Business Ecosystem Explained: Definition, Pros & Cons, and Industrial Ecology Concepts

Definition of Business Ecosystem

The network of organizations   including suppliers, distributors, customers, competitors, government agencies and so on – involved in the delivery of a specific product or service through both competition and cooperation. The idea is that each business in the "ecosystem" affects and is affected by the others, creating a constantly evolving relationship in which each business must be flexible and adaptable in order to survive, as in a biological ecosystem. The ecosystem model can also be applied to organizations such as hospitals and universities.

This term is part of a recent trend toward using biological concepts to better understand ways to succeed in business. Advances in technology and increasing globalization have changed ideas about the best ways to do business, and the idea of a business ecosystem is thought to help companies understand how to thrive in this rapidly changing environment.

A business ecosystem has seven types of actors:

• Customers
• Markets
• Products
• Processes
• Organizations
• Stakeholders
• Government / society.

Pros of Business Ecosystem

1. The model helps with the identification of sustainable strategic positions in situations where the production and distribution of a firm’s own products and services depend on a loose network of suppliers, distributors and other organizations that transcend the traditional boundaries of the ‘industry’. Most companies analyze competitors and suppliers, but forget to do the same with their complementary because common interests are overestimated, the potential for conflict and the investment needed to achieve strategic alignment underestimated.
2. Moore provided tools to measure a business ecosystem’s health. The inclusion of network dimensions allows a higher-level analysis than just one-on-one connections between firms. Network analysis needs to include linear or structural component as well longitudinal or temporal effects. Researchers can study topics such as coevolution only when time is included as a variable.
3. The model incorporated insights from evolutionary economics and complexity theory and made them accessible to managers and consultants. The metaphor of an ecosystem was smartly chosen in a decade characterised by the rise of the personal computer and the Internet supporting the acceptance of the model.

Cons of Business Ecosystem

1. Where Moore’s definition of business ecosystem is indeed at a higher conceptual level, the model’s strategic analysis is from the perspective of a singular company. It sticks to the classical ‘firm-centric’ view of competition and cooperation.
2. One may argue that this model is nothing but an excellent reframe of Hughes’ 1983 Large Technical System theory characterized by the four stages: invention, transfer, system growth and momentum with the sole addition that business ecosystems need to evolve continuously.
3. Lansiti and Levine’s study downplayed the importance of longitudinal co-evolution. Moore regarded this variable as a key factor of healthiness. The two authors stated in their conclusions that “roles in an ecosystem aren’t static” allowing companies the option to evolve. The scientific question remains whether a firm can “choose” its role or whether a position is the result of an adaptation process. Does the technology determine the network’s make-up or are the firms the main force of change?
4. Business community might be a better metaphor than business ecosystem. The famous scientist and founder of the modern evolutionary theory, Charles Darwin, defined an ecosystem as an island lacking interaction with other islands. However, actors in business ecosystems are typically members of multiple technology platforms. The  probably positive  effect of interactions between different ecosystems has not been researched in depth.

Concept of Industrial ecology

Industrial ecology (IE) is the study of material and energy flows through industrial systems. The global industrial economy can be modelled as a network of industrial processes that extract resources from the Earth and transform those resources into commodities which can be bought and sold to meet the needs of humanity. Industrial ecology seeks to quantify the material flows and document the industrial processes that make modern society function. Industrial ecologists are often concerned with the impacts that industrial activities have on the environment, with use of the planet's supply of natural resources, and with problems of waste disposal. Industrial ecology is a young but growing multidisciplinary field of research which combines aspects of engineering, economics, sociology, toxicology and the natural sciences.

Industrial ecology has been defined as a "systems-based, multidisciplinary discourse that seeks to understand emergent behaviour of complex integrated human/natural systems”. The field approaches issues of sustainability by examining problems from multiple perspectives, usually involving aspects of sociology, the environment, economy and technology.

The name comes from the idea that we should use the analogy of natural systems as an aid in understanding how to design sustainable industrial systems.

Definition of Industrial ecology

1. Product and process design-philosophy which (in addition to market competitiveness) takes into account their environmental interactions and impacts.
2. Industrial ecology is also taken to be the activity of designing and managing human production-consumption systems, so that they interact with natural systems to form an integrated (eco) system which has ecological integrity and provides humans with a sustainable livelihood.
3. Strategies for optimal utilization of resources can be developed (for societies as well as companies) that are based on an understanding of such flows of material and energy resources.

Hence, we can say that Industrial Ecology is:

• The study of the flows of materials and energy in industrial and consumer activities.
• The study of the effects of these flows on the environment.
• The study of the influences of economic, political, regulatory, and social factors on the flow, use, and transformation of resources.

Industrial ecology is concerned with the shifting of industrial process from linear (open loop) systems, in which resource and capital investments move through the system to become waste, to a closed loop system where wastes can become inputs for new processes.

Much of the research focuses on the following areas

1. Material and energy flow studies ("industrial metabolism")
2. Dematerialization and de carbonization
3. Technological change and the environment
4. Life-cycle planning, design and assessment
5. Design for the environment ("eco-design")
6. Extended producer responsibility ("product stewardship")
7. Eco-industrial parks ("industrial symbiosis")
8. Product-oriented environmental policy
9. Eco-efficiency

Principles of Industrial ecosystem

One of the central principles of Industrial Ecology is the view that societal and technological systems are bounded within the biosphere, and do not exist outside of it. Ecology is used as a metaphor due to the observation that natural systems reuse materials and have a largely closed loop cycling of nutrients. Industrial Ecology approaches problems with the hypothesis that by using similar principles as natural systems, industrial systems can be improved to reduce their impact on the natural environment as well. The table shows the general metaphor.

Biosphere	Technosphere
Environment	Market
Organism	Company
Natural product	Industrial product
Natural selection	Competition
Ecosystem	Eco Industrial Park
Ecological niche	Market niche
Anabolism or Catabolism	Manufacturing or Waste management
Mutation and selection	Design for environment
Succession	Economic growth
Adaptation	Innovation
Food web	Product life cycle

Tools of Industrial ecosystem

People	Planet	Profit	Modeling
Stakeholder analysis	Environmental Impact Assessment (EIA)	Cost–Benefit Analysis (CBA)	Stock and Flow Analysis
Strengths, Weaknesses, Opportunities, Threats (SWOT) Analysis	Input–Output Analysis (IOA)	Full Cost Accounting (FCA)	Agent-Based Modeling
Eco-labelling	Life-Cycle Assessment (LCA)	Life-Cycle Costing (LCC)
ISO 14000	Material Flow Analysis (MFA)
Environmental Management System (EMS)	Substance Flow Analysis (SFA)
Integrated Chain Management (ICM)	MET Matrix
Technology Assessment

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Sandeep Ghatuary

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