The Power of Digital Ecosystems

When Sony introduced the PlayStation in 1994, it wasn’t at all obvious that they would be successful. Nintendo and Sega were already in fierce competition and, although their arena was the 16-bit market, they were much more experienced in selling consoles and games.

One of the features that was radically different with the PlayStation was the introduction of a different storage medium. Instead of the cartridge, used by both Nintendo and Sega, Sony had decided to use a cheaper medium, the CD. When it came to guarding against piracy, though, CDs were seen as insecure. Sony had to develop a special version of CDs (the one with the black rear side) to guard itself against this.

It didn’t take long, though, before someone figured out how to crack it. By installing an inexpensive chip (called a mod-chip) it was possible to circumvent the copy-protection and allow anyone to burn original games onto regular CDs and play them. And in fact many did.

Now, this essay could have been a story about ”the gaming console that tanked because its copy protection got cracked.”

It’s not…

The PlayStation is one of the most successful gaming consoles ever, and was only recently discontinued after 10 years of service.

So why am I spending all this time talking about the PlayStation, and what does it have to do with digital ecosystems? We will get back to that a little later, but first let’s look at what ecosystems are.

A system of all systems

According to Roy Clapham, who coined the term back in 1930, an ecosystem is:

”the combined physical and biological components of an environment.”


Makes sense. But I think we can elaborate on that a little more. Arthur Tansley might lend us a helping hand. He redefines it to mean:

”The whole system… including not only the organism-complex, but also the whole complex of physical factors forming what we call the environment.”


OK, so an ecosystem is not only about the biological and physical components; it is also about the subdivisions of these. From atom to ape, so to speak. That seems reasonable, but something is still missing.

Eugene Odum, a contemporary thinker on this subject, put it like this:

”Any unit that includes all of the organisms (ie: the ”community”) in a given area interacting with the physical environment so that a flow of energy leads to clearly defined trophic structure, biotic diversity, and material cycles (ie: exchange of materials between living and nonliving parts) within the system is an ecosystem.”


This is interesting. So, not only is an ecosystem the animate and inanimate subdivided components that make up an environment; it is also the interaction and exchange of energy between these objects. The flow of energy throughout the system, so to speak.

The environment we live in is based on interdependencies in this flow. The sun needs hydrogen, helium, iron, oxygen, carbon and neon to create energy which transforms into light.

With light, photosynthesis can happen, which means plants can exist. When plants exist, animals have something to eat and with animals, humans.

These humans then use the environment to do all sorts of things: from making fire to inventing the wheel to creating moving vehicles to mastering French cuisine and even creating digital ecosystems.

Everything is an exchange of energy flowing through the system, creating ever more complex relationships. Now that we understand this, let’s look at the digital ecosystems.

Digital Ecosystems

On one side, digital ecosystems are simply an extension of the ecosystem. The flow of energy, albeit a different kind of energy, is certainly necessary for the system to exist at all.

What truly makes it digital, though, is the flow of data. It is ultimately the data that make it possible to do all the wonderful things we do with our computers and the network they are connected to.

Playing games, running businesses, making money transactions, sharing pictures, sending emails and IMs, downloading applications, uploading files, writing blogs, sharing information, streaming video and music: the possibilities are literally endless, and so are the ways to define them.

There probably isn’t any one definition that would suffice. It could be:

”A Digital Ecosystem is any distributed adaptive open socio-technical system, with properties of self-organisation, scalability and sustainability, inspired by natural ecosystems.”

Or it could be:

”A Digital Ecosystem is any connection of nodes where data flow and multiply to be interpreted and transformed into readable or meaningful structures by an interpreter.”

The definition I prefer is this:

”A Digital Ecosystem is any distributed scalable network allowing data to flow freely between its nodes and allowing trusted interpreters to access, edit or extrapolate value of the data.”

Sounds complex, but let’s break it down.

”…any distributed scalable network…” = Any network where nodes can be added or removed to change the size and reach of the network.

”…allowing data to flow freely between its nodes…” = allowing for games, music, video, documents, money transactions and everything else to move within the mesh that defines the digital ecosystem.

”…and allowing trusted interpreters to access, edit or extrapolate value of the data…” = allowing the right person or machine to interact with the data.

So a digital ecosystem is any network where nodes can be added or removed to change the size and reach, allowing for games, music, video, documents, money transactions and everything else to move within the boundaries of the network and allowing the right person or machine to interact with or share the data.

