Building a Business Ecosystem: Deriving a Framework and Testing It with Case Studies
Abstract
Ecosystem-based business models have received significant attention and praise in both business and research literature. Endeavours in building ecosystems sometimes prove successful, with firms transitioning to ecosystems enjoying valuation multiples significantly higher than their conventional peers. In practice, this entails firms expanding beyond their core offerings, such as a bank venturing into e-commerce. However, despite the evident interest in ecosystem-based business models, up to 85% of such ecosystems ultimately fail. Despite these notable failure rates, there has been limited discussion in research literature regarding the composition of businesses that yield reliable results within ecosystems. In this paper,
we first propose a “Hook-Engage-Monetize (HEM)” framework for understanding ecosystem business composition. We apply this framework to nine case studies of successful and less successful ecosystems from nine different countries. Our analysis demonstrates the potential of HEM as a tool for selecting businesses for ecosystems and for guiding future quantitative financial research in this area.
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