AirBNB Business Ecosystem

An Approach to Digital Ecosystem Modeling

Designing a new business  is not an exact science and there is no one template or approach that will work for  business or digital ecosystem modeling. However, there are best practices and guidance that you may want to consider. Overtime you will need to adapt the approach you take so that it is best suited to your organization but for now if you do follow these guidelines you will be on the way to modeling your business ecosystem.

A digital ecosystem is not built in a day

It takes a collaborative and iterative approach to define and design a business model and digital ecosystem. Start with the information that you know; focus on the key stakeholders and start to identify their customer segments, partners, the drivers and the value propositions. There will be gaps and unanswered questions but don’t let these slow you down, things will become clearer as you add more detail and gather input from others.

Most often the best approach is to focus on those stakeholders that are directly connected to the core element of the ecosystem and start working outward from there. As you uncover and discover more information you start to build a more detailed picture of the partner relationships, business model, monetization models and the types of interactions. It is better to sketch out the high-level design across the entire ecosystem rather than going a mile deep in one particular area. As you add more detail you will also uncover more questions that need to be answered, this is good as the sooner you raise the questions the better.

You can’t do it alone

Working collaboratively with other team members and external stakeholders will ensure that both the business model and business ecosystem are designed with input from a range of stakeholder roles and types. In many ways, you have to take on the now emerging role of the digital ecosystem curator.

Research and analyse, validate and then research and analyse again

A successful ecosystem will be built on solid information that is validated. You must ensure that you are equipped with the relevant information on the market, your competitors, customers, existing ecosystems. As you start to design your ecosystem you will need to have the basic information available but as you build out the level of detail in your ecosystem, further questions will surface that will require further research and analysis. Throughout the process you must validate any key assumptions either through research, analysis or discussion with key stakeholders or members of your collaboration team.

To lead or leverage

One of the first questions you need to consider is whether you want to take a lead or central position within the ecosystem (i.e. create your own ecosystem), or leverage an existing ecosystem. For example, if you take Airbnb they created their own platform ecosystem. Other stakeholders within the Airbnb ecosystem such as the insurance companies and photographers can operate successful businesses by leveraging the Airbnb ecosystem to access new sales channels, provide new services and products. Related Reading:Airbnb spawns network of ‘ecosystem’ companies “

What are the different types of relationships/interactions within the ecosystem?

The success of an ecosystem is firstly dependent on the level of interactions that take place between the participants or stakeholders, and secondly that there is sustainable value created and exchanged. As a starting point I would recommend that you focus initially on the Products/Services interactions between your stakeholders and to then start to add the other types of interactions.

Your ecosystem model (or models) will need to show the various different types of interactions or relationships that need to take place between the stakeholders;

  • Products/Services: The transfer of products or services between stakeholders
  • Value: Those interactions that generate value. In many cases this will be financial but there are other forms of value such as likes or reviews.
  • Contractual: Is there a requirement for a contractual relationship to exist between two stakeholders?  This could be something as simple as a T&C’s associated with a booking or an End User Licence Agreement
  • Operational:  What relationships or interactions are required in order to operate the ecosystem effectively?
  • Data: The data flows throughout the digital ecosystems, and without it nothing would happen. The key to this will be using APIs as the channel between stakeholders to enable the data to flow openly and consistently. APIs also play a key role in reducing barriers for adding new partners and services and thus are a strong enabler for an open ecosystem.

A picture paints a thousand words

Whether you use a whiteboard, PowerPoint or an ecosystem modeling tool it is essential that you create a visual representation of the ecosystem. You should differentiate between the different types of stakeholders (i.e. different roles such as producers, consumers, partners), draw lines to represent the different types of interactions. Also use background images to add context to the ecosystem so that you can position the stakeholders based on whether they are for example internal, external, cross-industry.

If your ecosystem diagram has a large number of interactions then you should consider creating different views of your ecosystem to show the Product/Services model, Operational Model, etc. This will help simplify others understanding of the ecosystem model and can significantly improve communications.

Don’t ignore the business model

In parallel to modelling your business ecosystem you should be evaluating, redesigning and updating your business model using tools such as the Business Model Canvas, Lean Canvas or the Platform Design Canvas. The Business Model and the Business Ecosystem are tightly related and interwoven, with each supporting the other so do expect to work through the design of these in an iterative way.

One method that works well is to create business models for each of the key stakeholders as this will provide you with a different perspective on the customer segments, value proposition, revenue model and channels for each of the key stakeholders – all of which is essential input needed to effectively model your business ecosystem.

Who are the other parties or stakeholders needed for the ecosystem to be successful?

The strength and success of an Ecosystem is dependent on the level of interaction and value generated for the people, organizations and entities that it consists of. Once you have defined the entities that you will be directly interacting with, then start to consider interactions with other industries and external ecosystems. For example, a Smart City Ecosystem can be made up of numerous interrelated and dependent entities across many ecosystems, e.g. Parking, Transportation and Traffic ecosystems.

What positions will these stakeholders play within the greater ecosystem universe?

Once you start to identify the stakeholders within the ecosystem you also need to think about positioning them in terms of their respective sectors as they may be participating in other ecosystems that can help to increase the value or experience provided to your customers. By doing this you can create a view of the ecosystem that will provides greater overall context, potentially identify new business opportunities and finally help identify those particular stakeholders that you need to give specific focus to.

Validate your assumptions

As you work through the process of modeling your ecosystem it is important that you validate your assumptions by sharing your work with others, not just internal people but with your key external stakeholders. Key questions that you should be asking yourself;

  1. Does the ecosystem support the business models for the key stakeholders?
  2. Are there any missing relationships?
  3. Will the ecosystem create and exchange sustainable value for participants?
  4. Is the Ecosystem adaptive to market changes?
  5. Does the ecosystem support our overall strategy?

What are your views on this? Does your business ecosystem have all five of these essential elements? Are they all self-evident or defined and documented? Where are you strongest? Weakest?

Please share your thoughts below.