The next big jump – the generative economy and ‘ecosystems of use’

Our fundamental economic system is being restructured around us!

New digital technologies are re-constituting the very way in which we create value. In this shift from the information or knowledge economy through to the generative economy the focus is no longer on the production of specific products and services for consumers but rather lies in the creation and control of ‘ecosystems of use’.

When we talk of an ‘ecosystem of use’ we refer to the way in which, in a generative economy, value is created through the control of an ecosystem that provides an environment in which others are able to create products and services via the use of products existing within the ecosystem. In this respect Youngjin Yoo has argued that a:

generative economy results when one actor’s production leads to the creation of new innovations that were not necessarily intended by the original inventor.

An example of an ‘ecosystem of use’ within this new generative economy is the combination of Apple’s operating systems (iOS and Mac OS), APIs (application programming interfaces) and SDK (software development kit). Combined, these various aspects of Apple’s broader product infrastructure create a space of generative value creation, that is an ‘ecosystem of use’. A concrete manifestation of the broader forms of value created as a result of this ‘ecosystem of use’ is Apple’s app store on iTunes. With each app released in the iTunes store value is simultaneously being produced both for Apple (in terms of their share of profits of each app sold) and for the developers of those apps.

The key to success in this new economy is thus not the production of products per se but rather the control of ecosystems of products which are themselves used to create new products. The emergence of these ecosystems of use provides an increasingly open-system of value creation.

These systems are open in that while they may be designed to bring about the creation of specific forms of value – such as apps for sale in the iTunes store – other types of value and products, not previously intended by the creators of the ‘ecosystems of use’, may also be created. In this respect the internet is a ‘ecosystem of use’. While it has produced much value in terms of its original intent as a point to point communication system it has also produced huge amounts of additional value – such as the creation of the World Wide Web and e-commerce – that were never intended by the systems creators.

The creation of these ‘ecosystems of use’ is opening up a range of spaces of innovation, adaptation, and agility that will allow for the creation of a host of new spaces of value creation.

Looking at Apple, Youngjin Yoo has claimed that the true value going forward for the company lies not in their current range of products, such as the iPhone 6S or the Apple Watch, but rather lies in their ‘ecosystem of use’. Looking at their operating systems, APIs and SDK he claimed that: 

the real innovation is in how they are preparing the enabling technology for payment, Internet of Things, and healthcare applications. They are thinking in an incredibly rigorous and deliberate way about who will come into their space and play with them.

In this respect, as an organization, Apple may be seen to be less concerned with products per se but may instead be more focused on people’s experiences and their activities. It’s the focus beyond the product – considering the entire ecosystem that maintains the user experience in the center – that will allow Apple to continue to grow and evolve. It is the dual focus on both design within a context and of design of a context that will help generate new value in the generative economy.

NB: In writing about the generative economy we ought not confuse this with the work of the same name pioneered by Marjorie Kelly. We will talk more about her work on alternative ownership structures in a later post.

Images courtesy of: Pixabay