Insights: Building Ecosystems to Drive Growth

As a leader one of the constant worries is losing the momentum of growth and thereby relevance in the market. This could be due to the organization's strategy not adapting to a myriad of factors related both to the external environment as well as internal capabilities 1. In the digital age, one such threat is posed by competitors who have built or are building an ecosystem of aligned partners to disrupt the current business models and value equations.

The need for having an ecosystem strategy is becoming more & more critical as the industry boundaries are getting blurred and being redrawn. Designing and building value creating ecosystems therefore ensures continuous growth by providing a superior value proposition to customers.

A well-conceived ecosystem offers several advantages over your stand-alone efforts. To name a few:

  • It offers new opportunities for growth ensuring multiple streams of revenue
  • A more complete end-to-end customer experience can be provided by leveraging data and digital technologies
  • Collaboration on innovation with partners can lead to combining the individual strengths in hardware & software to mutually reinforcing benefits
  • Digitization further simplifies your value chain leading to lower costs which in turn allows you to have a more competitive pricing offer

More and more your competition will not be with traditional competitors but with those that have built an impressive customer value proposition thru an ecosystem of partners. Your strategy needs to adopt an ecosystem approach with primarily three prominent areas to deep dive. The first is to evaluate how the current business model can be/will be disrupted, either by you or another player. The aspects to study for an ecosystem approach need to consider the following:

  • With digital technologies permeating business requirements, the customer needs are changing demanding a more personalized experience 2
  • The nature of disruption happening is not limited within your industry as technologies evolve and new digital companies are pushing the innovation frontier.
  • Your value architecture needs to be constantly re-evaluated as a disruption elsewhere in the customer value chain element can have a tendency to disrupt your playing field.

The second area revolves around building the strategy and how you are going to operationalize it. Having uncovered the possible paths of ecosystem disruption that can threaten your market position, you must accordingly prepare a strategy to either defend or lead an offensive. Maintaining status quo is not a viable option. Ecosystems with co-innovations can change the nature of your offer & value proposition. Their effectiveness drives the speed of disruption to the dominant current model as well as subsequent adoption by customers.

The third area involves building relationships with companies different from yourselves to create a shared objective and win-win. Managing the ecosystem requires a specific set of leadership skills. The partners to work with are in fact not your suppliers but players with whom you can create an integrated whole offer to meet customer needs. Value creation for customers can increase substantially by partnering these 'complementors'. However, one needs to be clear about how the alignment and synergies can be increased on a continuous basis working with the chosen partners.

The key questions for strategic review are therefore:

  1. 1. What are the trends that threaten your business model? How will these affect your value architecture?
  2. 2. Faced with this new ecosystem threat, what strategies can you adopt to respond and win in the market? How can you change the basis of competition?
  3. 3. How can you identify your complementors and what partnership strategies can you form as you build your ecosystem?
  4. 4. What role can you play in the ecosystem? Can you lead it, or would you be better off as a participant?
  5. Every major player will need an ecosystem of partners to succeed. The choices you make today will determine the viability of your business in the years to come. But as a leader it is equally imperative to know how to go about designing, building, and managing this superior business ecosystem.

1. Refer our earlier insight “Do you really have a Strategy?” for more details
2. Refer our earlier insight “Digital Transformation – A Growth Imperative” for more details