Ecosystem as a guarantee of success

From Sebastian Pforr and Alexander Grohmann.

30% of global GDP will be generated by ecosystems as early as 2025, according to a McKinsey study. This assessment is underlined by a cross-industry study by Accenture in Germany: 85% of the 1,251 CEOs surveyed believe that current business models will be obsolete in the next 5 years.

According to the CEOs, ecosystems are the drivers of this development. Ecosystems, their structure and participation in them will – according to both studies – essentially determine the future success of companies in digitalization. And this applies across all industries.

What is commonplace for many organisms in their natural ecosystems consequently offers enormous growth opportunities for companies: What is important in the successful use of ecosystems and how can SMEs simply profit from them?

ECOSYSTEMS AND DIGITALIZATION

In the ecological sense, ecosystems describe the community of different organisms. The functional aspect is decisive in them. This emphasizes the interaction, i.e. the exchange of material and energy flows, in significant and diverse sets of relationships. And this ecological circumstance, which is so commonplace, means a necessary rethinking for companies: just as for organisms, only the data, information and resources (material and energy flows) that ensure their existence and growth are important for companies. Organisms are accustomed to a much more diverse set of relationships that arise spontaneously, ensure the necessary inflows and outflows, or generate entirely new combinations. Companies are not. To date, they have preferred to align their value creation with products and services and to optimize them. Linear value creation is the keyword here. And in Germany, we are particularly good at it (1). Other forms of organization are less important, or to put it more casually: Never change a running system.

DIGITALIZATION MAKES EVERYTHING NEW NOW?

No, not completely, but a lot: digitalization changes access to data, information and their processing – and thus the economic requirements and rules for success (2). This is the technological peculiarity of digitalization, and it is both an opportunity and a challenge. Why? What was previously often accessible in analog form is increasingly becoming available digitally. The Internet has laid the infrastructural foundations for the exchange of data and information, and the Internet of Things (IoT) describes the physical and virtual networking of a large number of devices (smart devices) within it. As a result, company, industry and country boundaries are less likely to be barriers to market entry – they are becoming blurred. Customers produce more and more traceable data and can be reached more quickly and in a more targeted manner. In short, markets are becoming more dynamic, competition more intense and potential growth opportunities greater. So what can SMEs do?

EFFICIENCY IS SMART – NEW VALUE CREATION IS BETTER

Whichever company now optimizes its products and services with the data and information obtained, as before, is acting in an economically rational and smart way. Smart, industrial IoT solutions that enable condition monitoring, preventive and predictive maintenance are frequently and rightly cited at this point. Digitalization has already achieved a great deal here. With blockchain applications and distributed ledger technologies (DLT), there is much more to come: in automated and secure form, right up to the Internet of Value, i.e. the transfer of values via the Internet (3). 
Increasing efficiency is one side of the coin of economic reason, the other is value creation. In digitalization, this takes up the necessary paradigm shift described above. To achieve this, companies must increasingly rethink their strategy, starting not from the product and the service, but from the customer and the application there. Because that’s where the benefits come from. Only in this way can value-creating ecosystems become visible and be cultivated:

  • In contrast to linear value creation, an ecosystem starts strategically with the customer and his user journey. All touchpoints at which benefits are created for the customer are relevant. In this perspective, it is about nothing less than all products and services that are important for the customer and the associated players. Where does a benefit arise for the customer, where are there currently problems, and which interactions that create added value do not yet exist?
  • Is it comprehensible which data, information and resources are created in this network, which are necessary to generate benefits and how they can be used to create added value for the customer?
  • Digital ecosystems are customer-oriented networks that make data, information and resource flows visible. These flows are used to create new value via new business models. It is therefore a question of network-based value creation and the value creation flows there.
  • Business models must be developed in line with this, allowing all ecosystem partners to participate in the success. A shared vision, shared values and a shared model to which everyone contributes is necessary. Only in this way – as with organisms – can everyone benefit from diverse sets of relationships.
  • Digital ecosystems are nothing less than that: a future opportunity for all players. Not without reason is it often said in this context: competitors become partners. Another paradigm shift.
  • To summarize: Value creation must be rethought.

How can SMEs benefit quickly and skillfully from ecosystems?
Medium-sized companies need a clear digital strategy that starts with a target picture:

  1. Representation of the customer journey. Important: Do not think in terms of your own product, but in terms of the sum of all the customer’s applications.
  2. Present the ecosystem with touchpoints for generating added value and identify relevant business cases for the customer and your own company.
  3. Develop business models that promise success for all ecosystem partners. Analyze and select models including associated partner integration.
  4. Development and implementation of associated operation models: GAP analyses of the status quo, roadmaps for competence and application development, etc.
  5. Shaping the future! Gladly with the Digital Enablers.

References:

(1) Cf. Christoph Keese, who has already described this impressively in his Spiegel bestseller “Silicon Germany. How we are creating the digital transformation.
(2) Cf. for example Yeung, A., Ulrich, D. (2019): Reinventing The Organization. Boston: Harvard Business Review Press. 
(3) Cf. for example Sandner, P., Tumaskjan, A., Welpe, I. (2019): Der Blockchain Faktor. Wie die Blockchain unsere Gesellschaft verändern wird. Norderstedt: BoD – Books on Demand.