James F. "Jim" Moore

April 6, 2010

excerpt from “Business ecosystems and the view from the firm” Antitrust Bulletin, Fall 2005

Filed under: 1 — jim @ 11:58 am

The Antitrust Bulletin/Fall 2005

Business ecosystems and the view from the firm

BY JAMES F. MOORE

I. Introduction

For more than sixty years, markets and hierarchies have dominated our thinking about economic organization. The classic statement of markets and hierarchies as the two primary forms of economic organization is by Ronald H. Coase, The Nature of the Firm (1937) reprinted in OLIVER E. WILLIAMSON & SIDNEY G. WINTER (eds.), THE NATURE OF THE FIRM: ORIGINS, EVOLUTION, AND DEVELOPMENT (1991; subsequent economic policy study based on this dichotomy is surveyed in WILLIAMSON & WINTER (ibid.) and its systematic implications for antitrust in OLIVER E. WILLIAMSON, MARKETS AND HIERARCHIES: ANALYSIS AND ANTITRUST IMPLICATIONS (1975).

This paper suggests that a third form, the ecosystem organizational form, has now become so important in practice that it should be accorded equal recognition in theory and in policy-making. Markets, hierarchies and ecosystems are the three pillars of modern business thinking, and should provide the foundation for competition policy, regulation, and antitrust actions. I am pleased to contribute to this issue of the Antitrust Bulletin as a member of the American Antitrust Institute Invitational Roundtable on Complexity, Networks and the Modernization of Antitrust, American Antitrust Institute, April 26, 2005.

The ecosystem form of economic coordination has become pervasive on the business landscape. For comprehensive treatment of the business ecosystem organizational form and its applications, see JAMES F. MOORE, THE DEATH OF COMPETITION: LEADERSHIP AND STRATEGY IN THE AGE OF BUSINESS ECOSYSTEMS (1996); and MARCO IANSITI & ROY LEVIEN, THE KEYSTONE

ADVANTAGE: WHAT THE NEW DYNAMICS OF BUSINESS ECOSYSTEMS MEAN FOR STRATEGY, INNOVATION AND SUSTAINABILITY (2004) Business ecosystems surround, permeate, and reshape markets and hierarchies. Managers establish business ecosystems to coordinate innovation across complementary contributions arising within multiple markets and hierarchies.

The activities of business ecosystems set the agenda for “co-evolution” of markets and hierarchies and their outputs. Co-evolution is a core concept in studies of complex adaptive systems and the economy, focusing attention on reciprocal cycles of adaptation among one or more elements of an economic system. Uses of the term in business and economics range from the highly abstract and mathematical, to the empirical. For a mathematical treatment see PHILIP W. ANDERSON, KENNETH J. ARROW, DAVID PINES (ed), THE ECONOMY AS A COMPLEX ADAPTIVE SYSTEM (1988). Strategists such as MOORE (1996) op. cit., and IANSITI & LEVIEN (2004) op. cit. provide detailed empirical descriptions of co-evolution in action, demonstrating reciprocal interactions among technologies, business processes, products and services, market mechanisms, firm and ecosystem structures, and policy and regulation. CARLISS Y. BALDWIN & KIM B. CLARK, DESIGN RULES: THE POWER OF MODULARITY (2000) present highly detailed and fascinating studies of co-evolution between technical modularity in products, and the networks of firms that arise to produce them.

The focus of companies in most sectors has progressed from competing on efficiency and effectiveness to competing on the basis of continuous innovation. As companies have accelerated innovation in their own businesses, they have discovered that they can’t change the world alone. For every advance there are complementary innovations that must be joined in order that customers can benefit. These complementary advances often must co-evolve across company lines because no single firm has all of the required specialized knowledge and managerial resources necessary for the whole system. Indeed, a substantial solution to a customer need may require the participation of dozens or even hundreds of diverse contributors, each of which is a master of fast-moving, complex and subtle developments in its own domain. For a discussion of how innovation is coordinated by the business ecosystem organizational form, see James F. Moore, Predators and Prey: A New Ecology of Competition, HARVARD BUSINESS REVIEW, (1883)

