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Technology Innovation Management Review
June 2012
18
www.timreview.ca
Ecosystem Under Construction:
An Action Research Study on Entrepreneurship
in a Business Ecosystem
Marikka Heikkilä and Leni Kuivaniemi
Introduction
Today, we see a lot of new services and innovative busi-
ness ideas that mix the traditional boundaries of busi-
ness sectors and of companies. Innovations can be
found in the form of new products or services, cost-re-
ducing process improvements, or innovative business
models and methods. Many practitioners point out that
it is rather easy to come up with new ideas, but the real
challenge is in putting them into practice. This task is
especially demanding when innovations occur outside
the exclusive control and the supporting mechanisms
of traditional business firms (Muegge, 2011;
timreview.ca/
article/495
). Instead, an ecosystem consisting of multiple
expertises, capabilities, and resources should be cre-
ated around the innovation.
In our previous studies (Heikkilä, 2010;
tinyurl.com/
346kgel
),
we observed that the expansion of a business
ecosystem follows a process of collaborative business
modelling consisting of two parallel processes: i) the sys
-
tematic analysis, improvement, and adjustment of a
business model and its components and ii) the organiza
-
tional change-management process. That is, at the
same time as the business model is being developed, a
substantial amount of effort has to be put into change
management, to select the collaborators and escort the
partners to harmonize the network strategy, to syn
-
chronize its operations, as well as to evaluate the feasib
-
ility of the operational business model. In this article,
we concentrate on the very first tasks of change manage
-
ment, setting the scene, and selecting the players. We ex
-
plore how an ecosystem evolves through a case study of
physical activity prescriptions. The aim is to recognize
the different domains of players that are or should be in
-
volved in the ecosystem under construction.
The remainder of the paper is organized as follows. In
the next section, we review the existing literature on
business ecosystems. Thereafter we present the case
study and draw some conclusions from the case. We
end the article with a summary, contributions and limit-
ations of this study, and concluding remarks and sug-
gestions for future work.
In recent years, we have seen increasing interest in new service concepts that take advant-
age of the capabilities of business ecosystems instead of single companies. In this article,
we describe how a business ecosystem begins to develop around a service business idea
proposed by an entrepreneur. We aim to recognize the different domains of players that
are or should be involved in the ecosystem while it is under construction. The article con-
cludes with an ecosystem model consisting of six sub-ecosystems having different change
drivers and clockspeeds.
All great things are based on a series of small things, and all
the small things need hard work.
Kimmo Rauhala
Growth venturer and entrepreneur
Owner of Suomen Liikunta-apteekki
(Finnish Sport Pharmacy)
“
”
Technology Innovation Management Review
June 2012
19
www.timreview.ca
An Action Research Study on Entrepreneurship in a Business Ecosystem
Marikka Heikkilä and Leni Kuivaniemi
Relevant Research on Business Ecosystems
Recently it has become quite common to conceptualize
business networks by comparing them to biological
ecosystems (Iansiti and Levien, 2004a;
tinyurl.com/
bvn8zkv
). Similar to a biological ecosystem, a business
ecosystem is formed by large, loosely coupled networks
of entities. These entities such as firms, organizations,
entrepreneurs, etc. interact with each other and the
health and performance of each actor is dependent on
the health and performance of the whole. That is, the
actors are simultaneously influenced by their own cap-
abilities and their interaction ties with the other players
in the ecosystem (Håkansson and Ford, 2002;
tinyurl.com/bwq298m
). The trend of many firms looking for
new opportunities beyond their existing industry explic-
ates (Solaimani et al., 2010;
tinyurl.com/czoh69o
) that con-
temporary ecosystems are not restricted to any single
industry but cross a variety of industries (Moore, 1993;
tinyurl.com/cygzy6o
).
Perhaps the major difference between the concepts of
business ecosystems and business networks is in the
variety of actors. Typically, business networks are con-
sidered as groups of firms co-operating in designing,
producing, and delivering products to customers. Busi-
ness ecosystems, in turn, include partners and subcon-
tractors but also complementors, competitors,
customers, and potential collaborator companies, as
well as public bodies, local incubators, investors, and
even research institutes and universities (Moore, 1998;
tinyurl.com/7cghul7
). Each ecosystem typically encom-
passes several domains that it shares with other ecosys-
tems. It is expected to have a heterogeneous structure,
with actors adopting dramatically different roles that in-
fluence different aspects of the stability and productiv-
ity of the whole. This especially is the case when
complex knowledge is needed and the sources of ex-
pertise are widely dispersed (Powell et al., 1996;
tinyurl.com/6t4btal
).
