Digital Ecosystems, Platforms and the Platform Economy

Survey on the Chicken Egg Problem for Platforms in Digital Ecosystems

We need your opinion! Are you a platform expert and do you already have experience in building digital platforms that you can tell us about? Then take part in our survey on the Chicken Egg Problem.

The Chicken Egg Problem describes the challenge of platforms to build a critical user mass of providers and demanders. Without enough Uber drivers, no incentive for passengers, and without enough passengers, no incentive for Uber drivers - that comprises the Chicken Egg Problem for the Uber Ride platform. If you are familiar with this problem and have experience through your own platform, we welcome your expertise.

Duration: ~12 minutes 

Core Content:

• What has been your experience building a platform with the chicken egg problem?
• Was there a successful strategy that helped your platform solve the chicken egg problem?

Link to the survey

If you have any questions or comments, we welcome your feedback!

Nedo Bartels
nedo.bartels@iese.fraunhofer.de

Anna Schmitt

anna.schmitt@iese.fraunhofer.de

• What are Digital Ecosystems?
• What opportunities do Digital Ecosystems offer to companies? 
• What challenges exist in dealing with Digital Ecosystems?
• Where does my company stand with regard to Digital Ecosystems? 
• How does IESE support my company regarding Digital Ecosystems?
• Why should my company collaborate with IESE on Digital Ecosystems? 
• What references does IESE have regarding Digital Ecosystems?

Definition of Digital Ecosystems

A Digital Ecosystem is a socio-technical system in which companies and people cooperate that are independent but expect to gain mutual benefits from participating. A Digital Ecosystem has a digital platform at its center that supports this cooperation particularly well via ecosystem services.

A Digital Ecosystem  

• addresses actual needs of potential consumers, 
• delivers added value that was previously unattainably without the ecosystem service,
• is attractive to both providers and consumers of services, and
• provides added values for all partners involved in the ecosystem service.

The overall benefit of a Digital Ecosystem thus results from the combination of the digital brokering platform and a large set of partners who participate in the Digital Ecosystem for mutual benefit and whose interactions via the platform lead to network effects.

Examples

Good and successful examples of Digital Ecosystems have emerged around platforms such as AirBnB, Uber, Apple App Store, or Amazon Marketplace. It is striking that most of the very large Digital Ecosystems that we are familiar with come from the U.S. In addition, many very large Digital Ecosystems have recently emerged in China, e.g., WeChat or Alibaba, but these are perhaps still unknown to us. But, there are also some established Digital Ecosystems here in Germany, such as Delivery Hero, ImmoScout24, or Flixbus, which many people may not even know as a Digital Ecosystem.

So there are very many successful examples today, and new ones appear all the time. While many previous examples were more from the B2C area or even the C2C area, the trend is now also moving more strongly towards Digital Ecosystems in the B2B area.

Emergence

A Digital Ecosystem is created when a company sees an opportunity to do a promising new type of business and initiates the Digital Ecosystem. This means providing an initial version of the digital platform and finding the first partners (companies or people) who want to participate. From there, both the platform and the partner network must be continually expanded because, after all, that is what the Digital Ecosystem thrives on.

Digital Ecosystems differ significantly from traditional business and require a complete rethink of one’s own positioning and business model. That alone is already a lot to ask, but speed is also of the essence because many companies are simultaneously striving to establish competing Digital Ecosystems. In doing so, they are not only competing against local rivals, but are also directly involved in global competition.

To successfully build a Digital Ecosystem, more needs to be considered than just the direct partners that interact with the platform. As Digital Ecosystems often profoundly change existing businesses, the initiator of the Digital Ecosystem must usually also consider the possible interests and potential business models of the partners end-to-end.

Relationship to the Platform Economy

While a Digital Ecosystem is a very concrete association of companies, people, and IT systems, the Platform Economy is a fundamental economic principle, similar to capitalism, for example. A Digital Ecosystem can be built with the intention of functioning according to the principles of the Platform Economy. This means that such a Digital Ecosystem is about clear economic interests and there are typically multi-sided markets in which participants conduct their transactions via the digital platform. However, there are also Digital Ecosystems that do not belong to the Platform Economy, but pursue other goals, for example Wikipedia.

Back to overview

Fraunhofer Reference Model for Digital Ecosystems

The importance of taking a holistic view of the Big Picture of a Digital Ecosystem has already been emphasized above. The Fraunhofer Reference Model for Digital Ecosystems provides an overview of the relevant aspects.

