Publication II - OVERVIEW OF THE RESULTS OF THE PUBLICATIONS

4 OVERVIEW OF THE RESULTS OF THE PUBLICATIONS

4.2 Publication II

Publication II engages in conceptual development with the purpose of creating a taxonomy of variations in ecosystem architecture based on the comparative analysis and empirical setting of publication I. With illustrative examples from the ICT industry, and mobile service production and provision more specifically, it analyzes the multi‐actor ecosystem, consisting of operators, application developers and application stores. Understanding on the variation in ecosystem architecture was sought against the theoretical background of two‐sided markets, value co‐

creation, and business models. Following the definition provided by Zott and Amit (2008, p. 3) of the business model as “a structural template of how a focal firm transacts with customers, partners, and vendors; that is, how it chooses to connect with factor and product markets”, the paper proposes a taxonomy of business models varying in their degree of interdependence and degree of value co‐creation representing variation in ecosystem architectures. In terms of the dissertation entity, the objective of publication II was to extend the pre‐understanding created in publication I and to compare the different variations in ecosystem architecture on a more generic level.

Main findings and contribution

The literature review on business models reveals that regardless of the definition of the business model concept, value creation is an integral part of it. Although many other streams of literature have acknowledged the importance of partnerships in value creation, most of the business model literature has been focusing on value creation towards customers and other contributing entities have been left without attention. The business model concept has been geared towards analysing value creation (and appropriation) in contexts where we can clearly identify: a) a value chain, b) a supplier and c) a customer. Other types of contexts, such as ecosystems or multi‐sided markets, have not been addressed in business model literature. By examining the variation in ecosystem architecture, publication II brings attention to the different actors in the ecosystem. It considers the value creation or value co‐creation process to include several phases where different actors have different roles and tasks. This is seen to represent variation in complementarity. Additionally, given how much (i.e., in how many phases) different actors are engaged in the value creation process, the actors can have different decision making rights or different positions in hierarchy, leading to variation in terms of stratification. Based on the variation along these two dimensions, the proposed taxonomy classifies the observed variations in ecosystem architecture into four categories: the traditional operation model, managed service model, brand co‐operation model, and application store model. Based on the proposed taxonomy, implications on interdependence and value co‐

creation possibilities are discussed and from the point of view of the complementor, it also discusses the choice of which ecosystem to join in terms of delivery channel choice.

44 4.3 Publication III

Main objective

Publication III examines the role of initiative taking from different actors in a business ecosystem with a qualitative, exploratory case study. In order to examine the role, taking initiative is paralleled with positioning oneself as a first‐mover further occupying a central position in the ecosystem. By establishing the link between the literature on business ecosystems, co‐evolution and taking initiative, the purpose of the paper is to examine the actor‐

structure duality (i.e., how actors are positioned in a certain structure and what actions and processes they utilize to leverage such a position and structure) beyond the mere structural attributes of networks. Further, the duality is discussed in different phases of the development of the new product, highlighting the co‐evolutionary nature of business ecosystems. Such a joint consideration also represents an attempt to bridge the ecosystem architecture and industry evolution literature. The examination of a multi‐actor ecosystem takes place in the empirical context of the ICT industry. Different actors, such as vendors, operators, developers, and co‐

operation and standardization forums are taken into account, demostrating that the level of analysis is set beyond the boundaries of a single organization and also beyond its closest partner network. By expanding the literature on management and governance of innovation network to the ecosystem level, the objective of publication III in terms of the dissertation entity is to analyze multi‐actor collaboration on the ecosystem level and to complement the pre‐

understanding on structural properties created in publication I and publication II.

Main findings and contribution

Publication III discusses the responsibilities, interests, expectations, the nature of initiative taking, and the strategies and concrete activities to facilitate and support initiative taking (i.e., becoming the hub) of different actors in ecosystem. Publication III suggests that not only is there a need for a hub firm to lead development as a whole, but more likely there is a need for several actors taking the initiative at the right time and in the right place. The study contributes to the literature on management and governance of innovation networks. Previous literature on business ecosystems (Adner, 2006) and especially the literature of value networks (e.g., Kothandaraman & Wilson, 2001; Möller & Svahn, 2006) have typically focused on the strategic actions of the single hub or focal firm. Publication III expands the level of analysis from firm level to ecosystem level and adopts a multi‐actor perspective. Further, publication III points out that in different phases of market creation and industry evolution, different actors have to employ the hub position. These findings complement the suggestions of Davis and Eisenhardt (2011) in that the success of an ecosystem can be enhanced through rotating, rather than static hub positions.