Innovative ideas may come from large corporations or
organizations, but often they are suggested and pushed
forward by entrepreneurs, or in spin-off companies.
Many of the seeds of new businesses die young, but per-
haps are revitalised at some later date when more fer-
tile ground is available – this includes an ecosystem
that supports the growth. As Iansiti and Levien (2004b;
tinyurl.com/7t4xgvn
) point out, it is merely an academic ex-
ercise to try to draw the boundaries of an ecosystem. In-
stead, it is more helpful to recognize the types of
organizations or players that should be involved in or-
der to provide a suitable environment for new business
to prosper.
Moore (1993;
tinyurl.com/cygzy6o
) describes a business
ecosystem as consisting of layers (Figure 1), which cor-
respond to differing levels of commitment to the busi-
ness. The core business layer consists of the parties
forming the heart of the business. In traditional busi-
Figure 1. The layers of a business ecosystem*
*Adapted from Moore (1993; tinyurl.com/cygzy6o)
Technology Innovation Management Review
June 2012
20
www.timreview.ca
An Action Research Study on Entrepreneurship in a Business Ecosystem
Marikka Heikkilä and Leni Kuivaniemi
ness, this layer would be run by a single company or the
supply chain would be coordinated by the focal com-
pany. Alternatively, it can also be formed by a network
of several companies each taking care of part of the
core business. The next layer, the extended enterprise,
widens the view of the business supply chain to include
the customers, complementors and second-layer sup-
pliers, as well as standard-setting bodies in the particu-
lar field of business. The outermost layer adds trade
associations, unions, universities and other research
bodies, investors, and stakeholders to the business eco-
system. Even though they are perhaps not directly in-
volved in the business operations, these parties may
have a significant effect on the success of the business.
Pragmatic, Abductive Action Research
“Fighting Low Activity by Business Creation” (LA;
fighting
la.com/research
) is a research project focusing on prevent-
ing health problems that typical of Western industrial-
ized countries (e.g., obesity, Type 2 diabetes) by
developing significant global export service products
based on Finnish expertise in the domains of health, ex-
ercise, and well-being. These service innovations are
turned into new service and e-business models that are
exploited by a network of new ventures and corpora-
tions, and they are spread with help of the supporting
ecosystem. This ecosystem is expected to have a signi-
ficant impact on public health.
Our research method is action research (
tinyurl.com/
2rarbb
), where researchers actively participate in the
business decisions by producing knowledge for the eco-
system players. Whereas other research methods seek
to study organizational phenomena but not to change
them, the action researcher is simultaneously studying
the phenomenon and creating organizational change
(Heikkilä, 2010:
tinyurl.com/7f2g6ze
; Aspegren et al., 2011:
tinyurl.com/cn2sxwp
).
Action research is an established research method in so-
cial sciences, and it builds on a pragmatist philosophy
(Baskerville and Myers, 2004
tinyurl.com/8xqaeos
). In prag-
matism, the investigator and the research object are as-
sumed to be interactively linked so that the findings are
literally created as the investigation proceeds (Guba
and Lincoln, 1994;
tinyurl.com/bl4kgyh
).
As action researchers, we are actively taking part in
building the supporting ecosystem that we call an Eco-
system under Construction (EuC), which is the object
of the study described in this article. We aim to make
purposeful use of propositions, models, or theories,
and to question whether they are useful in practice “in
the sense of helping people to better cope with the
world or to create better organizations” (Wicks and
Freeman, 1998;
tinyurl.com/bt23uno
).
