Wednesday, February 11, 2009

Ecosystems: sustainability or innovation, pick one (at a time)

Business folk, particularly those in IT, love the ecosystem metaphor (perhaps erroneously). One of the reasons, I realized listening to Pamela Passman on a panel at the Silicon Flatirons annual conference, is that it provides validation to both incumbents and challengers. Passman advocated creating a healthy internet ecosystem, and emphasized the importance of both sustainability and innovation. [*]

Both of these are characteristics of ecosystems, but not, as I understand it, at the same time. For example, mammals could only start rise after the extinction of the dinosaurs, prompted by a massive meteor strike or large-scale volcanism. The innovation that led to Homo Sapiens resulted from a catastrophic breakdown in ecosystem sustainability.

The adaptive cycle model developed by Buzz Holling and his collaborators has ecosystems constantly cycling through four stages: exploitation or growth, a mature conservation phase, a catastrophic release, and finally reorganization leading to new growth. To take the example of a forest: a fire, drought, or insect infestation triggers the breakdown (release) of the intricate and productive biological web that had been established during the preceding conservation phase. This sets the stage for reorganization, during which species that had been excluded in the prior conservation phase move in. As they become established, exploitation of open niches leads to growth. Eventually, we reach another conservation phase. Everything settles down; all the niches become filled, and the network of connections between biomass and nutrients becomes increasingly tight. This is a stable and very productive stage, from the point of view of resource utilization and biomass production. However, the tight linkages make it fragile to sudden release, starting the cycle again.

Ecosystems therefore oscillate between stability and innovation, swinging through repeated crises. By focusing on the appropriate phase, both incumbents and newcomers can see themselves in an ecosystem view. During an exploitation/growth phase, which we have with the Internet at the moment, newcomers are validated by looking back to the preceding reorganization phase which led to their rise, and (re-)emerging incumbents look forward to the impending conservation phase during which they will reap their reward.

What does sustainability mean in this context? Certainly not eternal stability, since that’s not possible. At best, it’s management the ecosystem to limit the severity of the release phases while still generating enough restructuring to allow innovation.

The moral of this story is that ecosystems talk hides but does not end the endless tussle between newcomers and incumbents. Wise governance needs to find a way to extract the social benefits of both, while recognizing that each represents the eclipse of the other.


[*] Shane Greenstein had a great paper at the conference on what makes for "healthy" behavior in the internet industry; forthcoming in the Journal on Telecommunications and High Technology Law. For a brief summary, see Rocky Radar


Shafeen Charania said...

Brilliant! I wish I'd read your entry before I wrote this:

In fact, I will update mine to include this because I believe that your thoughts on ecosystem apply equally to individual organizations. As they grow to a certain point, they become ecosystems unto themselves, and must (to maintain vibrancy) undergo a similar process to the one you described.

Thanks Pierre!

Brett Glass said...

Pierre, how does your model account for the role of a third kind of actor: government? At that annual content, we saw many lawyers and lobbyists pushing government to enter the field. As a competitor entering an ecosystem that was previously dominated by incumbents, my small company fears not the incumbents (we are doing very well against them, thank you) but government regulation. Regulation is much kinder to large incumbents than it is to newcomers, because they have deep pockets and buildings full of people whose entire job is to deal with regulation. New entrants and challengers can hardly afford that. What's more, it is extremely difficult to obtain capital to enter a regulated industry; investors run from investments that might be threatened by government regulation. And regulation likewise deters innovation by boxing newcomers in; they can't do what isn't anticipated by the regulators. So, it was scary to see that so many of the participants in that event were not only pro-regulation, but smugly treating it as a virtual fait accompli. Do they realize that, in the broadband/Internet sphere, their ambitions -- if realized -- would likely bring about a duopoly, greatly harming consumer choice and innovation?