The data in itself is worthless without proper interpretation: just zeros and ones being transported back and forth in the network without any purpose. But with the proper interpreters, such as humans or machines, value emerge.

You can say that getting on the internet is the first example of a digital ecosystem, where you, as the trusted interpreter, have access to a host of options. Your email account and correspondence with friends or colleagues is another.

In reality, each individual on average will be considered a trusted interpreter in many different networks in any single day, making it impossible to speak of just one type of digital ecosystem. They all have one thing in common, though, and that is that data can flow freely within them, not between them.

If data flow is limited either because of incompatibility between the data and the interpreter or access restrictions stop the flow, then defines where one digital ecosystem ends and another begin.

This is not just a philosophical point. It illustrates the reach and friction of the network, and thus its strength, which again has implications concerning its success, as we will see later.

To add to that, there are even more exotic variations of these systems as I am going to show now.

The Digi-Mechanical Ecosystem

The PlayStation didn’t fail, despite the poor copyright protection of the CDs. On the contrary, it survived because of it. When it was known that it was possible to use a modchip to play copied games, a lot of people (myself included) warmed to the idea of buying a gaming console. In effect, the sales of the PlayStation would rise even higher and make it more attractive for game developers to develop for it. This positive feedback loop elevated the PlayStation to being one of the most successful gaming consoles ever.

Obviously other factors played a role, but I think it’s fair to say that a great deal of the success of the PlayStation can be ascribed as much to the emergence of a semi-digital ecosystem around the console. Perhaps we could go so far as to claim that this was the first time we really saw the power of digital ecosystems helping sell products.

The distributed network of humans, their consoles and CDs created a digi-mechanical ecosystem and allowed for games to be copied and thus the network to scale. The uniformity in the network (human, console, data, CD) allowed for rapid multiplication of nodes. You can say that scaling up was a relative commodity because the same data were allowed to flow and multiply, compared to the trapped data in the Nintendo and Sega cartridges.

Typecasting the networks

The Sony example is, of course, not your typical digital ecosystem, and the rules have changed quite dramatically as game consoles today are connected over the internet. But I wanted to include the example just to show that we don’t need to constrain our thinking. What is important is that data can flow and the network scale relatively easily.

The PlayStation is far from the only example of this phenomenon, so let’s look at a couple of others examples.

Product Ecosystems:

Apple
When Apple recently announced their new iPad, many critiqued the poor specs:

No camera, no USB, no multitasking, no Flash, no OS X, glorified iPod touch and it didn’t have e-ink like the Kindle.

But this critique is missing what the iPad does have, and what really matters: an almost unbeatable digital ecosystem to connect your iPad to. Whether you want games, applications, music, films, books, audio-books, newspapers, magazines or browse the web, the iPad gives you access to all that and with literally no friction.

The strength of Apple products today is their ecosystem, not their products. No-one really cares about products anymore. Obviously they have great products and a great interface, don’t get me wrong, but today we don’t buy gadgets because they have great technical specs. We buy them because they have great access to content.

Apple goes to great lengths of uniforming everything within its ecosystem. Ironically, that is why the App Store approval process is so hard. But once you get your application past that, it will normally benefit from the frictionless environment that has been established.

Amazon
The Kindle is no exception. Minutes from having unpacked the Kindle, you can start to download books directly to your device. Again, data flows almost without friction. The Kindle makes it possible to view the content, but without access to a wealth of books it would be worthless.

Service Ecosystems

37 Signal is a great example of a service ecosystem. By allowing others to develop third-party solutions through making an API available, they have basically strengthened their offering. For companies developing for 37 Signals digital ecosystem, it is a great way to gain access to the trust factor. Can you think of other companies digital ecosystems that are worth developing for to take advantage of the trust they have established?

Social Ecosystems:

Most of these ecosystems are well known, so I won’t spend too much time explaining them.

Facebook
Obviously a digital ecosystem that allows data to flow freely between friends.

Twitter
In fact, Twitter is almost nothing but a digital ecosystem mass-distributing a uniform 140 characters data unit. But that is its strength. It’s a very uniform format, allowing the data to flow freely and be read by almost any type of interpreter you can imagine. It’s just text but this text represents value.

Other examples would be Flickr, Steepster, Gmail, Buzz, 4Square, WOW, EVE Online, CyWorld etc. The digital space is filled with these social networks and they all have the same metrics that define them: uniformity, scalability and frictionless flow across the network allowing trusted interpreters to interact with the data and extract value from it.

