Business Ecosystems

The mobile phone industry has experienced dramatic changes in the last five years. In the West, while Apple has dominated the industry and Samsung has risen in popularity, previously established players such as Nokia, Sony-Ericson and Motorola have almost disappeared. In the Chinese market, the new smartphone company Xiaomi sold almost 19 million smartphones in 2013, up from only 400,000 in 2011. By taking advantage of established manufacturing resources and integrating them on its business platform, Xiaomi successfully imitated Apple’s business model, tailoring it to the Chinese mobile phone market. It co-opted the Chinese mobile phone ecosystem into its value-creation network, delivering unprecedented rapid growth and creating the most popular Chinese domestic mobile phone brand within two years.

By studying exploratory cases in the mobile computing industry, this chapter seeks to explore and discuss emerging industrial issues with which the business ecosystem research is booming.

This chapter will re-examine how the relevant manufacturing system theories tackle the emerging industrial challenges: uncertainty and interoperability which identify the research gaps — the potential and demanding area as the business ecosystem theory. Hence, the business ecosystems research will be systematically reviewed since the theory addressed well the industrial challenges.

This chapter has two aims:

ARM is the world’s leading semiconductor IP (intellectual property) supplier. IP¹ is designed to generate a specific function, which is equivalent to the heart of semiconductor chips. ARM has offered the IP license business model to those IC design companies. Following the business model, IC design companies develop their chips by combining different IPs from ARM with their own design to deliver the chips. ARM charges license fees to partners using ARM’s IP to design other chips. ARM also gets a royalty fee when partners ship ARM-IP-based chips. In order to attract more users, ARM set up a ‘connected community’ in order to provide their partners with a range of tools, software and systems IP to facilitate adoption and incorporation (Finlay 2002). ARM also licenses the IPs to chip manufacturers to improve their technique for manufacturing ARM-based chips.² ARM-IP-based chips are used by different OEMs for different digital markets including the mobile, computing, embedded and home market.

Intel is an IDM (Integrated Device Manufacturer) company and is the top player in the semiconductor industry. Intel was founded on July 18, 1968, based in Santa Clara, California. Intel mostly focused on the computer processor unit (CPU) and also made motherboard chipsets, network interface controllers, flash memory, graphic chips, embedded processors and so on.¹ In 2010, Intel had around 70 per cent of the world processor market, with the 2nd largest manufacturer, AMD, having around 26 per cent. The rest only accounted for very little market share.

MediaTek (MTK), founded in 1997,¹ was a leading IC design company for wireless communications and digital multimedia solutions. The company was a market leader and well known for its single-chip solutions for mobile chips, digital TV, DVD and VCD products. MTK got the reputation mostly because of their Turnkey solutions (single-chip solution) for mobile phone in Shenzhen region of China in 2008. MTK started this business in 2006, and became one of the biggest contributors with 20 per cent of world mobile chip shipments in south China, followed by the top players such as Qualcomm, Infineon, TI (Zhu & Shi 2010). The Turnkey solution integrated most chips inside the mobile phone board, which was presented to customers in a ready-to-use condition. The single-chip style lowered the technology barrier for SMEs with little R&D capability. Meanwhile many customers shortened the design-cycle time and reduced the design cost thereby raising their competitiveness in the market.² Actually, the Turnkey model was not new at all. MTK started the Turnkey model with the first of their products — the VCD chip, which was followed by DVD and mobile phone chips. The reason why Turnkey was highlighted in the mobile phone market was the huge shipment of mobile phones compared with those of the VCD or DVD markets because the mobile phones were bought by almost every individual, whereas VCD players were bought by families.

Learning from the three cases, by combining the common features of each phase, this chapter is to develop the typical life cycle of a business ecosystem. Moore’s life cycle was mainly developed from a stable PC industry, while our data was collected from the emerging mobile computing with very dynamic and uncertain nature, which will update Moore’s business ecosystem life cycle.

As learned from the review of existing literature, the constructs of a business ecosystem should be addressed further as the system could be understood through exploring its constructive elements (Von Bertalanffy 1969). Accordingly, many scholars applied this constructs study to different levels of manufacturing systems: in 1984, Hayes and Wheelwright highlighted constructs study by the framework of ‘structure-infrastructure’ model since constructive elements had a big impact on system manufacturing strategy (Hayes & Wheelwright 1984). In 1998, Shi and Gregory applied this framework at the international manufacturing system level as intra-firm level (Shi & Gregory 1998) and Harland addressed the interfirm supply-chain level (Harland 1996) as well. Other scholars also paid attention to global engineering networks (Zhang et al. 2007) and global supply network level (Srai & Gregory 2008). As a result, this chapter has adopted the framework of ‘structure-infrastructure’ to deconstruct the business ecosystem in order to understand the business ecosystem itself.

This chapter categorises the different configuration patterns of business ecosystems through the data gathered from exploratory and main cases. The outcome of this chapter focuses on the following objectives: The configuration pattern study has been mentioned by a few papers, but has not been well explored and highlighted in previous studies (Shi & Gregory 1998; Zhang et al. 2007). There are two reasons to suggest that each business ecosystem has its own configuration pattern.

The five-phase business ecosystem life cycle (BELC) has been developed as well as the ecosystems’ construct and configuration patterns along the life cycle. This chapter especially addresses the question of how firms nurture business ecosystems under the life-cycle stages: how they deal with the business ecosystems’ constructive elements and develop different configuration patterns. What are the key constructive elements out of those eight elements during the nurturing process?

This chapter concludes the book by summarising the research findings, discussing their theoretical and practical implications, and suggesting future research directions as below: