively guided to engage the members, engage your brand ethos, and meet particular goals. Just like a great social party or business event, they manifest a sense of context, ambiance, and purpose-a culture that the users can participate in and help define, becoming genuine members of the experience. An effective day-to-day relationship dynamic drives cost-effective organic growth, while ensuring that your brand is well represented and extended. Community management and moderation services define the environment, provide referent examples and leadership, and direct the content to reflect the company’s focus.

Lithium describes their approach as:

As the name implies, customer support communities are part of a company’s overall customer care and support process. These communities typically focus exclusively on user-to-user support, providing a place for customers to answer questions posed by other customers. However, in some cases company experts also answer questions, usually when they can’t be answered by other users (for example, when they involve account-specific matters) or when users haven’t replied over a pre-defined period of time (commonly two or three business days).

Financial Transactions

Today’s marketplaces will allow payments through payment clearinghouses, such as PayPal.

The marketplace will also track invoices and shipments.

A marketplace that has financial transactions will typically support reconciliation of invoices and payments.

The marketplace has a configurable workflow for Payment schedules

Factors Affecting the Adoption of Business Ecosystems

When considering any B2B collaboration, Aberdeen Group recommends companies consider adopting a “value framework,” such as the following:

  • Total cost of ownership, including software, hardware, maintenance, all levels of help desk support, and partner buy-in.
  • Business value gained, including reductions in operating inventory and logistics costs and improvements in supply chain performance.
  • Speed, including initial implementation time, time to train your trading partners, and the time it will take to adapt and roll out new business processes.
  • Trust, which is the most important aspect of the business ecosystem.
  • Project risk including estimated risks if the project fails or users reject the software. Also consider the risk of system downtime or the cost of data security breaches.

Other factors include “Vendor lock-in”.  Forrester wrote:   avoid vendors that do not make hard comment son process interoperability among the ecosystems.  Push for standards adoption in your specific vertical to sector investments in last-mile best-of-breed vendors that may cross applications.

Major Trends in Business Ecosystems Today

  • Overlap with consumer-oriented online communities.  Today Facebook is the fastest-growing online community. While it has typically been oriented toward consumers, it is now being used by corporations.  With this trend it is important to consider building new business networks on top of the consumer networks.
  • Public Sector shared service consortia:  This refers to the migration of specialized content into third-party, public sector organizations, in order to create a level of independence and avoid unfair trade laws.  For instance, we have seen most of the internet protocol ownership move into a third-party organization, along with a number of the business standards groups and financial standards groups.
  • IP-Specific Trade Associations:  Industry expertise of the core IP of trade associations such as the Blue Cross Blue Shield Association (BCBSA).  Instead of teaching a vendor their trade secrets, BCBSA could deliver core IP around common services such as claims, provider data, and group purchasing while purchasing for interoperability of across applications.
  • Application infrastructure:  This refers to the common infrastructure upon which a community building application operates.  It includes a discussion of standards and servers.
  • Web Services:  The W3C defines a Web Service as “a software system designed to support interoperable Machine to Machine interaction over a network”. Web services are frequently just Web APIs that can be accessed over a network, such as the Internet, and executed on a remote system hosting the requested services
  • Managed Services:  Managed services is the practice of transferring day-to-day related management responsibility to another organization. It can be a strategic method for improved effective and efficient operations. The person or organization who owns or has direct oversight of the organization or system being managed is referred to as the offerer, client, or customer. The person or organization that accepts and provides the managed service is termed the service provider.  Examples of managed services used on a day-to-day basis in today’s world include:
    • Payroll (as done by ADP)
    • Shipping (as done by FedEx)
    • Financial management (as done by Schwab)
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Comments»

1. kuma - May 15, 2008

this is actually the first time i hear about business ecosystem. I havent read the whole article but then taking customers’ opinions and have that as feedback to the system and sustain development of business is cool, as opposed to some companies that don’t care and have machinese answering inquiries instead of getting some human to answer the phone.


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