The future of digital ecosystems

If you have followed me this far, let me offer you a final observation.

The next big battle is going to be a battle between digital ecosystems; not gadgets, not products and not services.

The most important weapon is going to be the WMCs: Weapons of Mass Connection, a.k.a. the APIs.

These APIs will make it possible for different organizations to have data flow freely between them. Allow for anyone with the right idea to leverage on others’ success without taking anything away from them. On the contrary, the more trusted interpreters you can give access to the data flow, the more robust the digital ecosystem will be.

Just ask Zynga about that. Or what about Tweetdeck, Topsy or Seesmic? And what about eBay and the thousands of people building small shops on top? When you boil it all down, they are digital ecosystems that allow you to tap into the flow of data by using the APIs they have made available and are dependent on.

The more who join, the more who find it attractive to develop for them; and the more that gets developed, the more attractive the ecosystems are to join. This creates the same positive feedback loop that allowed the PlayStation to succeed.

This is what it is all about: creating the strongest digital ecosystem by allowing data to flow freely between the nodes.

In conclusion

Understanding the power of digital ecosystems is going to be one of the major differential factors to any successful organization in the future. Either you should attempt to create your own data flow or you should tap into the existing API’s of the digital ecosystems you believe you can benefit from. Who know what kind of possibilities this will bring. But it going to be exiting to be a part of.


31 Comments on “The Power of Digital Ecosystems”

  1. 1 jp said at 11:45 pm on March 2nd, 2010:

    Why ecosystems and not platforms, networks, hybrids, or bundles of hardware, software, content, or services? One of the problems I find with “ecosystems” is that they are far from being self-organising or sustainable. If they were, regulators would not intervene (windows, google, etc), or they wouldn't be forced to change or adapt by potential users or competitors (iphone, facebook, etc).

  2. 2 Thomas Petersen said at 12:01 am on March 3rd, 2010:

    Hi JP

    I see what you say but they are techno centric.

    Ecosystems is about the flow in and out of all these terms including humans.

  3. 3 jp said at 12:15 am on March 3rd, 2010:

    I'll have 3 years to think about it ;-) I am about to start a phd on exactly these sort of questions.

  4. 4 Thomas Petersen said at 12:20 am on March 3rd, 2010:

    Fantastic! Please keep me posted on your thinking.

  5. 5 jp said at 12:31 am on March 3rd, 2010:

    I am actually thinking of blogging and twiterring on the research process, but I still have to buy a domain, choose a platform, and get it all up and running. Why is it all so complicated and time consuming?

  6. 6 Power Tools | Tools said at 3:32 pm on March 3rd, 2010:

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  7. 7 alexandrosM said at 11:40 am on March 3rd, 2010:

    Being in Digital Ecosystems research myself, I would say one extremely important point is missing: Absebce of single points of control and failure. Natural ecosystems are rarely if ever dependent on singletons (single species or single organism) to be sustained. Their adaptivity and resilience comes from that one fact. All the examples the author states are tied to a single corporate entity, often designed so, and therefore cannot exceed the lifespan of the entity that created them. A great example of that is napster. Once the central entity was shut down by way of courts, the ecosystem evaporated.

    In a sense the Internet and the Web are much closer to the true Digital Ecosystem, even though purists such as myself can still find things that can be improved, single points of control/failure etc. but at least they are not as pronounced as the ones present in the star-topology twiter/amazon/apple ecosystems.

  8. 8 alexandrosM said at 11:40 am on March 3rd, 2010:

    Being in Digital Ecosystems research myself, I would say one extremely important point is missing: Absence of single points of control and failure. Natural ecosystems are rarely if ever dependent on singletons (single species or single organism) to be sustained. Their adaptivity and resilience comes from that one fact. All the examples the author states are tied to a single corporate entity, often designed so, and therefore cannot exceed the lifespan of the entity that created them. A great example of that is napster. Once the central entity was shut down by way of courts, the ecosystem evaporated.

    In a sense the Internet and the Web are much closer to the true Digital Ecosystem, even though purists such as myself can still find things that can be improved, single points of control/failure etc. but at least they are not as pronounced as the ones present in the star-topology twiter/amazon/apple ecosystems.

