5 strategies for a multi-dimension support ecosystem

According to a World Economic Forum¹ report, platforms are defined “as technology-enabled business models that create value by facilitating exchanges and interactions.”

In short, these are B2B digital platforms that trade and leverage value in a transaction between different stakeholders in an ecosystem. For example, a mobile payment solution is part of mobile, social, data analytics, and banking services ecosystems. By plugging into the ecosystem, they share an interoperable infrastructure that is fuelled by data, connecting multiple stakeholders to create real value. This is a platform economy that draws on digital technology to create business opportunities which did not exist previously.

In a McKinsey article², the authors note that “CIOs and IT organisations have a huge role to play in capturing these opportunities. But they can’t do it through business as usual.”

In an ecosystem environment, the articles suggests, focussing on “protecting the centre” can limit a company’s ability to seize emerging opportunities. “To adapt their complex business-technology architecture to function in a world of ecosystems, CIOs will have to figure out how to simultaneously draw external technologies closer while managing security issues and getting a handle on the accelerating stream of technological innovations.”

Over the next decade, the creation of interconnected ecosystems will unlock US$10 trillion of value for business, according to the ‘Digital Transformation Initiative: Unlocking B2B Platform Value’ report by the World Economic Forum.

Platform economies are challenging to build. Business leaders must create an environment that is conducive for them to thrive, and a culture where partnerships are collaborative.

Businesses will benefit from extended platform economy strategies by finding new customers, tapping into new sources of data, and improving established business practices. How CIOs manage these partnerships, as a broad network of ecosystem technologies, will compel them to work closely with the CEO on business priorities and to become a prime strategic partner.

A platform economy represents a different mindset from a traditional supply chain model. In a platform economy, B2B partnerships and ecosystems create economic value by shifting away from linear value chains to create shared outcomes.

This shift is denoted by three critical traits:

Value shifts

Historically, value has been created “upstream” and systematically pushed down the value chain to the consumer. Platform business models create value in an iterative and continuous fashion across entire ecosystems.

Non-linear growth

Network effects can accelerate the velocity of change for how value is created (and destroyed).

Trust

This is a foundational element between market participants, who must understand and apply a core set of principles to govern platform-powered ecosystems.

Establishing a foothold in a platform economy requires making considerations about how organisations think about strategy and innovation in the years ahead.

Nicholas Evans, author of ‘Mastering Digital Business’, suggests businesses ask the following questions:

1. What percentage of investment should go into ecosystem models?

2. What types of ecosystems should be considered?

3. When should an organisation choose a hub vs. spoke strategy?

4. What is an appropriate pricing strategy, which will spur growth of the ecosystem or platform?

5. Should an organisation hedge its bets by playing within competing ecosystems?

6. What sustainable competitive advantage and differentiation can be gained from an ecosystem model versus a traditional value-chain oriented business model?

Evans proposes five strategies businesses should adopt to prepare for a platform economy:

Incorporate ecosystems into market and competitive research

Companies must deploy research beyond traditional competitors to identify and evaluate who the ecosystem and platform players are within their industries. Are rapidly maturing business ecosystems attracting competitors from other industries such as information technology, to disrupt traditional value chains and business models?

Take an ecosystem view of the customer experience to enable cross-industry thinking

Companies must evolve business perspectives from a single to an aggregated customer value chain. That is, they must accept that they are no longer the sole supplier in an end-to-end customer journey. Aggregating discrete services via an ecosystem or platform creates value. For example, the overall passenger experience in air travel is aggregated across airlines, airports, car rental agencies, and hotels.

Support and foster intra-ecosystem innovation to move beyond traditional R&D

In the platform economy, investments in R&D internally will draw upon more open innovation techniques by pulling ideas from outside the organisation. The notion of unique R&D efforts will need to change to support and foster intra-ecosystem innovation to sustain continuous and collaborative innovation with ecosystem partners.

Build the capability to dynamically pull in new partners for co-innovation beyond traditional business partners

Dynamic partnerships will be de rigueur in a platform economy, requiring companies to identify potential ecosystem partners and open lines of communication. This role may be superseded by new ‘innovation’ software using sophisticated algorithms to identify potential partners beyond today's matchmaking.

Incorporate ecosystem metrics into your innovation dashboard

Performance dashboards will need to be revised to report on ecosystem metrics to measure ecosystem-related ideas in the queue, the flow-rate through the pipe, and the return on ecosystem investment compared to the flow-rates and returns of the more traditional products and services in the queue.

To succeed in this platform economy, all ecosystem partners must commit to collaboration and a shared understanding of platform tensions and dynamics.

B2B participants in such an ecosystem must agree to measure overall ecosystem output rather than just individual firm output. This will require training and education. A first step is acknowledging the gaps and incentive structures required for relevant stakeholders to ensure functioning platform.

By focusing on these five strategies, business leaders can unlock the trillions of dollars in value, but collaboration across ecosystem partners cannot be overstated. Business leaders need to work together and ensure that their actions are harmonised to drive ecosystem value and that the promise of platforms is realised.

Download this IDC Whitepaper to glean more insights into digital transformation.

Or, have a chat with us if you are looking to accelerate your digital transformation.

¹ Digital Transformation Initiative: Unlocking B2B Platform Value, World Economic Forum 2017.

² Adopting an ecosystem view of business technology, The Mckinsey Digital, February 2017