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Should Your Company Build an Open or Closed Ecosystem?

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One of the biggest decisions companies need to make is whether they want to build in a closed, proprietary ecosystem or an open one. While this is often thought of as a problem for digital companies, it applies to electric car makers, coffee makers, and more. When deciding, companies should follow four principles: 1) embrace the idea that open vs.

closed is a spectrum, not a binary, 2) balance benefits and costs through centralized governance, 3) pursue strategic differentiation through different levels of openness, and 4) help educate regulators on the tradeoffs.

Most companies, at one point or another, need to decide what kind of ecosystem they want to build or operate in. Consider a coffee maker like Keurig. Should it supply all of the pods for its machines or should it allow third parties to provide them ? Similarly, electric vehicle manufacturers like Tesla face the decision of whether to make their charging stations exclusive to their own cars or available to competitors.

 

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