The Other Yellowstone Ecosystem

Just as natural resource-based bio-ecosystems operate in a complex natural balance, business ecosystems require deliberate, conscious management and shepherding of their resources to thrive.

Evolving Ecosystems and the opportunities they create

By Greg Ruff WHITE SPACE STRATEGY

If we could create totally closed natural ecosystems and isolate them from outside influences, then they would, in theory, reach a natural balance and continue that way indefinitely.

However, a closed ecosystem is impossible in a global world, where everything and everyone is mobile. We’ve seen accelerating effects of migration from noxious weeds to new species of predatory fish crowding out other species on our natural ecosystems for decades. This phenomenon is as old as the postulated human migration from Asia to America 20,000 years ago across the Bering land bridge.

Business ecosystems experience the same kind of challenges when new business species – new technologies, processes or business models – are introduced into the ecosystem. Some businesses successfully coexist, some thrive as the new entrant causes the market to grow, and some go extinct when they fail to adapt.

The participants in business ecosystems can make conscious choices about how to develop strategies and tactics to coexist with newly introduced business species. They can make the choice to compete head to head, to expand the market beyond the new competition’s focus, to adapt to the new model, to find a niche and reinforce their position there, or even to move to or create a new market.

When Home Depot and Lowes entered the Bozeman business ecosystem, some established local businesses chose to adapt to the new business model and ultimately added additional value to the market.

One, Kenyon Noble, built a new “warehouse store” location to provide a selection and pricing to match the competition. With Kenyon’s history and reputation for service, it was able to compete and actually increase the size of the market. Another, Owenhouse Ace Hardware, added a second location for convenience and larger selection, and maintained their high-service reputation.

There are also larger-scale examples. When the iPad was announced, another company called KNO was already designing a folding, book-like tablet for education. Recognizing it couldn’t compete with Apple’s brand and hardware, KNO quickly shifted to developing its software and content (the key element of education sales) to run on the iPad, and is now the leader for K-12 educational and textbook iPad software.

In each case, by carefully understanding the markets and the impact of new entrants, these companies were able to devise specialized strategies to compete with the new species, offer unique, differentiating value, and at the same time expand the market.

The key here is to understand how to adapt and grow the ecosystem by offering new value in the form(s) most important to the customers. That new value can be as simple as location, convenience, selection, service, brand and relationships. The most important tenet, however, is to operate as an ecosystem, not a war zone.

Greg Ruff has consulted to Fortune 500 companies and startup businesses on management, market and growth strategies since 1987. He first visited Big Sky in 1993 and recently relocated here. In this column, he writes about how business- and bio-ecosystems can mutually benefit from creative thinking.