The future of business is in ecosystems

Last week, I said that the future of news is entrepreneurial (not institutional). Today, a sequel: The future of business is in ecosystems (not conglomerates or industries).

At the Foursquare conference last week, I was struck by the miss-by-a-mile worldviews held by the chiefs of big, old conglomerates and the entrepreneurs starting new, nimble companies. The conference is off the record, so I won’t quote anyone by name. And in truth, these are the same conversations I hear often elsewhere. Having these different tribes conveniently in the same room merely focused the contrast for me.

In one moment, a very successful mogully man was slack-jawed in amazement at how little money – “$50,000!” – one of three entrepreneurs had used to start another fast-growing enterprise. The big man thinks big – that’s what made him big. The small guys think small and get big by using existing platforms and depending on their users to like and market them. To the new guys, it’s so obvious.

Here was the key moment for me last week: In a discussion about the importance of distribution, some start-up guys – each the creators of new enterprises that took off like gun shots – were asked by a representative of the big, old club which company they would most want to do distribution deals with. The start-up guys cocked their heads like confused puppies. Why would we want to do that? they asked. What was unsaid: Doing a deal with one company would be so limiting. We get our distribution through customers and developers, through embedding and APIs and social connections. That’s how we grew so big so fast for so little. Don’t you see that?

No, they don’t.

This week, we see this contrast, too, in Rupert Murdoch’s threat – he thinks it’s a threat – to cut off Google. Nose. Face. Cut. Spite. Murdoch – whodoesn’t use the internet – does not see how distribution works today. He does not understand that being open to the link economy brings him free distribution, free marketing, great benefit. That’s because he, like his fellow old machers, won by taking control rather than giving it up. This new world is utterly inside-out from the world they built. It breaks all their rules and makes new ones (which is what I tried to analyze in What Would Google Do?). That’s what makes it so damned hard for them to understand it.

In our New Business Models for News at CUNY, we saw quickly that a big, old newspaper company was not going to be replaced by a big, new newspaper company but that instead, news would come more and more from ecosystems made up of scores of companies operating under different means, motives, and models, each dependent on the others to optimize their success. That is why we built in networks that enable separate sites to join, creating critical mass they can sell to advertisers. That is also why we factored in the benefit of platforms, cutting their infrastructure costs to near-zero.

And there, I believe, is the structure of the future of business in the new, post-industrial, decentralized, opened economy. Oh, sure, every economy has always been an ecosystem made up of interdependent relationships. But they were based on zero-sum arithmetic: take and control so others cannot. They work at arm’s length. They negotiate every relationship.

Sure, even in the huggy ecosystem, companies fight and compete. But in an ecosystem-based economy, companies benefit – they find efficiency and growth – by working collaboratively. As I see it, the new economy and its opportunities will be built in three layers:

1. Platforms. There’s tremendous benefit in building a platform and the more people use to succeed, the more the platform succeeds. Google, YouTube, Facebook, Twitter, Amazon, eBay – you know all the examples.

2. Entrepreneurial enterprises.
Thanks to the platforms, it’s incredibly inexpensive to start new companies. It’s also a helluva lot cheaper to fail (and try again). This is why I believe that the future of news – and many other industries – is entrepreneurial: because it can be. It’s not just media and its bits. It’s manufacturing (because you can use others’ factories and distribution channels and your own customers as your platforms).

3. Networks. It is still necessary to gather the smalls together into bigs: audience brought together so advertisers can buy access to them more easily; purchasing brought together to get better prices. So there is business in creating and serving these networks.

For the sake a PowerPoint, a diagram of the three layers of an ecosystem-based economy:

ecosystemchart500

In our New Business Models for News Project, this is how I (crudely) drew the ecosystem for news.

ecosystemnews

How do you draw the conglomerate-based industry? With boxes, each separate, with arrows pointing to each other at a distance. Simplistic? Sure, but the change in the worldview of the new economy looks that basic when you hear the two tribes trying to understand each other.

And if you haven’t had enough of my silly charts, here’s another on video.

  • Pingback: Glyn Moody (glynmoody) 's status on Wednesday, 11-Nov-09 13:46:47 UTC - Identi.ca

  • http://www.simsblog.typepad.com Judy Sims

    Absolutely bang-on Jeff. Most media execs still don’t understand that the new economics of media are completely different. It is no longer “build it and they will come”. It’s build it, distribute it and network it and “you will find them”.

    • http://tourdehood.wordpress.com misterarthur

      You’re right – but I think it’s more distribute it and network it and “they’ll find you”

  • Jameel Gordon

    Hi Jeff,

    I’m trying to understand this. Are you saying it’s easier for mogully man, to follow his hearts desire and go in the business of everything? He can develop all his ideas for cheap (cut out the middle man), build it within the market itself, and possibly connect the ones that work?

  • Tom

    The distribution / dissemination of news might work like that. Nevertheless, when it comes to monetizing the massive traffic a site then receives, the old rule of supply & demand still holds. The more news websites are out there, the more pressure on advertising rates will we see.

    One might argue that only those sites that provide non-exclusive (=commodity) content will be in trouble. But then, with the web making redundant content transparent immediately (think Google News), aren’t we heading towards new monopolies? Not yesterday’s regional monopolies, but “thematic monopolies”? Specialization at its best.

    Hm, I personally like the concept of several media covering the same topic from different angles…

    • http://www.jtrigsby.com jtrigsby

      It seems your argument assumes that each, or at least several, news sites will become huge and draw “massive traffic.” I think the reality of where we are headed is that there will likely be very few huge sites but rather boutique & niche content providers that are then aggregated by larger distribution platforms (ie Twitter search, Google search).

      The easy example here is a reporter that focuses on a widget. If you want to know what’s going on with that widget or in that widget’s industry, you read this person. His actual content may be found in many places, but its still his, his byline, his brand. THAT now enables him to monetize his brand. He may get rewards or spiffs for driving x amount of traffic to the aggregator, and the aggregator monetizes the traffic stream. Everybody wins.

      • http://wyman.us/ Bob Wyman

        jtrigsby wrote: “boutique & niche content providers that are then aggregated by larger distribution platforms (ie Twitter search, Google search).”

        Yes, except that while “search” will always be important, it can’t be the “larger distribution platform.” Search is a discovery tool that is most useful when you know what you’re looking for. Thus, for most of the market, search will always complement the distribution platform, not replace it. The average user, who seeks “current awareness, ” serendipity and entertainment in the news reading experience, will almost always be better served by a human curated and edited product.

        bob wyman

    • http://wyman.us/ Bob Wyman

      Tom wrote: “thematic monopolies”?
      No. What you would expect is something more like “thematic oligopoly.” Within each “theme” you would find a small number of organizations who jointly dominate the production of content related to that theme. Competition between the producers would largely be based on “voice” or “perspective.” For instance, for any “theme” related to politics, government or economics, you would probably have a left, right and center producer who each addressed different, somewhat disjoint markets for theme-related content. Other dimensions or qualities would distinguish those organizations who covered non-political themes such as specific industries, technologies, sports, arts, etc. (Dimensions of competition would include: technical depth, geography, sub-theme specialization, etc.)

      So, while we once had a market of 1,500 or so newspapers each of whom was building a geographically defined local monopoly over production and delivery of “general news and information,” in the future we will have a market served by a much larger number of individual theme-oriented content producers who share a much smaller number of delivery platforms. (Note: There is no reason why platforms would be geographically focused. The New York Time, for instance, already has a San Francisco Bay Area “hyperlocal” blog. They might serve a Grand Forks, ND hyperlocal blog in the future…) While you have “consolidation” within each theme and a reduction in the number of delivery platforms, you’ll also see a tremendous fragmentation of the actual content producers — which would lead to increased quality of journalism and an increase in the breadth of coverage.

      The pressure to increase journalistic quality (where “quality” is defined by the market), comes as a result of the reduction in barriers to market entry that result from creating a market for smaller, more focused content producers. Today, it is terribly difficult to get into the business of producing a “newspaper” since to do so, you have to be able to generate content covering a vast number of themes — you need to cover all themes even though you don’t necessarily have to produce the “best” coverage for any particular theme. However, in a world where the content production market has been fragmented into themes and delivery is via aggregating platforms or “new news organizations”, entry into the market depends only on being able to serve *one* theme better than the existing producers. The result will be increased competition to claim dominance over the various content themes via increased quality within each theme. But, remember that we’ll have oligopolies within each theme… That means that this competition will NOT result in a reduction of revenues to the reigning dominant producers at any time.

      bob wyman

      • http://en.wikipedia.org/wiki/Zero-profit_condition Tom

        Bob, let’s assume you’re right and the Internet is reducing barriers to entry to almost zero. We would then see a very fragmented news market with numerous entrepreneurs creating oligopolies around specific (niche) topics. We would see new entrants producing at very low marginal cost in a very transparent and competitive environment. It would be pros, semi-pros and amateurs in almost perfect competition.

        To my ears this sounds a lot like a “zero-profit condition” (see http://en.wikipedia.org/wiki/Zero-profit_condition). With stiff competition, low barriers to entry and very low marginal cost, there’s going to be a lot of pressure on prices!

        So, to come back to your last sentence: I’m not so sure about the overall revenue pie staying as big as it is. However, I’m almost certain that being *profitable* would be a lot harder.

      • http://wyman.us/ Bob Wyman

        Tom, new technologies may be reducing barriers to entry but they aren’t completely removing them. Also, in the real world, transaction costs and other factors ensure that markets are not, in fact, infinitely divisible. Thus, the opportunity to profit will remain.

  • Pingback: Die neue LinkedIn-Twitter-Anbindung: Was wird aus Xings Walled Gar - Beitrag - Twittwoch e. V.

  • http://www.proxiti.info/apropos Olivier Bauchat – Proxiti

    Mr Jarvis,

    Thank you for this article and all others.

    I want to apply some of your excellent principles by building the first French hyperlocal news network : the ProXiti Network.

    1- I’ve build a begining of information platform
    2- I’m an entrepreneur
    3- I got a network of 6000 internet websites

    But i’m not a rich man and i’m currently searching business angels or VC’s who have the same view and want to support my initiative and developping this network.

    If you agree with the vision of Jeff Jarvis, and want other precisions contact me : contact@proxiti.com

  • http://blog.fourcher.net Mike Fourcher

    I’ve come to the same conclusion and have been preaching the same in Chicago. I would go even farther to suggest that these smaller enterprises are the new “category killers” in the media business. They target one specific niche and take that business away from the bigger behemoths.

    This is a repeat of what happened to the retail business in the 1980’s.

  • http://www.planetwebfoot.com Cheryl H

    Excellent post! I have had similar conversations when visiting my parents for dinner. My father was an executive and a very large natural resource company and I am employed by a social networking software upstart. I have tried to explain to him the new fluidity in the business model with little success,I will be sending him a link to this article. Thanks for the information

  • http://www.talmont.com Ralph Talmont

    Jeff,
    Spot on.

    Our up-start is actually building a publishing platform along these principles. After wrestling with the theory of it for months I’ve finally coined the phrase “participatory free market” which is the best way I can describe what the next incarnation of capitalism may look like. (Blog post http://talmont.com/blog/?p=68) What do you think?
    Publishing has changed and those execs who continue to paddle against the current are going to get very exhausted very soon.

    Have a great day,
    RT

  • Pingback: Wednesday links: Black November Abnormal Returns

  • Pingback: Negócios e ecossistemas : Ponto Media

  • http://thepulse.ca shawnpetriw

    Provocation: What happens when the platforms supporting the ecosystem go the way of GeoCities?

    Let’s not forget that YouTube, Twitter and Facebook lose piles of money. As do many other platforms we are assuming will always be there.

    Remember we agree to the terms of service of the various sites – and that gives them permission to turn off the switch at any time, without notice.

    Perhaps the solution becomes having your own video upload and other services instead of YouTube, etc., but then that erodes the “cheap platforms” argument and requires a relatively large investment in tech (development, maintenance, storage, bandwidth) etc.

    Furthermore, so much of the infrastructure relies on advertising – is that really sustainable?

  • Kevin

    I would argue that Murdoch is not quite as out of touch as many are saying. He is saber-rattling. He knows (or at least his people know) how much traffic Google brings. What he (and other newspaper publishers) are wanting is for Google to pay them a percentage of the ad money they are making on the links. Broadcast television plays the same game with cable. They threaten to pull local signals while in retransmission agreements and hope the local audiences will bring some pressure to the cable operator.

  • Shyam Kapur

    This is an excellent article pointing out how fast the world is changing in this new information age. I am also one of those entrepreneurs bootstrapping a company from the ground up in the midst of intense competition from a number of big and small companies. I do this because I believe that the future is going to be free flow of data. Also, I am working to equip the common man to have for free the tools necessary to make sense of all this data that is flowing past an incredible pace. My creation TipTop, the first and only truly semantic search engine, is now available in a beta version at http://FeelTipTop.com Please give it a try. If you like it, please share it and prove Jeff, me and other like-minded folks right. Let us not just dream about a golden new age but make it happen together.

  • http://realvirtuality.wordpress.com Alex

    I can’t say I always agree with you, Jeff, but I think this analysis – and forecast – is absolutely spot on. What all this means, however, is that there will probably be less people to employ because small businesses (even if there’s many of them) need fewer employees because there’s less logistics to be handled.

    I like the term ‘ecosystem’. I would like to be part of an ecosystem. Makes me feel all warm and fuzzy inside.

  • Pingback: Thursday Morning Edition 11/12/09 « Coney Media

  • http://www.uitzendplaats.nl Online uitzendbureau

    Jeff go on. This is a post from Holland. I read your book and I’m impressed about it. Also the posted on your blog are amazing. We are also busy with a new start-up Uitzendplaats.nl | online uitzendbureau. We help people finding a job easier. Hour business it’s free for businesses and workers, and that is helping use. People don’t have to go any more to a office in the centre off the city, they can now direct contact businesses for work behind the computer online.

    Thank you, Franck Antonides

  • Martijn Linssen

    Thank you very much Jeff, great post.

    Murdoch probably doesn’t even know that the http://www.fox.com/robots.txt is put there by his company to draw in the Google traffic. Oh well, enough of that, the whole thing’s almost an anachronism

    The dinosaurs are dying out. They can’t keep up with the evolution of business and IT, just because they’re too big.

    It’s not companies who make people (“You know A? He works for XYZ”), it’s people who give value to networks (“Yeah, XYZ. The network A, B and C participate in”)

    I am positive I’ve reached, been influenced by, and influenced not a lot fewer people in the past half year on LinkedIn, Twitter and Yammer, than in the 10+ years before at my own company

    Networking is not a brandnew concept per se, but the effort involved is now so much smaller. And, for free. The availability and ease has just grown from 0.x% to 90%-ish

    Will we see a splitting up of big companies? Will they become financially or organisationally independent? Will there be certain max sizes to a company across industries? I do think so!

  • http://www.comradity.com Katherine Warman Kern

    “This week, we see this contrast, too, in Rupert Murdoch’s threat – he thinks it’s a threat – to cut off Google. Nose. Face. Cut. Spite. Murdoch – whodoesn’t use the internet – does not see how distribution works today. He does not understand that being open to the link economy brings him free distribution, free marketing, great benefit.”

    Here’s another way to look at it. Nose. Face. Cut. Spite. Journalists who do not know what the dollar value of online distribution is.

    Google is paying Murdoch and Twitter hundreds of millions of $ to include MySpace and Twitter content in their search index. That’s meaningless babble. Google is paying NOTHING to include the content written by professional journalists in their search index.

    Writers and their advocates are battling Google in court for royalties for Google e-books.

    Journalists don’t seem to care that Google is commercializing [read:making money on] their content on Google News Reader.

    Maybe book writers, who make money on royalties, are acutely aware of the potential to be screwed by Google. Journalists, who are paid a salary, are blind to the dollar value of their content and its relationship to their paycheck.

    Katherine Warman Kern
    @comradity

    • Andy Freeman

      > Google is paying Murdoch and Twitter hundreds of millions of $ to include MySpace and Twitter content in their search index. That’s meaningless babble. Google is paying NOTHING to include the content written by professional journalists in their search index.

      I hope that Google isn’t paying. (I don’t know for sure.)

      All of those “professional journalists” (or rather, their employers) are free to block Google and other search engines (using robots.txt) whenever they feel cheated.

      Why should Google pay? I don’t see anyone else who does reviews or commentary paying. “Professional journalists” don’t pay sources (or at least aren’t supposed to).

      Search engines deliver readers to your site. At that point, it’s up to you to make money.

      However, feel free to set up a “news search site” with exclusive content from as many “professional journalists” as you can get. (It’s actually really easy to build a search engine – search for “lucene”. Plus, there are a lot of Yahoo search folks looking for a new gig.) Block google and the other search engines.

      That will give you all of the search engine results page revenue.

      The risk is that readers may not follow you, that they may be satisfied with news from folks who won’t join your club.

      Let’s find out.

  • http://www.onesherpa.com Andee Sellman, One Sherpa

    Hi Jeff,
    I absolutely love your thoughts. Coming from the baby boomer demographic which thrived on power and control it was quite a mind set change for me to move out of corporate and try and build a small business of my own. Your thought provoking analysis is wonderful and the description of the struggle going on in media at the moment is fascinating.
    It was so interesting to me to find out that the Alexa traffic tool has Google and Facebook as the top two sites with about 60% of the world traffic. Now that’s something that is hard to ignore when you want to get news out to people.

  • http://athousandnations.com Patri Friedman

    I am trying to apply the same paradigm to government :). Move from a few large, slow, old, centralized states to many small, quick-moving, distributed states. See Let A Thousand Nations Bloom and seasteading.org, you might find some resonance with our ideas :).

  • Pingback: Worte zum Wochenende « Real Virtuality

  • Pingback: Footprints (13.11.09) | Chris Deary

  • Pingback: Outside.in blog » More on the #NewBiz Conference at CUNY

  • Pingback: Creativing :: ESPNs anti-social media policy, Facebook’s ad innovations, and change isn’t just for advertising anymore | doug schumacher

  • http://www.jonbuscall.com jon buscall

    Murdoch’s approach reminds me of the typically aging male CEOs I seem to come up against who don’t want to listen, don’t want to change and think that by being an ostrich it will all go away.

    Of course we’re putting our businesses at risk by using platforms that can be turned off at the flick of a switch but it gets us heard. Hiding behind a paywall or whacking the customer with intrusive marketing isn’t going to win an audience.
    The platforms will change, I am sure, but the praxis won’t.

    Love the ecosystem metaphor. That’s spot on.

  • Pingback: Gestalt IT, the Craigslist of new tech journalism | Social Media Stories

  • Pingback: MixedRealities :: How can virtual worlds contribute to the post-industrial eco-systems?

  • Pingback: Eine Metapher für den neuen Journalismus « Real Virtuality

  • Pingback: Rubber Republic - News

  • Pingback: Your Reputation is NOT Cheap: Passphrases over Passwords | self-governed

  • Pingback: Reflections on CUNY graduate school New Journalism Models Hyperlocal camp « Christopher Wink

  • Pingback: links for 2009-12-05 « Glenna DeRoy

  • Pingback: The Park Paradigm - Platforms, Markets and Bytes (video)

  • Pingback: Community 2.0: How the disruption of media and government has birthed a smarter community « Kn?

  • http://www.planetwebfoot.com PLANETwebfoot

    Great article!!! It’s very interesting to see the differences between the ‘old school’ and ‘new school’ way of thinking when it comes to business and marketing practices. I think it’s foolish to think that the big conglomerates are so set in their ways that they are and will be unwilling to adapt to the changing face of internet marketing and PR. Yes, there may be some moaning, complaining and ‘saber-rattling’ but when all is said and done they will either need to adapt or lose at least some of their market to new ideas and technologies that are available at their customers’ fingertips.
    I have a tendancy to agree that the future of news and information distribution will be focused into networks and niche markets based on the interests of the consumers in those markets. It only makes sense that people aren’t going to want to waste their time and money on information that they aren’t even going to read.
    Why buy a newspaper, even for only a couple of dollars, when you are only going to be reading one section of it when that information is readily available elsewhere for free?

  • Pingback: Cutting-edge journalism: the new news ecosystem  | CUNY Journalism School at SABEW

  • Pingback: Warum muss mit Journalismus Geld verdient werden? « Real Virtuality

  • Pingback: Medial Digital» Linktipps Neu » Linktipps zum Wochenstart: Projekt Offene Daten zu Parteispenden

  • Pingback: Community 2.0: How the disruption of media and government has birthed a smarter community | A Smarter Planet Blog

  • Pingback: Parsee » Blog Archive » Future of the business

  • Pingback: Why Murdoch’s legal threats against search engines are hollow | Richard Hartley