Profits are no longer enough
Corporates are looking beyond profit margins and inculcating a culture of environmental, social, and governance standards to assess success and long-term business viability.
Customers, investors, and employees consider the way businesses treat their people, the environment, and the communities within which they operate in, as critical competitive differentiators. This mindset shift toward ‘stakeholder capitalism’ is demonstrated by, for example, the fact that companies rated higher in initiatives such as diversity and inclusion and corporate social responsibility (CSR) attract more investors than traditional, profit-oriented businesses. Millennials, in particular, share this economic bias when evaluating employment opportunities and making consumer purchase decisions.
Global challenges such as the pandemic, geopolitical uncertainty, and climate risk further amplify the importance of executives looking beyond profits as their North Star. The rise of environmental, social, and governance (ESG) factors in corporate agendas highlights executive adoption of this broader stakeholder view.
As larger social and economic realities and needs dominate boardroom discussions, CEOs around the globe are revisiting the ‘purpose’ of their enterprises and, in turn, the measures by which they assess success and ensure their businesses’ long-term viability.
Ecosystem collaboration is complex, but the C-suite recognizes its increasing importance as a powerful means for growth and profitability.
Over the past few years, much has been written about ecosystems. While economic ecosystems have always existed, the entities involved in the network did not necessarily knowingly collaborate or exchange value with one another in the service of the consumer’s ultimate purpose like wellness or mobility as they may have evolved organically. Enabled by innovative technologies and inspired by the pursuit of corporate resilience, digital purpose-driven ecosystems have taken hold and are evolving. Further, through real-time data, new insights inform new business visions at an accelerated rate.
In an example, MIT CISR research found that companies engaged in ‘digital partnering’ with the intent to expand both their ‘reach’ (new customers) and their ‘range’ (new products) achieved higher revenue growth. This is nearly 10 percentage points above industry average.
Identify and address the challenges
The TCS 2021 Global Leadership Study revealed 58% of leaders, versus 35% of followers, include ecosystems when building their future strategy.
C-suites increasingly recognize that the sharing and building upon the assets of ecosystem collaborators is a powerful means for growth and profitability. Therefore, to strive for greater prosperity in their business means purposeful growth, which can be achieved with the alignment of ecosystems. However, this can be complex task for two reasons.
1) Ecosystems evolve based on new business aspirations.
2) Identifying where business visions can intersect is tricky.
Successful ecosystem collaboration—whether accessed through an alliance, joint venture, organic or inorganic growth—requires each collaborator to thoughtfully assess their goals, culture, and capabilities, and understand how this enables their future vision, and also identify the gaps. This insight then needs to be leveraged in the context of the ecosystem in which it seeks to join, and the companies within it. To ensure a good match in the ecosystem, the collaboration ‘due diligence’ approach should:
Focus on confirming or denying a good match exists between the collaborators for mining and creating the synergies, ensuring all players help to fill the necessary gaps, or can in the future.
Identify anticipated purpose-driven outcomes that can be achieved through ecosystem collaboration.
Openly accept and enable necessary changes in business models, approaches, or strategies in order to make collaboration a reality.
Examples in practice
Ecosystems can drive new partnerships and business models that had previously not been on the horizon.
Let’s look at two examples of successful ecosystems that drastically changed the business trajectory. Pharmaceutical giant, Merck, whose mission is to ‘invent for life’, naturally fits within the wellness ecosystem, and places a priority on ESG when allocating resources and forming partnerships to ensure access to health and environmental sustainability.
In pursuit of continually improving patient outcomes and reducing total cost of care, Optum Medical Benefits Management, a United Health Group company, partnered with the National Comprehensive Cancer Network to optimize cancer treatment through a unique point-of-care decision-support tool.
A new world order
It is critical that corporations and all humanity identify our needed trajectory to find purpose and prosper.
Re-ignited by the challenges of the COVID-19 pandemic, the longing for a sense of purpose has set a new trajectory for not only corporations but humanity as a whole. And collaboration, from alliance to acquisition, is the means for more rapid adaptation to an ever-changing business environment. Businesses that seek to survive for the long term must find or shine a bright light on their purpose and align their strategies and tactics to continually add value in what is projected to be the most transformative decade in all of human history. To paraphrase Spock from Star Trek, “live purpose and prosper”.