By Peter Williamson & Arnoud de Meyer
More companies are starting to recognize that developing a vibrant ecosystem of partners across industries is essential for accelerating innovation and withstanding disruption. Partners can share new technologies and knowledge, open up new routes to market and help create new business models.
But it isn’t enough to get an ecosystem up and running; you also need a way to sustainably monetize it. In our work analyzing company ecosystems, we’ve found that a firm needs to do three things if it wants a sustainable profit stream from the ecosystems it has created.
First, it must identify a “keystone contribution,” some element or activity it can uniquely own and control that is essential for the ecosystem to create value for customers.
Second, an ecosystem leader needs to establish an efficient “tollgate” to collect revenues when partners use its keystone contribution. The tolls may take the form of: license fees, royalties or commissions on transactions within the ecosystem; a share in the revenues of the products and services that partners supply; or the profits on value-added products or services created using the data and knowledge from the ecosystem.
Of course, the toll for any single type of transaction, activity or partnership can be only so high. Leaders must also diversify their revenue sources. That means designing multiple tollgates at different points in the ecosystem. Another useful strategy we’ve observed is to vary the charges between participants, subsidizing some and demanding a higher share of the value created from others.
Third, leaders need to find a way to leverage the ecosystem to innovate and find ways to renew the keystone contributions. This means establishing reliable and ethical channels to accumulate data on the activities of partners and customers, and processes for innovating on insights gleaned. While some learning needs to remain proprietary, some can be shared with partners to help make the ecosystem more productive.
By focusing on these three priorities, companies can establish sustainable profit streams, ensuring their ecosystems work for them.
Peter Williamson is a professor at the Cambridge Judge Business School. Arnoud De Meyer is a professor at Singapore Management University.