  9. 9 jp said at 11:56 am on March 3rd, 2010:

    Even if it can help create new knowledge initially, I tend to think that looking at something through a particular concept, will simply make us understand that something through the characteristics of the concept and not so much that something in all its shapes and forms! Or maybe I am just confusing myself!

  10. 10 Thomas Petersen said at 12:01 pm on March 3rd, 2010:

    Well but the danger of not looking at anything trough a set of lenses is that you have widened the scope too much IMHO.

  11. 11 James McIntyre said at 2:18 pm on March 3rd, 2010:

    Speaking of twitter as an ecosystem, you've given me my first legit reason to follow someone on twitter. I've been waiting for someone to explain this phenomenon so coherently/elegantly. When working with various budding entrepreneurs/developers I find that few of them have “seen the light” that is organic phenomenon like that you've explained. Few of them are able to “zoom-out” and see their idea/app in the larger scale of what energy is currently flowing that they could “plug-into” in order to bootstrap their operation.

    Thanks.

  12. 12 thruflo said at 2:49 pm on March 3rd, 2010:

    There's a lot to like in this post. I find parallels between 'real' ecosystems and digital ecosystems fascinating. I'd point to Stuart Kaufmann's books (e.g.: At Home in the Universe) for some fascinating material about how generic ecosystems behave (they tend to self-optimise to the “edge of chaos”) which is applicable to the digital arena.

    However, being super critical, I'd suggest that the post is also a bit loose in places. The playstation analogy is a bit confusing: the article is about the iPad, which is both a tighter and more relevant example. Also the suggestion that the playstation was the first such digital ecosystem is a little fanciful. Didn't people copy disks on the Amiga 500?

  13. 13 Thomas Petersen said at 3:12 pm on March 3rd, 2010:

    Thruflo

    You are right both the Amiga or the C64 or any other computer of course fits the description.

    I used the PlayStation example because it's an example of an unforeseen consequence of digital ecosystems.

    The subject of this essay is a moving target and hard to narrow down and be super precise with. That is also the charm of it. So you might be right that having both the PlayStation and the iPad as examples is too much.

  14. 14 Mike Cuesta said at 2:52 am on March 4th, 2010:

    Great article. Interesting how some people fail to have vision.

  15. 15 Florian Komm said at 5:06 pm on March 5th, 2010:

    Thank you for is terific post. Retweeted it right away!

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  18. 18 Venessa Miemis said at 1:55 pm on March 12th, 2010:

    Hi Thomas!

    nice piece. i've been thinking a lot about this too lately. i just went back through my archives to a post from a few months ago – Is Twitter a Complex Adaptive System? (http://emergentbydesign.com/2009/11/17/is-twitt…) that might bring you another perspective. my thoughts have evolved since then, but definitely check out the concept of CAS, it's a great framework for fleshing out 'digital ecosystems.'

    and i agree with you, and this is the focus of all my research. the future is networks. (not even 'future', this stuff is here right now). what we have to figure out is how to leverage them.

    glad to have found you, see you in the twittersphere. :)

    - @venessamiemis

  19. 19 Thomas Petersen said at 2:21 pm on March 12th, 2010:

    Vanessa thanks.

    You are referring to Stowe Boyd in your post and he actually wrote about one of my other essays.

    http://000fff.org/slaves-of-the-feed-this-is-no

    His post is called The False Question Of Attention Economics and although he misrepresents my view it's a good read too.

    Thanks for tip on CAS I will definitely check it out and comment if I feel I have anything to contribute.

    See you in the twittersphere for sure :)

  20. 20 Kataweb.it - Blog - SNODI di Federico Badaloni » Blog Archive said at 4:19 pm on March 15th, 2010:

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  21. 21 Kataweb.it - Blog - SNODI di Federico Badaloni » Blog Archive » Progettare ecosistemi digitali said at 6:55 pm on March 15th, 2010:

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  22. 22 Alexander Ainslie (@AAinslie) said at 6:21 pm on March 24th, 2010:

    In the context of digital ecosystems, it is worthwhile to read this book:

    Invisible Engines: How Software Platforms Drive Innovation and Transform Industries
    http://bit.ly/ahqcpg

  23. 23 Gennaration – Dijital Ekosistem Savaşları said at 1:23 pm on April 16th, 2010:

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  24. 24 Black&White™ — The Ghost Protocol – Digital Identity for Immortals said at 3:54 pm on April 29th, 2010:

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  30. 30 COLDFIRE1992 said at 8:45 pm on February 15th, 2012:

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