A senior executive might say “we need to promote a business ecosystem around our new product” or “the iTunes ecosystem is becoming important for our company” or “our business ecosystem is becoming more standards-based and open.” The term “business ecosystem” and its plural, “business ecosystems,” refer to intentional communities of economic actors whose individual business activities share in some large measure the fate of the whole community. Companies making accessories for the Apple iPod can be said to be members of the iPod business community or, more evocatively, the iPod business ecosystem. The same can be said of the entertainment companies that license music through iTunes, the iPod-connected music downloading site, as well as the consumers who purchase and enjoy the music.

A business ecosystem, as we will see, can also be conceived as a network of interdependent niches that in turn are occupied by organizations. These niches can be said to be more or less open, to the degree to which they embrace alternative contributors.

One of the most exciting ideas in business today is that business ecosystems can be “opened up” to the entire world of potential contributions and creative participants.

In order for companies to co-evolve their goods and services, they must find ways to align their visions, so that research and development investments are mutually supportive, and capital investments and operating processes are synergistic. Companies must establish interfaces and protocols for putting together their contributions. Most important they must dialogue closely with customers so that what is created is what the customer wants and is willing to pay for. Mastering these challenges, of what might be called “distributed creativity,” is the aim of the ecosystem organizational form. The conventional hierarchical firm does not effectively address the breadth and importance of inter-firm relationships. The unaided market is not able to achieve inter-firm coordination sufficient to justify players aligning their dreams, plans, and product road maps. A seminal study of the failure of firms and/or markets to achieve such coordination and the rise of ecosystem-style “flexible specialization” is MICHAEL J. PIORE & CHARLES F. SABEL: THE SECOND INDUSTRIAL DIVIDE: POSSIBILITIES FOR PROSPERITY (1984)

Courts and regulators need to recognize the ecosystem form, appreciate its nature, structure and operation, and seek to support its contributions to pro-competitive and pro-innovative social outcomes. Antitrust cases that do not recognize this level of organization run the risk of ignoring and possibly damaging important collaborative, innovation-furthering public goods. Cases also run the risk of being used by opponents of a particular business ecosystem to undermine the effectiveness of an innovating community, thus making the courts unwitting tools of narrow competitive interests and inadvertently impairing collective advances that might benefit the whole society. In instances when leaders of business ecosystems seek to use their power in predatory or narrowly collusive ways, it is vital that regulators and courts be able to “connect the dots” and understand why particular actions are being undertaken, and anticipate their likely anticompetitive consequences.

Filed under: 1 — jim @ 10:56 am

James F. Moore May 2010

James F. Moore is an expert on leadership and change in large scale social, economic, and technical systems. His current projects include:

1. Study of health and health care systems, hoping to go beyond current approaches to reform by examining the systems relationships among consumer behavior, health care coordination and process improvement, information technology, and law and public policy.

2. Maintaining an ongoing action-research study of the Internet and political and social change, focusing on the role of citizen participation and new forms of interactive media.

3. Continuing a twenty-year participation in the evolution of the computer and communication sector, with primary concern for innovation, business strategy and leadership, industry structure, and the role of volunteerism and popular movements such as Open Source Software. Currently Jim is engaged with the development of personal media networks and new types of groups and communities.

Jim is a private investor involved in the venture capital and corporate venture business, and has served on the boards of several companies and organizations, including two public companies.

Jim is a human rights advocate and is involved in politics, and works to bridge the global digital divide. He is a supporter of both Amnesty International and Human Rights Watch. Jim volunteered full-time in the campaign to stop the genocide in Darfur, Sudan in 2004-2005. He was co-founder and served for more than a year as the day-to-day editor for the web campaign “Sudan: Passion of the Present” and helped develop and sustain a number of other activist individuals and organizations including Save Darfur and the Genocide Intervention Fund/Genocide Intervention Network. These organizations are part of a broader campaign to establish a world capability to prevent or intervene to halt and recover from genocidal situations.