This begins with the organization that initiates and operates the Digital Ecosystem, extends to all the partners involved and the user community, and also includes direct and indirect competitors. In this regard, it is important to take an integrated view of business, technical, and legal aspects for all points listed in the model.

Six typical phases in the lifecycle of a Digital Ecosystem. Based on the following statements, you can easily determine where your company currently stands.

1 | My company has not given any thought to Digital Ecosystems yet

Then your company is in the positioning phase and must at least think about Digital Ecosystems, because they will influence the environment of all companies. Then these three decision options are open to you:

• Join one or more ecosystems that already exist or are in the process of being established,
• Initiate your own ecosystem, or
• Make a deliberate decision to stay away from Digital Ecosystems.

2 | My company has decided to build a Digital Ecosystem

Then your company is in the design phase of the Digital Ecosystem. This primarily involves the detailed development of concrete ideas for an ecosystem service and testing them on concrete examples. To do this, you need to comprehensively and thoroughly think about the Digital Ecosystem and explicitly design the functionalities, asset flows, money flows, data flows, and contractual relationships.

3 | My company has a precise idea of what the Digital Ecosystem should look like

Then your company is in the phase of examining the prospects for success in terms of feasibility and viability, based on the initial design. This means that you need to shed light on the business, legal, and technological aspects of all decisions made so far that affect your organization, the partners, and the user community.

4 | My company has assessed the prospects for success of the envisaged Digital Ecosystem

Then your company is in the MVP phase. If you have developed a promising idea for an ecosystem service, you should develop a Minimal Viable Product (MVP) as quickly as possible, and use it to take up a position on the market. This means that you should reduce the scope and complexity of the developed idea to such an extent that you can produce a useful result as quickly as possible. To do this, you can, for example, take out certain functionalities or do processes that can be automated manually at first. However, the developed MVP should be able to illustrate the basic idea and functionality of the ecosystem service very well and generate enthusiasm.

5 | My company has released an MVP of its Digital Ecosystem and is thus “live”

Then your company is in the phase of starting growth. Through early adopters and additional measures to bring partners together and create incentives, you must successively bring more participants into the ecosystem so that supply and demand will increase. This is also where the initial and intended network effects begin.

6 | My company has successfully completed an initial growth phase with its Digital Ecosystem

Then your company is in the phase of expanding growth. You need to make your Digital Ecosystem and the platform fit for fast and high scalability by means of a high degree of automation and a powerful organization. Because this is the only way you can fully benefit from the characteristics of Digital Ecosystems: The number of partners and available offerings leads to self-reinforcing network effects.

Back to overview

As an institute for innovation-, systems-, and software engineering, Fraunhofer IESE is in a position like no other to provide you with holistic support for Digital Ecosystems – starting with the initial intent and continuing throughout the entire lifecycle of a Digital Ecosystem. In doing so, we cover a very wide range of services. We can help top management with strategic decisions, assist with the design and construction of the Digital Ecosystem and the digital platform, and clarify technical implementation issues with the developers.

Tailored to your needs, we offer different types of cooperation:

• We completely take over tasks for you
• We actively support you in your tasks, work with you, and provide guidance to your team
• We teach you our methods so that you can apply them on your own

The graphical overview below shows key activities along the phases of the establishment of your Digital Ecosystem. The individual services are explained below the figure.

Ecosystem Strategy Definition

We support you from the very beginning, starting with the first important activity, the definition of an ecosystem strategy for your company. Do you want to join one or more ecosystems already in existence or in the process of being established? Do you want to initiate your own ecosystem? Or do you want to make a deliberate decision to completely stay away from Digital Ecosystems? If you want to initiate an ecosystem, we will support you in thoroughly working out and checking which ecosystem services you can offer to generate attractive added value for all participants in your Digital Ecosystem.

Ecosystem Ideation

The core idea of already existing ecosystems often seems simple and obvious. However, it requires enormous creativity to design such concepts that ultimately appear to be so simple. Our creativity techniques, which have been used successfully many times and which are specially tailored to ecosystems, will help you find and concretize the core idea of your Digital Ecosystem. We do not only examine the economic, technical, and legal framework conditions, but also consider all participants of the planned ecosystems and their interests as well as arising asset, data, and money flows.

