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Kay Plantes is an MIT-trained economist, business strategy consultant, columnist and author. Business model innovation, strategic leadership and smart economic policies are her professional passions. A former Madison, WI resident, Kay now resides in San Diego, CA. The views on her blog are not those of her employer, IBM.

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December 15th, 2011

The good, bad and ugly of ecosystems

 

A platform acts like a magnet drawing participants into an ecosystem that advances a market.

Qualcomm Life, a fully owned subsidiary of Qualcomm that focuses on the wireless healthcare marketplace, is on track to create a well-tuned ecosystem to accelerate the adoption of wireless solutions. Wireless healthcare devices will identify problems in patients with chronic diseases earlier and move care to lower cost locations, thereby lowering the cost of care.

About ecosystems

Ecosystems – a concept appropriated from biology that’s now actively used in business strategy literature and the investment community – are loosely knit networks of organizations that serve to create whole solutions. The network operates through conscious and unconscious collaboration and competition involving the platform company and other organizations using it.

Far more than a supply chain, ecosystems also include complementary product and service providers, distributors, government agencies and even customers. For example, Microsoft’s ecosystem includes multiple software and IT-service companies, educators and others that collectively enabled Microsoft’s operating system platform to become the standard solution for the PC world.

The advantages of an ecosystem extend to more than the platform creators. The success of game developer Zynga (creator of Farmville) stemmed from being part of the ecosystem created around the Facebook platform. The same is true for Rovio Entertainment Ltd. (creator of Angry Birds), which grew with the Apple operating system platform.  Both platform creator and ecosystem members can ride a wave of growth when the ecosystem works well.

About Qualcomm Life’s 2net platform and hub

A wave of growth – that’s what Qualcomm Life is hoping to accomplish by introducing its 2net platform and hub. The 2net platform is Qualcomm Life’s FDA-approved wireless medical data system for safely, reliably and seamlessly storing, encrypting and transferring data from medical devices to a hub, thus making data available to designated users. How does it work? Here’s an example.

A wireless blood glucose monitoring device could supply data over the platform to help diabetics’ primary care physicians monitor their patients’ health, to help patients track their health, and to alert elderly diabetics’ assisted living helpers when more care-oversight might be needed. The open platform can work for all brands of wireless health care devices, connecting devices, companies and people to advance patient care 24-7-365 while meeting with HIPPA requirements for patient privacy.

The platform and hub will significantly reduce product development costs across the wireless healthcare marketplace. Early in my career I was part of a team that created a real time electronic anesthesia record-keeping device. The success of the new-to-market product category was undermined by the amount of time patient-monitoring company partners and my company’s engineers spent interfacing our respective products.

Qualcomm Life steps into this type of mess. Here’s one example from Don Jones, vice president of global strategy and market development for Qualcomm Life, shared during an interview with InformationWeek Healthcare. “The 2net platform  will make it very easy to integrate mobile health devices and in-home health devices to Electronic Health Records (EHR), alleviating the need for EHR companies to integrate each manufacturer’s device.”

The downside of ecosystems

Ecosystems can occassionally hurt participants. For many years, Swatch Group, the world’s largest watch manufacturer, advanced the success of the Swiss watch industry by supplying mechanical movements and other components to enable other companies to supply high end watches bearing the coveted and profitable “Swiss made” label.  Swatch Group’s production parts platform lowered Swatch Group’s overall costs while enabling close to 500 other companies to join or remain in the market, enriching the brand awareness and image of Swiss made watches globally. (See my earlier blog on why Swatch Group saved its industry.)

Starting January 1, 2012, Swatch Group, according to the New York Times, plans to reduce sales to other watch makers and possibly end them “to concentrate on producing watches with higher profit margins and to make sure it has enough supplies on hand for its own brands, including Longines, Omega, Tissot and Breguet.”  Swatch Group parts customers, like Edox, (which produces 70,000 to 90,000 Swiss made watches a year with an average price of $1,600), are unprepared and likely financially unable to backward integrate on their own. And partnering with other watchmakers may be precluded given Swatch Group’s potential timing. Is it any wonder that Edox  joined eight other Swiss watch companies to sue Swatch Group?

Are your ecosystems working in your business models’ favor? Are there ecosystems you should be part of? Could you be a platform company? Or, have you incorrectly placed ecosystem thinking on the back burner? What’s your 2012-2015 ecosystem strategy?


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