Entrepreneurial Ecosystems: Some Key Points

Entrepreneurial ecosystems are dynamic networks of people who facilitate startup creation, growth, and sustainability. These ecosystems provide an environment that nurtures innovation, allows easy access to resources, and promotes knowledge sharing. Here are key points to keep in mind.

Think Entrepreneurial Teams, Not Entrepreneurs

  • Successful entrepreneurs begin their journey by forming a core team. Entrepreneurial teams, not sole entrepreneurs, build successful businesses.
  • Entrepreneurial teams increase their probability of success when they are cognitively diverse.
  • Entrepreneurial teams create valuable businesses from resources they do not entirely own or control. They are, therefore, dependent on their networks.
  • Entrepreneurial teams create new value with a business model that explains how they will create value by recombining these resources.
  • Successful teams experiment with their business model and redesign them based on their learning.
  • For successful entrepreneurial teams, experimentation never ends. They are continuously exploring adjacent opportunities.

Entrepreneurial Teams Access Resources Through Their Networks

  • They gain access to these resources through their networks.
  • The social networks supporting entrepreneurs form an entrepreneurial ecosystem in a community or region.
  • There are one or more entrepreneurial ecosystems in any community or region.
  • These entrepreneurial ecosystems vary in terms of their level of connectivity and their capacity to gather and direct resources to support entrepreneurs.
  • These entrepreneurial ecosystems also vary in terms of their sophistication and technology focus.
  • A high-performing ecosystem increases the volume and velocity of resources flowing to promising business models promoted by entrepreneurial teams.
  • Thriving entrepreneurial ecosystems support continuous experimentation and reframe failure as intentional iteration.

Trust, Fragmentation, and Corruption

  • Trust powers high-performing ecosystems. Deep ties have formed through reliable behavior patterns among participants in the ecosystem.
  • Entrepreneurs face significant barriers to starting and growing a business if an ecosystem is weak, fragmented, and disconnected.
  • Weak ecosystems can be strengthened most easily by spreading the habit of “closing triangles.” (Bill knows Jane and Jennifer, but Jane and Jennifer do not know each other. Bill closes a triangle by introducing Jane and Jennifer.) This simple act of connecting people within the entrepreneurial ecosystem can foster trust, collaboration, and knowledge sharing.
  • Patterns of corruption dramatically erode entrepreneurial ecosystems. Therefore, another crucial aspect of strengthening entrepreneurial ecosystems is addressing and mitigating corruption where it exists.

Barriers to Ecosystem Formation

There are many barriers that retard the formation of ecosystems, but these five stand out in my experience:

  • Failure to establish safe, shared spaces. This barrier often comes down to a failure to establish clear rules to create an environment in which trust can form. This step is essential. Most of us are familiar with the work of Amy Edmondson and psychological safety. The Japanese concept of “ba”, explained by scholars Nonaka and Konno, also provides important insights into the shared spaces that support creativity and innovation. You can learn more about this concept here.
  • Ambiguity and lack of shared understanding. An entrepreneurial ecosystem is a set of open networks embedded in other open networks. It’s a complex adaptive system that is continuously shifting. Unless the purpose of the ecosystem is clearly stated and the process for developing it is simple, people will quickly step away. So here’s the paradox: when building an entrepreneurial ecosystem, don’t rely heavily on the jargon of an “entrepreneurial ecosystem.”
  • Weak skills and thin patterns of collaboration. Collaboration is a process of designing and guiding conversations. Virtually everyone likes to think of themselves as good at collaboration, but few people are innate collaborators. Collaboration is a process of recombinant innovation among equal partners. But weak skills and bad behavior are more common than we’d like to think.
  • Inability to replicate successful routines. When successful collaborations do occur, they are often the function of personal chemistry, not a rigorous process. So, they are rarely replicated and reduced to a routine. More common: people who have the innate skills of collaboration become overloaded because people rely too heavily on them.
  • Failure to confront the bad actors. Bad behavior happens, and when it does, too often people are unwilling to confront it. That failure undermines the trusted networks that form the foundation of any ecosystem.