Business ecosystems are partnerships in which three or more companies interact as equals to create a service offering that none of the parties would have been able to offer alone. They are made possible by the dramatic reduction in transaction costs unleashed by digitalization, as well as the disappearing boundaries between industries and individual companies.

An example of a business ecosystem is an automotive manufacturer that wants to break into the business of private and public mobility by teaming up with an existing online platform and an insurance company to create and implement new business ideas.

In this case, the OEM and the insurance company are likely to be large organizations, and the platform operator is probably a startup. Still, the parties work together on a narrowly defined project as if they were equals, with one company designated as an orchestrator.

Business ecosystems offer smaller companies the resources and experience of their larger counterparts, but they are equally important for the big companies, too. First, opportunities for corporates to grow intrinsically or through M&A have, to a large part, been exhausted. And many corporate innovation efforts follow “old” industry logic, which often leads to common constraints for the initiatives, even if they exist in a company incubator.

When it is a business ecosystem pursuing an idea, the dynamic is different, and a unique benefit emerges for the larger company. Incubators and accelerators are a place where innovation and growth can take place. Why not build business ecosystems together with startups from the accelerator or establish business ecosystems in the incubator with startups as potential partners? Doing so would enable the benefits of existing startup initiatives to be used in a completely different way.

Roland Berger, together with the Helvetia Inno­vation Lab at the University of St. Gallen, has studied business ecosystems and found that three questions must be answered before the value networks can work effectively.

• Is there a clear value proposition or a strategic issue to serve as the basis for a future value proposition?
• Does the solution require more than two partners, and what are the risks facing each of the involved partners?
• Does the expected benefit (total margin from the val­ue proposition) justify the risk and the cost to all par­ticipants as well as the transaction costs incurred by the orchestrator, e.g. to pay for the required IT platform and orchestration personnel?

Before proceeding, it’s important to distinguish business ecosystems from digital platforms, which are mostly used to reduce transaction costs and produce network effects that increase the benefits for the customers as the number of providers on the platform increases. Business ecosystems, on the other hand, are designed to transform a company’s value chain into a value network of multiple partners.

It’s also important to understand the risks, especially those to corporate partners.They may be attracted by the competitive edge, new markets and critical resources that come from the business ecosystem, but corporates also face risks. These include entrepreneurial risk, as well as the risk of high investment in coordination efforts and mutual dependencies.To manage these risks, we recommend corporates take the role as the orchestrator and act as a complementor. They should also participate in multiple ecosystems (e.g. use a portfolio approach) to minimize the risk of failure in a single ecosystem.

In the end, if the business ecosystem is working as it should, corporates and startups will be interlinked in a way that creates synergies – synergies that would not have been possible just a few years ago.