From Michael Porter forward, much has been written about how organisations benefit by structuring around value chains to deliver products efficiently and at scale. Arising in manufacturing and the production line, the ‘chain of functions’ metaphor has been widely used to describe how organisations create value, or add it, for decades. Today, platform-based ecosystem enterprises are replacing hierarchical and functionally-based organisations, and Porter’s ‘value chain’ is collateral damage.
‘An ecosystem is more than a set of partnerships. Since it is a network of loose contributors who interact closely to create mutual value, there is necessarily an atmosphere of interdependency among partners in the ecosystem. This means that all partners share the same interest and that individual partners will only be successful if the ecosystem succeeds. As such, business and operating models need to be adapted to the new paradigm.’ — Omar Valdez-De-Leon.
Ecosystems are characterised by coexistence, codependence and symbiosis. Digital ecosystems rely upon collaboration amongst autonomous partners or agents, a shared commitment to value creation and delivery, and a common digital operating platform. Ecosystem partners engage as long as it makes business sense and are free to disengage when circumstances change. Ecosystem-derived products and services are refined constantly in response to environmental factors such as customer demand, competition, market conditions, regulation, supply, and the emergence of new or improved technologies.
In a healthy digital ecosystem, all of these (and other) factors find an equilibrium that is sufficient for all. Value — created or realised — is the output and outcome, but in most cases it is no longer the result of a production line, or a linear production process.
Eosystems that have always existed in the form of markets and collectives have been super-charged in the Digital Era, surfing the wave of digital technologies and services. Technologies such as Blockchain provide a striking example of how loosely coupled enterprises may be woven together by a common digital platform. Blockchain allows ecosystem players to delegate trust, underpinning new and disruptive systems – supply chains, custody chains, provenance, power generation and sharing grids, to name just a few.
Some commentators call out distinctions between the traditional value chain, value stream and the ecosystem variation, value networks, decomposing the latter into ‘networked value chains’ or ‘value chain networks’. All variations rely upon the notion that digital ecosystems set up fertile conditions for value to be created from granular, digitized interactions and collaborations in ways that far exceed the historical value chain notion. Where manufacturing value chain hand-offs might involve physical transport of an assembly from one plant to the next, digital value networks can be as fine-grained as the orchestration of API calls under the assurance of smart contracts, all under the ownership and control of separate business entities or regulators.
Digital ecosystems are disrupting traditional Enterprise Architecture practice. Exposure to loosely-coupled platform-based distributed collaborations re-focuses enterprise design and architecture on open, adaptable business models and operating models. Enterprise Architects must reorient to face ecosystem models, decentralised business models, value propositions, ecosystem service design and supplier-consumer negotiation and contracting, dynamic service orchestration and negotiation, and platform-based operating model representations. Traditional EA frameworks and methods do not facilitate this kind of design. EA modeling and reasoning in ecosystems is still very much in its infancy.
Value streams continue to be a useful modeling concept, and linear chains still have a place, even in some ecosystem or platform environments. The opportunity for Enterprise Architects is to get much better at recognising how value is created inside distributed ecosystem enterprises, and to be able to design and operationalise these value-creating activities on the digital platforms that have overtaken almost every aspect of our lives.
‘Competitive Advantage: Creating and Sustaining Superior Performance’ by Michael E. Porter, 1985.
‘How to Develop a Digital Ecosystem’ by Omar Valdez-De-Leon. Technology Innovation Management Review, August 2019 (Vol 9 Issue 8).
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