4.4 Publication IV Main objective

Publication IV develops a construct of a partnership business model and with a qualitative, exploratory case study it examines the usability of such a model in analysing the service development collaboration between an operator and its partners. The empirical context of publication IV is the information and telecommunication technology industry. Similarly to publication II, publication IV follows the definition of Zott and Amit (2008, p. 3) of the business model as “a structural template of how a focal firm transacts with customers, partners, and vendors; that is, how it chooses to connect with factor and product markets” and further on the findings of publication II. Although the importance of partnerships in value creation has been acknowledged elsewhere in the literature, most of the business model literature neglects the

role of contributing entities, such as complementors, in value creation towards customers.

Publication IV attempts to bridge the literature on inter‐organizational relationships (especially the complementary resources stream) and business model to examine inter‐organizational value creation. Thus the concept of business model is analyzed from a critical viewpoint: while the business model describes how a single company does business, what it tells us about how a firm creates value to and with its partners is questioned. In terms of the dissertation entity, publication IV examines complementarity as a property of the structural template defining multi‐actor collaboration.

Main findings and contribution

Relating to the findings of publication II, the literature review and followed conceptual analysis reveal that business model definitions concentrate mainly on the issues of customer value formation; the possibility of offering value to partners, in other words, to complementors, is typically vague and at best implicit. The conceptual analysis contributes to the literature on business models by clarifying the value creation construct. By bridging the literature on inter‐

organizational relationships and business models, publication IV discusses complementarity as a dimension of the structural template (i.e., business model or ecosystem architecture) which defines how the transactions between a focal firm and the complementors are organized. In addition to complementarity per se, the findings show that the nature and extent of complementary resources are decision‐making criteria for the complementor when deciding which ecosystem to join and which hub to complement. The results suggest that partners evaluate the attractiveness of the hub firm in terms of value and resources. In the context of publication IV and from the point of view of the complementor, the complementary resources include information about the customers, marketing and distribution resources to achieve the critical mass of customers, easy‐to‐use technological interfaces for complementors to create complementing products or services, technical support (technical documentation, reports and test results) and the creation of a test and development environment.

4.5 Publication V Main objective

Publication V examines different market entry timing and a range of strategic decisions. It focuses on the competition between two ecosystems in platform‐based markets, namely the follower platform and the incumbent platform where the ecosystem is organized around a software platform. The multi‐actor structure comprises the following actors: the hubs (platforms), customers, and complementors (the suppliers). The study proposes a simulation model, executed with agent‐based modelling. Simulation was chosen as the approach to build the model in order to grasp the complex and dynamic nature of the phenomenon under scrutiny and to model situations where multiple actors make independent but interdependent decisions (for similar arguments on why to use simulation see Harrison et al., 2007). Further justification on the choice of the approach can be provided with the argument that the theoretical background is rooted in Simon’s (1962) work on complexity and complex systems upon which simulation models are also built. The inherent complexity of such a system was deducted into a set of assumptions regarding the structural properties of the ecosystem; for example, regarding the permeability of boundaries, the model assumes open membership and operationalizes this as the ease of changing the platform. In addition, the model incorporates network effects by assuming that higher asset mobility will lead to positive network effects. In terms of the dissertation entity, publication V focuses on how central actors can turn the position in a structure into an advantage (i.e., increase in value appropriation and relative performance) thus moving beyond the structural discussion at an ecosystem level.

46 Main findings and contribution

The proposed simulation model incorporates a much richer illustration of the complex and dynamic nature of the platform‐based market than earlier studies on the topic (Gandal et al., 2000; Park, 2004; Zhu & Iansiti, 2012). The model incorporates structural properties such as asset mobility and permeability of boundaries. By introducing variance in the variables such as platform quality, pricing decisions, and surplus division between the hub and the complementor, it introduces the strategic decisions of the hub, which in turn influence value appropriated and relative performance. Furthermore, these are examined in light of different market entry timings. The proposed model embraces the essential actor‐structure duality by firstly examining the structure in which a particular actor operates and secondly, how the actor can influence the structure (i.e., division of surplus) with strategic decisions.

4.6 Publication VI Main objective

Publication VI develops a conceptual model of the sources of architectural advantage. The model is based on the definition of architectural advantage by Jacobides et al. (2006) and adopted by Ferraro and Gurses (2009): a position of advantage in the industry that provides firms with the ability to change the stable but evolving rules and roles, which shape the division of labour and surplus between different types of participants in an industry’s value chain in terms of high levels of value appropriation without the need to engage in vertical integration. It builds upon the literature on industry architecture, industrial organization and information systems. Publication VI focuses on firms employing a hub position in the context of the study (platforms in multi‐sided markets). In terms of the dissertation entity, publication VI paves the way and creates a pre‐understanding of the full variety of structural dimensions which influence the variation in the architecture. However, it is noteworthy to mention the following differences between the proposed model in publication VI and the proposed model of the whole dissertation. The focus of the conceptual model of publication VI is on how the particular actor can leverage the suggested sources to change the architecture in order to appropriate more value (excluding the analysis on the influence on value creation), thus setting the unit of analysis at the firm‐level (and not employing the ecosystem‐level perspective).

Main findings and contribution

Publication VI paves the way to the proposed model of the dissertation entity by creating a pre‐

understanding of the structural properties of ecosystem architecture and their implications for value creation and appropriation, complementing the established actor‐structure duality of publication V. In publication VI, the identified sources of architectural advantage in multi‐sided markets include complementarity, asset mobility, homing, positive network effects (direct and indirect), negative congestion externalities, bargaining power, switching costs (and lock‐in), and bottleneck position. In addition, these sources of architectural advantage were proposed to have links to competition between platforms and industry life cycle phase.

Table 5 offers a summary of the publications. Each publication has a contribution per se to the specific theoretical tradition it builds upon. Further, as the dissertation is an aggregate of publications, each publication has a contribution to the dissertation entity. The contribution of the dissertation itself is discussed in the next chapter.

Table5:Summaryofthepublications PUBLICATIONIPUBLICATIONIIPUBLICATIONIIIPUBLICATIONIVPUBLICATIONVPUBLICATIONVI TypeofpaperConceptual ConceptualQualitativeQualitative QuantitativeConceptual Research question(s)or thepurposeof thepaper

Q1: What possibilities and challenges does the two‐ sided application market bring to an intermediary? Q2: How do the possibilities and challenges influence the market dynamics?

Q1: How can value be co‐ created in different delivery channel choices?

Q1: What is the role of initiativetaking from different actors in a business ecosystem in the development of offerings?

The purpose is to develop a concept of a partnership business model and to examine its usability in an exploratory casestudy related to the IMS service development platform and collaboration between an operator and its partners.

The purpose is to examine different market entry timings and a range of strategic decisions in competition between ecosystems.

Q1: How do platform owners create and sustain architectural advantage in multi‐sided markets? Theoretical backgroundLiterature ontwo and multi‐sidedplatform‐ based markets.

Literature onbusiness models, value co‐creation, and two and multi‐sided platform‐based markets.

Literatureon management and governance of innovation network,business ecosystem, co‐evolution and first‐mover advantage (paralleled with initiative taking).

Literature onbusiness models and inter‐ organizational relationships (focusing especially on complementary resources as a rationale and structural determinant) Literature ontwo and multi‐sidedplatform‐ based markets and first‐ mover advantage

Literature ontwo and multi‐sidedplatform based markets, business ecosystems and industry architecture MainfindingsF1: Ecosystem architecture can vary within the same industry and thesuggested dimensions of variations include complementarity, asset mobility, and membership criteria. F2: Managing innovation leverage by standardizing a technological interface could increase asset mobility.

F1: Ecosystem architecture can vary in terms of complementarity and stratification, which can influence the nature of interdependence and value co‐creation possibilities between the hub firm and the complementors.

F1: In an ecosystem, there is a need for a hub firm to lead the development (i.e., market creation or the development of a new product) as a whole.

F2:

Further, there is a need for several different actors to take the initiative (i.e., occupy the hub position) at the right time and atthe right place.

