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featureed image Published 2019-10-15, by Kellie Auman

How Ecosystems are Reshaping Vertical Markets in Modern Industry

From the dawn of the first industrial revolution in the Victorian era, and until very recently, vertical markets were the dominant paradigm in business operation. The idea of having a “food chain” with strictly defined hierarchies has long been baked into business practices, and this linear operational design produced all of the most famous businesses of the 20th Century.

Ford. Exxon. Walmart. Proctor & Gamble. AT&T. These were just some of the names that defined industry throughout the last hundred years, and even as recently as ten years ago, they were still among the most valuable companies in the US.

Yet today, every one of them has fallen off the list of highest-valued companies. Today, those slots are filled by names like Apple, Amazon, Alphabet (Google), and Microsoft. Furthermore, the valuation of those companies has also shot sky-high. In 2009, Exxon-Mobil was #1 with a valuation of about $340bn. Today? It’s Apple, valued at a trillion dollars.

The shape of modern business has been entirely redefined in the span of a single generation – practically a single decade. And it’s almost entirely due to the rise of business ecosystems.

Disruption And Displacement

Digitally-transformed, Internet-enabled businesses have skyrocketed in both value and influence, but it’s not simply because of technology. It’s because of how they have leveraged that technology. The creation and embrace of ecosystem-based business models has allowed these operations to sprint past those still using the last-century vertical market model.

The differences between the two models are striking:

  • Cooperation-based organization: The vertical model is inherently cutthroat, often encouraging resource-wasting competition even within its own business structure. The ecosystem model is designed around cooperation, with each partner within the ecosystem embracing a “rising tide lifts all boats” mentality.
  • Demand-side focus: Ecosystems move away from the old “supply side” standard of creating products, then creating demand, to instead focus on the demand side of the equation. With a world full of demand, there’s far less need to try to create demand. Ecosystems fulfill the needs already being expressed.
  • Broader performance goals: Paradoxically, it seems that no longer focusing solely on financial returns and rent extraction can lead to greater profits. Ecosystems focus on growing their assets, reach, networking, and learnability – then profit naturally follows.
  • Better built-in regulation: Because ecosystems are viewed as cooperatives of semi-equals (some more equal than others) rather than strict hierarchies, they are better equipped to self-regulate. This will help to avoid the intrusive and often ill-considered government regulation that was so often imposed upon vertical market structures.
  • Diversification breeds stability. True to their name, vertical markets tended towards linearity. One disruption in the chain could (and often did) cause disaster. On the other hand, because of their distributed, somewhat amorphous nature, ecosystems are more resilient and able to overcome failures in individual nodes.

The result? For the past ten years, the story of the business world has been of highly flexible ecosystem-based operations disrupting and displacing highly-entrenched vertical models. From Amazon to Uber, business ecosystems are clearly the wave of the future.

FUSE Enables Ecosystems

FUSE by LogicBay takes our years of experience creating ecosystem platforms for individual operations, and takes the concept to a whole new level. FUSE is an open platform for constructing diverse and robust ecosystems.

To learn how FUSE can quickly revolutionize your business, bringing you closer than ever to your business partners and customers, contact us today.