In 2003 and 2004 he served as the National Director of Internet and Information Services for the US Presidential Campaign of Howard Dean, overseeing all social media as well as technology infrastructure.

In 2003 he wrote “The Second Superpower Rears its Beautiful Head” which considers how citizens worldwide are joining through communications technology to engage international institutions and shape global policy. The article became an Internet phenomenon and was reviewed in publications ranging from the National Journal to the New York Times. In 2004 Jim was honored by the 4th World Forum on e-Democracy as one of the top 25 individuals, organizations and companies that are having the greatest impact on the way the Internet is changing politics worldwide.

From 2000-2004 he was a Senior Fellow at Harvard Law School, promoting legal reforms in developing countries in order to support entrepreneurship and technology diffusion. While at the law school he organized and chaired the board of Hewlett-Packard’s “E-inclusion” program to create technology for and in developing world economies. He founded the Open Economies Project to promote laws supportive of digital entrepreneurs. As part of a team sponsored by the Markel Foundation, he advised the South African Government on policies to promote digital development, including telecom law reforms. He served as a member of the United States delegation to the Digital Opportunity Task Force of the G8 Group of Nations, and was an adviser to the United Nations ICT Task Force and to the ICT initiative of the World Economic Forum.

Jim had an early career as a strategic management consultant. From 1989-2000 he was the founder and CEO of GeoPartners Research, a management consulting and investment strategy firm, where his clients ranged from Muppets creator Jim Henson to AT&T, Hewlett-Packard, Intel and Royal Dutch Shell. In addition to management consulting, Jim was involved in corporate venturing on behalf of AT&T Ventures, Intel Capital, GE Capital and Softbank (the largest single investor in the Internet economy, and the only major investor to sustain its success). He also advised and invested in start up companies, and served on the board of directors of two public companies.

Jim has written widely on business topics. He developed the concept of “business ecosystems” to describe networks of companies that collaborate and co-evolve to generate economic value. His Harvard Business Review article on business ecosystems, “Predators and Prey: A New Ecology of Competition,” won the McKinsey Award for best article of the year for 1993. His 1996 book “The Death of Competition: Leadership and Strategy in the Age of Business Ecosystems” won numerous awards (“one of the ten best books of the year,” BusinessWeek, and “one of the ten best books of the decade for entrepreneurs,” Wall Street Journal) and was a best-seller. It was translated into and published in several languages including Chinese. His work was featured in publications including Fortune, BusinessWeek, The New York Times, The Wall Street Journal. He appeared on national television, including being interviewed on the Charlie Rose Show on PBS.

While most of his business career has been in high technology, his early work was in health care organizations. These included Boston Children’s Hospital (MA) community primary care service, Wrentham State School (MA) services for the developmentally disabled, the Bedford (MA) VA Hospital alcoholism service, the Santa Clara County (CA) mental health system, and American Medical International (CA), national health management. His doctoral thesis grew out of a multi-year study of Alcoholics Anonymous as an informal but systematic environment for community and personal healing. He has continued to follow the evolution of clinical practice under changing conditions of policy and organization, society, technology, and patient/clinician/community behavior.

He was an early friend and adviser to the Harvard AIDS Institute and the Harvard Society and Health Program (now Harvard Department of Society, Human Development and Health), and is currently involved with the Harvard Center for Population and Development Studies. He is a member of the Leadership Council of the Harvard School of Public Health.

Moore earned a doctorate in Human Development from Harvard University in 1983, where he combined studies in organizations with cognitive and developmental psychology. He was a post-doc in organizations at Stanford University, and conducted research at Stanford and Harvard business schools. He earned his undergraduate degree in 1976 from The Evergreen State College in Washington State—one of the most innovative organizations in public higher education. He is active in college affairs, and received the Bud Koons Award for Service from the college in 2006.

Moore lives in Massachusetts with his wife Sarah Moore, a lawyer and minister. He has three children, one in college, one who attends public Cambridge Rindge and Latin School, and one infant.

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