The Future of Business Is in Ecosystems

Last week, I said that the future of news is entrepreneurial (not institutional). Today, a sequel: The future of business is in ecosystems (not conglomerates or industries).

At the Foursquare conference last week, I was struck by the miss-by-a-mile worldviews held by the chiefs of big, old conglomerates and the entrepreneurs starting new, nimble companies. The conference is off the record, so I won’t quote anyone by name. And in truth, these are the same conversations I hear often elsewhere. Having these different tribes conveniently in the same room merely focused the contrast for me.

In one moment, a very successful mogully man was slack-jawed in amazement at how little money – “$50,000!” – one of three entrepreneurs had used to start another fast-growing enterprise. The big man thinks big – that’s what made him big. The small guys think small and get big by using existing platforms and depending on their users to like and market them. To the new guys, it’s so obvious.

Here was the key moment for me last week: In a discussion about the importance of distribution, some start-up guys – each the creators of new enterprises that took off like gun shots – were asked by a representative of the big, old club which company they would most want to do distribution deals with. The start-up guys cocked their heads like confused puppies. Why would we want to do that? they asked. What was unsaid: Doing a deal with one company would be so limiting. We get our distribution through customers and developers, through embedding and APIs and social connections. That’s how we grew so big so fast for so little. Don’t you see that?

No, they don’t.

This week, we see this contrast, too, in Rupert Murdoch’s threat – he thinks it’s a threat – to cut off Google (GOOG). Nose. Face. Cut. Spite. Murdoch – who doesn’t use the internet – does not see how distribution works today. He does not understand that being open to the link economy brings him free distribution, free marketing, great benefit. That’s because he, like his fellow old machers, won by taking control rather than giving it up. This new world is utterly inside-out from the world they built. It breaks all their rules and makes new ones (which is what I tried to analyze in What Would Google Do?). That’s what makes it so damned hard for them to understand it.

In our New Business Models for News at CUNY, we saw quickly that a big, old newspaper company was not going to be replaced by a big, new newspaper company but that instead, news would come more and more from ecosystems made up of scores of companies operating under different means, motives, and models, each dependent on the others to optimize their success. That is why we built in networks that enable separate sites to join, creating critical mass they can sell to advertisers. That is also why we factored in the benefit of platforms, cutting their infrastructure costs to near-zero.

And there, I believe, is the structure of the future of business in the new, post-industrial, decentralized, opened economy. Oh, sure, every economy has always been an ecosystem made up of interdependent relationships. But they were based on zero-sum arithmetic: take and control so others cannot. They work at arm’s length. They negotiate every relationship.

Sure, even in the huggy ecosystem, companies fight and compete. But in an ecosystem-based economy, companies benefit – they find efficiency and growth – by working collaboratively. As I see it, the new economy and its opportunities will be built in three layers:

1. Platforms. There’s tremendous benefit in building a platform and the more people use to succeed, the more the platform succeeds. Google, YouTube, Facebook, Twitter, Amazon (AMZN), eBay (EBAY) – you know all the examples.

2. Entrepreneurial enterprises. Thanks to the platforms, it’s incredibly inexpensive to start new companies. It’s also a helluva lot cheaper to fail (and try again). This is why I believe that the future of news – and many other industries – is entrepreneurial: because it can be. It’s not just media and its bits. It’s manufacturing (because you can use others’ factories and distribution channels and your own customers as your platforms).

3. Networks. It is still necessary to gather the smalls together into bigs: audience brought together so advertisers can buy access to them more easily; purchasing brought together to get better prices. So there is business in creating and serving these networks.

For the sake a PowerPoint, a diagram of the three layers of an ecosystem-based economy:

In our New Business Models for News Project, this is how I (crudely) drew the ecosystem for news.

How do you draw the conglomerate-based industry? With boxes, each separate, with arrows pointing to each other at a distance. Simplistic? Sure, but the change in the worldview of the new economy looks that basic when you hear the two tribes trying to understand each other.

And if you haven’t had enough of my silly charts, here’s another on video.

Comments

[jack dee:]

hmmm , an article supporting the very basis of your business.
It is like an Exon writing about oil, or the mouse telling us how the cat should live in a cage.


When all the free loading online newspapers have killed off the quality papers, where are you going to get your news from?

Oh wait, your site is already pulling its headlines from FOX, great that really going to improve our world insight, thanks...

big is not bad, big is not dumb, and suggesting that the old guys just dont get is pathetic, they just have not figured out how to stop you stealing thier work and using it to profit..

Nov 12 02:08 PM

[CGP:]

@Jack Dee:
I wonder if the freeloading argument was around when free network broadcast TV got into the news business? TV by itself wasn't a strong enough concept to replace newspapers, maybe the internet and bloggers also take a place alongside them. It seems the blogs break a good deal of news now (although journalistic standards across the board may not be what people expect them to be - though I believe consensus will eventually set "better" standards).

Maybe instead of using "old guys" as a perjorative we should say whoever grasps optimal size, level and concept of "control" will be a winner. Would it be more PC to dump on inflexible, type-A, power hungry moguls?

I think this article has a grasp on the "new normal"; seeing the headline I thought it was another article pounding the table for AAPL - "ecosystem, ecosystem, ecosystem!!!!"

Nov 12 04:37 PM

[CGP:]

btw Hearst and the yellow journalism years weren't shining moments for print but newspapers eventually evolved to be respected institutions

Nov 12 04:41 PM

[iranewlander:]

I once read a freebie online
Too bad that it started not mine
But I downloaded links
and worked out the kinks
Until some thought my story was fine.
==========
own it, sell it, move on. But if you can't monetize it when it's hot, you ain't gonna do it when it's not.
wereport.com

Nov 13 12:04 AM

[jack dee:]

The Networks pay reporters to go into the field, they pay investigators.
The BBC maintains staff across the globe, ABC NBC etc are not freeloading they put time effort and money into news. they have never been free loaders like OPs own websites.


On Nov 12 04:37 PM CGP wrote:

> @Jack Dee:
> I wonder if the freeloading argument was around when free network
> broadcast TV got into the news business? TV by itself wasn't a strong
> enough concept to replace newspapers, maybe the internet and bloggers
> also take a place alongside them. It seems the blogs break a good
> deal of news now (although journalistic standards across the board
> may not be what people expect them to be - though I believe consensus
> will eventually set "better" standards).
>
> Maybe instead of using "old guys" as a perjorative we should say
> whoever grasps optimal size, level and concept of "control" will
> be a winner. Would it be more PC to dump on inflexible, type-A, power
> hungry moguls?
>
> I think this article has a grasp on the "new normal"; seeing the
> headline I thought it was another article pounding the table for
> AAPL - "ecosystem, ecosystem, ecosystem!!!!"

Nov 13 01:09 PM