Our theoretical reasoning is moving back and forth
between empirical discovery and theory in abductive
manner (Paavola, 2006;
tinyurl.com/cg26esw
). Even though
it has been heavily criticized, abduction is seen as a
method to test new ideas or to make sense of new situ-
ations (Richardson and Kramer, 2006;
tinyurl.com/
cblzcmq
), which is the case in the creation of an ecosys-
tem. The original theoretical framework is successively
modified, partly as a result of unanticipated empirical
findings, but also because of theoretical insights gained
during the process (Dubois and Gadde, 2002;
tinyurl.com/d9bu5vb
). By helping to create the EuC, which
combines partners and researchers with previous know-
ledge and understanding from several complementing
areas, such as business, law, information systems,
sports, and medicine, the ecosystem can help to
provide new theoretical explanations and practical
methods to find potential cures for the western world’s
problem of meagre physical activity.
Case Study: Physical Activity Prescriptions
The case example examined in this article is “physical
activity prescription”, a service innovation in prevent-
ive healthcare. The idea of boosting the physical activ-
ity of patients with prescriptions had been suggested by
several researchers in the late 90s. The first pilots were
carried out by public instances (marked as Phase 0 in
Figure 2). The adoption of the sports prescriptions
however, died down after the public financing ceased.
Phase 1 presents the new start, where the development
is driven by an entrepreneur who has invested a lot of
time in creating and promoting a business model re-
quiring close collaboration of several companies. Fig-
ure 2 illustrates how previously the ecosystem
consisted of mainly the most outer layer: universities
and research institutes working with several unions and
associations. In Phase 1, the ecosystem-building started
from the core, with partners from a university and a
funding institute. Phase 1 is led by an entrepreneur
who has years of experience in the field and has know-
ledge of the research projects on physical activity pre-
scriptions. Even though physical activity prescriptions
have been trialled before, this business proposal is the
first one that also gives financial incentives for the com-
panies to provide the service.
Technology Innovation Management Review
June 2012
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An Action Research Study on Entrepreneurship in a Business Ecosystem
Marikka Heikkilä and Leni Kuivaniemi
Key players
The entrepreneur built the core of the around a net-
work of companies. He saw that three parties are
needed to guarantee the viability of the business:
1. Private medical clinics
2. Pharmacies
3. The entrepreneur’s own company
Well-known private medical clinics provide credibility
and critical mass. Initially, there were several prospects
for the core partners, and those that had the most in-
terest in the business idea were met in person. After ne-
gotiations, the leading private medical centre in
Finland, Terveystalo (
terveystalo.com/en/
), was selected as
a core contributor. Its core assets are doctors and a
large customer base: the company has over 2,000 practi-
tioners providing occupational healthcare in more than
150 locations. It also has the customer contacts of com-
panies that purchase occupational health services for
their employees. This relationship provides a good fit
with the planned business model in which occupation-
al healthcare patients are considered to be the most im-
portant segment of the new service. The role of the
medical clinic in this business is to prescribe physical
activity to its patients, especially within occupational
healthcare.
Easy access and continuance of customer relationships
can be guaranteed via pharmacies located near the cus-
tomers. In Finland, there is at least one pharmacy in
each community; in most communities there are mul-
tiple pharmacies. Most of the pharmacies are privately
owned. The activities of pharmacies are controlled with
licences provided by The Finnish Medicines Agency, a
central administrative agency operating under the Min-
istry of Social Affairs and Health. Currently the majority
of pharmacies’ turnover comes from prescription
drugs, but most pharmacies are seeking business op-
portunities to provide additional services. Pharmacies
seem to have a good chance of success with their new
strategy because a recent survey shows that customers
are highly satisfied with pharmacy services
(Apteekkariliitto, 2010;
tinyurl.com/bo5omlf
). After negoti-
ations, a chain of 64 privately owned pharmacies,
Avainapteekit Ltd. (
avainapteekit.fi
) joined the team. Their
task in related to physical activity prescription is coun-
selling and ongoing measurement of the improvements
in the physical health of the patients.
The entrepreneur’s own company (Finnish Sport Phar-
macy) coordinates the operations. Whereas in previous
experiments the researchers and public instances were
leading the formation of the ecosystem, in this case the
leader is the entrepreneur. His company is focusing on
exactly those issues pointed out in previous trials as the
most critical to success. The entrepreneur plays the
Figure 2. Evolution of the case ecosystem
Technology Innovation Management Review
June 2012
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An Action Research Study on Entrepreneurship in a Business Ecosystem
Marikka Heikkilä and Leni Kuivaniemi
main role in the creation of a fluent process that fits
with the daily practice of practitioners and customers.