Ecosystem Platform & Ecosystem Service Building

This activity is about building the ecosystem platform and the ecosystem services. This encompasses almost all areas of software and systems engineering and places a wide variety of requirements on the quality properties to be achieved. Building the ecosystem platform and the ecosystem services extends almost over the entire lifecycle of a Digital Ecosystem once the target direction has been clarified. We tailor our support to your individual needs in all phases from initial design to expanding growth. In these phases, we lend a hand with a wide range of service running in parallel. During the whole time, you will benefit from our integrated and holistic approach.  

Ecosystem Organization Building

Building a Digital Ecosystem has drastic effects on your organizational structure. Which organizational form is suitable for your planned Digital Ecosystem must be decided individually. We support you in examining possible forms of organization and establishing new roles needed for building a Digital Ecosystem.

Ecosystem Partner Network Building

Without partners, a Digital Ecosystem is worth nothing, even if you have built an outstanding ecosystem platform. We not only support you in finding the right partners, but also help motivate them to participate and are committed to including them in the Digital Ecosystem at the right time and in the right combination (onboarding). 

Ecosystem Community Building

Without a large and engaged user community, a Digital Ecosystem is worth nothing, even if you offer an innovative ecosystem service. We help you to actively build up a user community and nurture it over time. 

Ecosystem Assessment

If you want to build a Digital Ecosystem, this is an immensely challenging and long-term undertaking, where you can be heading in the wrong direction for a long time without realizing it. It is therefore worth checking from time to time whether you have embarked on the right path. It is never too early or too late to do this: In every lifecycle phase of your Digital Ecosystem, we support you as a neutral partner with an objective assessment of the current direction and status of your Digital Ecosystem. However, it is especially the early phases in which it is necessary to check intensively whether the right course has been set. Because the more advanced your project is, the more difficult and expensive it is to change course.

Back to overview

Digital Ecosystems offer the opportunity for disruptive repositioning and increasing influence with a huge scope for design. Network effects and participation in business in the Digital Ecosystem promise a future-proof position in your own domain.

As described above, building a Digital Ecosystem is extremely challenging. On the one hand, this is due to the complexity to be mastered of numerous tasks that have to be considered in an integrated manner. On the other hand, you enter new territory with each task and are faced with a high degree of uncertainty. Nevertheless, you need to get to market quickly with your Digital Ecosystem and grow rapidly because you are in a race with competitors who want to establish Digital Ecosystems in parallel. It has been shown that early market entry offers significant advantages.

We will be happy to support you in overcoming these challenges associated with your Digital Ecosystem. With our contributions, we help to make your Digital Ecosystem successful.

We provide orientation and leadership, but always remain neutral.

This guarantees you a targeted approach and the good feeling of not forgetting anything crucial.

We draw on experience from many projects and domains.

This helps you avoid mistakes that other companies have already made, with painful and expensive results.

We support you from strategic decisions to technical implementations, from the start of your ecosystem project throughout the entire lifecycle to strong growth.

In this way, you secure a strong partner that takes an integrated and coordinated view of the various complex challenges. At the same time, you avoid having to find a specialized partner for each task and having to spend a lot of effort coordinating all partners.

We have clearly organized the terminology surrounding Digital Ecosystems.

This saves you unnecessary and lengthy terminology discussions or even the extremely expensive effects of terms and concepts that are not clearly understood. (A common understanding is achieved more quickly.)

We have consolidated our experience into methods that can be applied flexibly and have been tried and tested many times.

This enables you to master the high uncertainty and complexity of your ecosystem project faster and more unerringly.

We really get involved right from the start (not just in an advisory capacity) and roll up our sleeves with you.

This ensures that you can start your project right away, giving you a head start in a competitive field by going live sooner. It also allows you to optimally build up your team over time, which then learns directly from our experienced staff.

The Fraunhofer-Gesellschaft is the largest applied research organization with a wide range of expertise in more than 70 institutes.

This ensures that you get access to technology and engineering expertise from all disciplines relevant to your ecosystem in all domains within the Fraunhofer partner network.

Regardless of whether you ...

• are currently thinking about how your company should position itself on Digital Ecosystems,
• are strongly determined to establish a Digital Ecosystem, but are still working on the exact direction,
• are already quite sure that you are on the right track, but would like to discuss your ideas with experts,
• are already in the process of construction and are looking for experienced systems and software engineering support for your digital platform, or
• have any interesting ideas and questions and would like to discuss them with us.