F1: The complementary resources include information about the customers, marketing and distribution resources to achieve the critical mass of customers, easy‐to‐use technological interfaces for complementors to create complementing products or services, technical support (technical documentation, reports and test results) and the creation of test and development environment.

F1: Quality of the platform is positively related to the relative performance of the follower platforms. F2: Low customer price as early as possible provides the best results for the follower platform.

F1: Thearchitectural advantage model incorporates the following sources: complementarity, asset mobility, homing, positive network effects (direct and indirect), negative congestion externalities, bargaining power, switching costs (and lock‐ in), and bottleneck position.

Table5:Summaryofthepublications(continued) ConclusionsC1: Dimensions of variation represent the structural properties of the design of ecosystem architecture. C2:Thestructural properties could be managed for example with orchestration processes.

C1:The taxonomyof ecosystem architecture based on the dimensions ofcomplementarity and stratification.

C1: The consideration of strategic actions (i.e., takinginitiative, becoming a hub or orchestrating) in networksor ecosystems should gobeyond the boundaries of a single organizationand its closest partner network and an ecosystem‐level analysis should be employed with multi‐ actor perspective.

C1: Complementarity is a dimension of the structural template (i.e., business model or ecosystem architecture) which defines how the transactions between a focal firm and the complementorsare organized. C2: The nature and extent ofcomplementary resources aredecision‐ making criteria for the complementorwhen deciding which ecosystem to join and which hub to complement.

C1: Asymmetric pricing in regard to different ecosystem members is of importance; price optimization is a more effective strategic action than the creation of switching costs.

C1: Theproposed architectural advantage model suggests that there are structural properties which can be used and leveraged to change the architecture in order for the focal firm to appropriate more value. Contributionto thedissertation entity

Publication I locates the research problem, creates a pre‐understanding of the structural properties of ecosystem architecture and sets out relevant directions for future studies andtheory developed.

Based on publicationI, publication II extends the comparative analysis to taxonomywith the dimension of complementarity and stratification.

PublicationIII brings attention tothe management and governanceof the innovation network to analyze multi‐actor collaboration at the ecosystem level to complement the pre‐ understanding on structural properties created in publications I and II PublicationIVprovides an in‐depth examination of complementarity as a property of the structural template defining multi‐ actor collaboration.

Publication V focuses on how central actors can turn the position ina structure intoan advantage (i.e., increase in value appropriation and relative performance) thus moving beyond the structural discussionon ecosystem level.

Publication VIcreatesa pre‐understanding of the full variety of structural dimensionswhich influence the variation in the architecture and further value creation and appropriation.

5 CONCLUSIONS

The purpose of the study was to enhance the understanding of ecosystem architecture design and to examine it both from an exogenous and an endogenous perspective. In addition to the contributions of the individual publications of part II presented in the previous section, the focus of this chapter is to communicate the overall contribution of the dissertation in terms of the theoretical and managerial implications. The discussion is based on the findings reported in the individual publications and on the overall understanding gained during the research process. The first section provides answers to the research questions which have guided the examination. The second section assesses the theoretical implications of the study, including its contributions to the emerging literature on ecosystem architecture design and to network theory. The implications for managers, business leaders and managers are discussed in the third section. The fourth section addresses the limitations of the present study. The chapter concludes with the fifth section and suggestions for future research avenues.

5.1 Review of the results of the study and answering the research questions

In order to address the first sub‐question, what the structural properties of ecosystem architecture are, the dissertation proposes a distinction between exogenous and endogenous ecosystem architecture design properties, based on the multiple‐lens examination of three different ecosystem architecture conceptions and the conceptual and empirical research in the complementary publications. The study reviewed three different, emerging streams of ecosystem architecture literature, namely boundary, design and orchestration, and conducted empirical, qualitative and quantitative research. Distinct structural properties of ecosystem architecture were identified and then further categorized into endogenous structural properties related more to a specific position in architecture and exogenous structural properties referring to the “building blocks” of the architecture. Exogenous structural properties, arising from the inherent characteristics of ecosystem architecture, are exogenous from the hub firm point of view and cannot easily be

In document Ecosystem architecture design: endogenous and exogenous structural properties (sivua 43-0)