He will provide an electronic prescription system that
makes this process possible. He will also provide train-
ing to the doctors and pharmacists, which is needed for
this new service. Also a large pharmaceutical company
in the Finnish prescription and OTC (over the counter)
market, ratiopharm Oy (
ratiopharm.fi
), is committed to
helping train practitioners.
Business model
The “value add” in the new business model does not
come from automation of the processes but from an en-
tirely new process consisting of tasks carried out in mul-
tiple organizations. The process starts at a medical
clinic, where the doctor prescribes medicines and phys-
ical exercise to the patient suffering from “wealth dis-
eases”. As the patient goes regularly the pharmacy for
the medicine, the pharmacist measures their physical
health and provides advice on how to improve it fur-
ther. These measures are also available to the doctor
when the patient is coming to the next check-up.
The business model requires information systems that
facilitate and support this process (Mooney et al., 1996;
tinyurl.com/cau7sbc
). Currently, there are no information
systems or measurement equipment in place that
would transfer necessary information between the part-
ners. That is why Phase 2 of the ecosystem-construc-
tion process, which is now underway, involves business
negotiations with information systems providers and
health monitoring equipment suppliers. Information
technology is actually the major cost issue to solve be-
fore a proof of concept can demonstrate whether the
business model is fiscally sound. For proof of concept, a
minimalist prototype or pilot is needed to demonstrate
how the business idea will play out in the real world
and why all the core companies are needed to provide
the services.
Ecosystem sub-sectors
In this case study, based on previous literature and on
workshops where the business model was discussed,
we added the actual names of the potential players to
Figures 1 and 2. Currently, the challenge in boosting the
growth of the ecosystem is how to recognize who are
the next actors or areas that should be contacted and in-
volved in collaboration. To overcome this challenge, it
is useful to divide the ecosystem map into differing sub-
sectors as we have done in Figure 3. The sectors are re-
cognized from business modelling literature. Business
model articles typically list external forces that affect
the success of the business. These forces include com-
petition/co-opetition, policies and the legal environ-
ment, social or technological change, research insights,
and changes in customer demand (Nalebuff and
Brandenburger, 1996:
tinyurl.com/7jjllcb
; eFactors, 2002:
tinyurl.com/cyv3jxo
; Hoffner et al., 2004:
tinyurl.com/7a72l3s
;
Osterwalder, 2004:
tinyurl.com/cx9smc7
).
Figure 3. Sub-ecosystems within the business ecosystem
Technology Innovation Management Review
June 2012
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An Action Research Study on Entrepreneurship in a Business Ecosystem
Marikka Heikkilä and Leni Kuivaniemi
Each of the ecosystem sub-sectors shown in Figure 3 is
described in greater detail below, in the form of imple-
mentation advice for business leaders attempting to
construct similar business ecosystems:
1. Technological change: Perhaps the majority of new
business models build on technology or information
technology. Decreasing information and communica-
tion costs make totally new processes and ways of work-
ing possible. In addition to proving new business
possibilities, it also challenges the existence of current
ones. Therefore, identify the potential technologies for
your business and contact the suppliers.
2. Research insights: In addition to the business as-
pects, the ecosystem should attract research. The sali-
ence of the symbiotic relationship of business and
research may be seen in Silicon Valley (Sydänmaalakka,
2011;
tinyurl.com/d8c64bo
). Take the time to read major re-
search articles on the topic of your business and con-
tact those researchers; they can help to locate suitable
collaborators within the universities or other research
institutes.
3. Changes in customer demand: Consumption pat-
terns and “fashion” are examples of changes in custom-
er demand. High adoption rates of social media is a
good example of social change that might provide new
possibilities. Customer co-creation is increasingly adop-
ted to gain knowledge on the changing demand.
4. Competition/co-opetition: One of the main pres-
sures comes from competitors. In order to survive, your
product or service must be cheaper, better, or quicker
than that of your competitors. However, sometimes col-
laboration with your competitors might be needed to
execute your business model. Competitors, for in-
stance, might have some specific knowledge or capabil-
ities that you do not have or wish to invest in. Be brave
and try to turn your competitors into co-opetitors.
5. Social change: Changes in work practices, processes,
culture, and social mood in general might have an ef-
fect on the business. Changes in attitudes on environ-
mental issues, technology adoption, or outsourcing to
low-cost countries can affect the business. Collabora-
tion with various kinds of associations and societies
helps to keep track of social change.
