Innovation in business ecosystems - essential but is it sufficient?

I have tried to come up with a very simplified model of a business ecosystem.
A business ecosystem consists of all interacting organizations and individuals in the context of a particular business or market, including governing bodies.  The whole business ecosystem will co-evolve, driven by innovation in the supplier organizations and the governing bodies.
In this article, I will discuss this internal innovation and in a future article, I will explain why innovation is sometimes not sufficient.

In the illustration I have simplified that down to only 2 actors, the blue suppliers and the yellow consumers.  Any actor can interact with any other.
The interactions will typically be the selling and buying of goods and services.
The suppliers all compete with each other by all possible means to maximize their perceived value in the eyes of the consumers.
Some companies will be leading, and they have achieved that through innovation and economies of scale.
Innovation in these companies typically happens through internal process improvement:

• Product innovation is aiming to differentiate its products from competitors.
• Service innovation is trying to complement the product (or service being sold) with surrounding services that would augment the value of the core product (or service).
• Pricing innovation will try to optimize the revenue or the profit that can be achieved, e.g. cost of seats in airline reservation systems.
• Promotion will make use of all new channels and methods to maximize reach and impact of the promotional message.
• Cost reduction, often trough economies of scale have to maximize the gross margin and minimize OPEX needed to put it in the market.

Innovation is important, it can make the difference between success and failure of a business.  However, when there are disrupting factors in the business ecosystem, even innovative companies can become the victium of this disruption.