Today, as almost all businesses are launching digital transformations, it is critical they define their places in the digital ecosystems in which they increasingly operate. That is, they must define their role within a complex network of stakeholders – extending across multiple industries – that connect online and interact digitally to create value for themselves, their partners, and their customers.
By understanding their part within the digital ecosystem, businesses can become more alert to new types of customers with whom they can engage, emerging competitors they must guard against, and valuable growth opportunities they can seize.
But, if a business focuses too narrowly on its sector, or its current customers, and fails to take a holistic approach to its digital interactions, it runs the risk of becoming static, and then becoming the next incumbent to be disrupted by more digitally agile and outward-looking business.
It has happened to other businesses, from paper roadmaps to just about every form of retail outlet to your local taxicab company. It could happen to yours.
Adopting the Ecosystem Mindset
In a world of ecosystems, companies must surrender old ideas of control so they can work with other stakeholders in a decentralized network.
Instead of concentrating on linear supplier-customer-distributor relationships, companies in an ecosystem rely on platforms to conduct business. It’s a way for each party in the ecosystem to bring value to the other parties.
A famous example is Amazon, which built a technology infrastructure to support its online retail business and later sold that computing power to other firms through Amazon Web Services. Third-party software developers offer services through this platform bought by an array of customers in different fields, from banking to manufacturing. And AWS has customers like Netflix that is a competitor in streaming video. For the purposes of the ecosystem, each gets value from the exchange of computing services that are separate from the video business.
Learning the Three Ecosystem Roles and Finding Your Place
We have found that there are three primary roles businesses play within the world of digital ecosystems and, indeed, sometimes one business will play more than one role.
Ecosystem orchestrators connect various stakeholders enabling others to make and sell goods and services through the ecosystem. Ping An began in Hong Kong as an insurance company and then build a cloud-based infrastructure to support commercial transactions for other businesses. Now Ping An is in banking, auto sales and its Good Doctor service connects physicians to 230 million Chinese patients for online consultations. And the company’s revenue has rocketed from $29 billion in 2010 to $145 billion in 2017.
Modular producers create value in multiple ecosystems. For example, PayPal, the online payments system, provides financial services wherever digital financial services are used. It can meet the needs of buyers, sellers, consumers, and other businesses. It is sector and industry agnostic and can play in any ecosystem. Consumers, both individuals and enterprises, extract value from an ecosystem.
Consumers can also be producers. For example, a company that buys goods in bulk at Amazon can turn around and sell them on another online marketplace (say, Etsy) the next day.
These roles are fluid. Firms can play in several ecosystems, creating a portfolio of business models. Apple, for example, makes hardware and hosts a third-party applications marketplace. Microsoft sells software, makes hardware, and hosts a cloud computing platform.
The world of ecosystems is very different than the traditional way of conducting business, but the world has become a very different place. The winners in this new world recognize that and understand that their digital transformation neither begins nor ends at the four walls of the company.
Frank Diana is Managing Partner, Tata Consultancy Services, and co-author of “Defining Your Digital Ecosystem: The First Step in a Machine-First Transformation” in Volume 12 of the TCS Perspectives management journal.
About the author(s)
Frank Diana is a global consultant with Tata Consultancy Services working with leading companies on how to prepare for the future with a focus on enabling the Enterprise of 2020. With over 30 years of experience in a variety of executive roles across industries, Frank provides a unique perspective and regularly speaks to executive audiences on forward thinking topics such as digital transformation, business analytics and how companies can plan for the coming shifts.