6. Policies and legal environment: Legal issues are
something that you must always take into considera-
tion. For example, be aware of the differences in work
regulations between countries. New privacy laws can
make the use of some business models illegal. Many
times, it pays to find out the legal restrictions at the be-
ginning so you take them into account when building
the ecosystem.
We suggest that when considering the expansion of the
ecosystem, one should carefully consider all the six sub-
ecosystems recognised in Figure 3 and plan in what or-
der the sectors should be covered. Our research so far
has already revealed that there are significant differ-
ences in the clockspeed of the sub-ecosystems and this
should be taken into account in planning. The clock-
speed characterizes the general velocity of change in
the sector and the pace of the firms' internal operations
(Mendelson and Pillai, 1999;
tinyurl.com/d9ov3cz
). It can
be measured by the rate at which new products, pro-
cesses, and organizational structures are introduced.
We have tentatively placed the sectors in their clock-
speed order: the fastest is the technology sector and the
slowest is policies and legal environment. This has prac-
tical implications; the sectors where one is most likely
to find actors that are willing to cooperate in new, in-
novative initiatives are the technology and research sec-
tors. In contrast, because no quick changes are
expected to accrue in legal and social environments, a
business initiative can build on the current laws and so-
cial customs. However, one should always be aware of
the status of preparations of new laws and policies, and
act accordingly.
Conclusion
This article presents early results from an ongoing ac-
tion research study on a business ecosystem. The busi-
ness case examined is physical activity prescription, an
innovation in the field of preventive healthcare. An en-
trepreneur is pushing the business initiative forward.
His goal is to create a functioning business network
consisting of companies that jointly provide health pre-
scription services - profitably. Together with other act-
ors that provide and co-create supplementary services,
products, and research in cooperation with public insti-
tutions, these organizations form the ecosystem.
We suggest that the expansion of an ecosystem can be
analysed and even perhaps planned by considering six
differing sub-ecosystems: technology, research, cus-
tomer demands, competitors, social environment, and
legal and policy environment.
In the future, we will work to widen the case network to-
gether with the growth entrepreneurs, corporations, as
well as by teaming with researchers from different
Technology Innovation Management Review
June 2012
24
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An Action Research Study on Entrepreneurship in a Business Ecosystem
Marikka Heikkilä and Leni Kuivaniemi
About the Authors
Marikka Heikkilä, PhD. Econ., is project manager at
the University of Jyväskylä. She serves as a coordin-
ator of several national and international projects.
Her areas of interests are business networks, busi-
ness models, and coordination of complex opera-
tions. Outside the university, she is an active
entrepreneur. Previously, Marikka has worked as lec-
turer, assistant professor, and researcher at the Hel-
sinki School of Economics and at the Faculty of IT at
the University of Jyväskylä.
Leni Kuivaniemi, PhD. Econ., is currently working
as a project manager in the Jyväskylä School of Busi-
ness and Economics (JSBE). She is also partner and
manager in two growth ventures. Leni has strong ex-
perience in sales, entrepreneurship, and growth ven-
turing, both in teaching and practice. Previously she
has worked as an assistant professor and a program
co-director at JSBE. Leni also holds a master's de-
gree in law from the University of Helsinki.
Citation: Heikkilä, M. and L. Kuivaniemi. 2012. Ecosystem
Under Construction: An Action Research Study on
Entrepreneurship in a Business Ecosystem. Technology
Innovation Management Review. June 2012: 18-24.
fields. Thus, in the future, the business and research
network will serve as a platform onto which the ecosys-
tem is built one piece at a time. The use of this ap-
proach can be seen in its grander form in Silicon Valley,
but whereas there it has developed over a longer period
of time and without guidance, our aim is to proactively
find the best-fitting components for the ecosystem to
flourish.
The ecosystem is built on trust and benefit for all the
participants. In the business world, the gains have to be
measurable and arrive quite quickly. On one hand, this
pressure creates challenges for action research, but on
the other hand, it rewards the research team because
we receive immediate feedback on our input. Our re-
search hypotheses either work in a real market situ-
ation or they do not. If they do, our research will have
wider meaning and impact for society both in terms of
health and growth venturing.
